On the 15th of June 2023, the Uganda Revenue Authority (URA) issued a Public Notice regarding the payment of stamp duty on agreements and memoranda of agreements. This was followed by a more recent Public Notice issued on the 21st of January 2025, reminding the public to pay stamp duty on agreements and memoranda of agreements.
These notices exemplify URA’s intensified objective to widen the tax base and revenue collection efforts, driven by target pressures from the Ministry of Finance and the broader Executive Branch of government in Uganda.
Historical Context of Stamp Duty
The concept of stamp duty has a history spanning over 325 years. Originating in the Netherlands, it was adopted by the United Kingdom to finance wartime expenses. British Prime Minister William Pitt the Younger characterized it as a tax that was “easily raised, widely diffused, pressing little on any particular class,” emphasizing its unobtrusiveness. However, it was not without contention.
In the American colonies, opposition to stamp duty culminated in the Boston Tea Party, a precursor to the American War of Independence. Despite such controversies, stamp duty gained popularity due to its low collection cost, and much of the administrative burden.
Initially, stamp duty applied broadly to various documents, with payment evidenced by affixing or embossing stamps. Over time, some jurisdictions like the United Kingdom, have since narrowed the scope of stamp duty where it is now limited to transactions involving shares, securities, land, buildings, and intangible assets such as intellectual property and goodwill.
The Legal Provisions Concerning Stamp Duty on Agreements in Uganda
As imposed under the Stamp Duty Act, stamp duty is a tax levied on specific documents or instruments that create, transfer, limit, extend, extinguish, or record rights or liabilities.
According to Section 2 of the Stamp Duty Act, documents that attract stamp duty must be duly executed instruments. The second schedule of the Stamp Duty Act outlines dutiable instruments and their corresponding tax rates.
Importantly, the payment of stamp duty is a prerequisite for the legal admissibility of these instruments in Ugandan courts. Among the dutiable instruments are agreements or memoranda of agreements, with an exception for sale-based financing agreements under Islamic finance arrangements.
Stamp duty on agreements signed within Uganda must be paid within 45 days of signing. For agreements signed outside Uganda, payment must be made within 30 days of the document being received in Uganda.
In Uganda, stamp duty on agreements or memoranda of agreements is UGX 15,000. The Stamp Duty Act prescribes that agreements are duly stamped if they follow URA-prescribed procedures. General Notice No. 488 of 2014, published in the Uganda Gazette, introduced electronic processes for stamp duty declarations and payments. These reforms align with the Electronic Transactions Act, which permits public bodies to accept electronic filing or approval of documents, provided the format is gazetted.
Taxpayers must follow these steps to fulfill stamp duty requirements for agreements:
- Declaration: The agreement is declared on the URA web portal, generating a declaration form and payment slip.
- Payment: Taxpayers pay UGX 15,000 using the generated payment slip.
- Verification: The declaration form and agreement are submitted to a URA office, where a barcode or sticker is affixed to the agreement.
- Stamp Certificate: Using the barcode number and declaration form, taxpayers generate a stamp certificate from the URA website.
For agreements, the URA-issued barcode or sticker serves as evidence of payment. The barcode must match the payment registration number on the stamp certificate.
Does payment of stamp duty apply to oral contracts?
The Contracts Act of Uganda stipulates that a contract may be oral, written, partly oral, partly written, or implied from the conduct of the parties. This raises the question of whether stamp duty applies to oral or unwritten agreements.
Per the Stamp Duty Act, stamp duty is levied on instruments that are executed. Execution of an instrument is defined as the act of signing the document.
Based on interpretations in the United Kingdom—from which Uganda’s laws are derived—stamp duty does not apply to unwritten agreements. However, per the English decision in Associated British Engineering Ltd v Inland Revenue Commissioners [1940] 4 All ER 278, any document recording the oral agreement in such a way as to become a primary record of the contract may attract stamp duty. Thus, even a memorandum prepared for internal purposes and long after the original transaction could be subject to stamp duty.
Non-Compliance and Penalties
Non-compliance with stamp duty obligations is an offense under Ugandan law. Failure to pay stamp duty can result in a fine of UGX 2 million or imprisonment for up to six months.
Additionally, the URA has the authority to recover unpaid stamp duty through distress proceedings involving the seizure of goods from the taxpayer’s property as security for payment. This method has sparked concerns about proportionality.
For instance, in Uganda Law Society & 12 Others v Attorney General, Const. Pet. 32 of 2020, the Constitutional Court deemed the distress mechanism disproportionate when applied to the non-payment of stamp duty of UGX 100,000 for a professional license. A similar principle could apply to the UGX 15,000 stamp duty on agreements, underscoring the need for reform.
Limitation
Unlike the Tax Procedures Code Act (TPCA), which prescribes a three-year limitation period for audits and assessments of taxes, the Stamp Duty Act lacks a statute of limitations. As the current stamp duty law took effect in July 2014, the URA could potentially audit cases dating back to 2014.
However, under the Interpretation Act, where no time is prescribed, actions must be undertaken without unreasonable delay and as often as due occasion arises. A three-year statute of limitations, as prescribed under the TPCA, seems reasonable and should apply to the Stamp Duty Act to ensure fairness.
Recommendations
Taxpayers should make timely payment of stamp duty on duly executed agreements to avoid penalties from URA.
Considering the historical context and current challenges, Uganda could benefit from narrowing the scope of stamp duty. Following the example of jurisdictions like the United Kingdom, eliminating stamp duty on low-value instruments like agreements and focusing on high-value transactions—such as land transfers— could enhance efficiency and fairness.
Conclusion
Stamp duty on agreements is a significant element of Uganda’s legal and tax framework, ensuring the compliance and validity of instruments. However, its administration, penalties for non-compliance, and the proportionality of enforcement mechanisms have raised debates. Simplifying the system by concentrating on high-value instruments could align Uganda’s tax regime with international best practices, fostering a more equitable and efficient system.