_Key Legislative and Policy Updates in Uganda’s Real Estate Market

For any regulation to be effective, it is important that it meets the purpose for which it was designed, and where it is incapable, amendments are proposed. Several regulations relating to real estate, its usage, and ownership have been passed in Uganda in the last twelve months.

Nancy Birungi April 07, 2022

Among these were the gazzeting of the regulations on the Data Protection and Privacy Act, a requirement for a restrictive clause in the transfer of shares, the Rental Income Tax Amendment and most recently, the amended Landlord and Tenant Bill, 2021.

Rental Income Tax
The Income Tax (Amendment) Bill, 2021 was passed into Law, providing changes in the tax rate and allowable deductions for rental income. With the aim to ensure equitable taxation, harmonise the tax regime, and increase revenue collection, the new amendment provides a standard tax rate at 30% of chargeable income for both individuals and entities, after allowable deductions amounting to 75% of the rental income (to cover expenses and losses incurred in production of such income) have been removed. Any expenses that spill over beyond 75% cap will be carried forward and deducted in the following year of income. With the new amendment, a taxpayer will not be permitted to enter a loss-making position for tax purposes.

The Landlord and Tenant Bill, 2021
The amended Landlord and Tenant Bill, 2021 was passed by Uganda's Parliament on February 1, 2022. The bill intends to regulate the relationship between landlords and tenants, reform and consolidate the law relating to rent of property, and define landlords' and tenants' obligations in respect to letting of premises. The bill allows landlords to re-enter and possess tenants' premises in the presence of Area Local Council officials and the police to recoup accrued rent arrears. This is on condition that notice is issued to the tenant who has defaulted for a period of more than 30 days. The bill also makes it mandatory for the landlord and tenant to execute a formal tenancy agreement before occupation of premises. Additionally, any annual rental increment is limited to not more than 10% of the prevailing rental rate. The rent escalation will be subject to a 60 days’ notice issued by the landlord to the tenant. Furthermore, the Bill permits the parties to mutually agree on the transaction currency albeit the Uganda Shillings is the recommended currency. A landlord renting out a business premise in a city or municipality will be required to provide a tenant with his or her bank account number, into which all rent payments may be deposited, to promote compliance in the payment of rental taxes.

A company with no restrictive clause on transfer of shares to non-Ugandans is deemed a “non-citizen company”
In the case of Biyinzika Enterprises Ltd & Others v Biyinzika Farmers Ltd & Another, Civil Appeal No. 18/2012, the Court of Appeal of Uganda ruled that a company incorporated in Uganda whose Articles of Association do not contain an express clause restricting issue of, and transfer of shares to non- Ugandans is deemed a non-citizen company pursuant to s. 40(7)(e) of the Land Act Cap 277 and thus, cannot constitutionally and legally acquire the mailo land tenure irrespective of the fact that Ugandan citizens have majority controlling interest. Companies are advised to review and amend their Articles of Association to reflect the legal requirements of the Companies Act, 2012 for Ugandan companies. All stakeholders undertaking property transactions with companies registered in Uganda should be keen to ensure compliance with the legal requirements. The bottom line is, existing companies that are currently non-compliant should amend their shareholding to have a controlling interest in Ugandans and to revise their Articles of Association to restrict the transfer of majority shares to non-citizens, so that they can satisfy the requirements of s. 40(7) of the Land Act in order to qualify as either citizen or non-citizen companies for the purposes of dealing in land in Uganda and, if the former, become capable of owning freehold (or mailo) tenure.

Registration with the Personal Data Protection Office
The Personal Data Protection Office (PDPO) was operationalized in August 2021 with a mandate to regulate the collection and processing of personal data in Uganda. Pursuant to a press release dated 2nd November 2021, the Personal Data Protection Office granted a grace period of up to end of December 2021, requiring that all persons or institutions that collect personal information are registered with the Data Protection Office. Furthermore, the press release stated that starting January 2022, enforcement measures shall start against organisations/persons who have not registered. Regulation 15 sub-regulation (3) of the Data Protection and Privacy Regulations 2021 provides that contravention amounts to commitment of an offence and is liable, on conviction, to a fine not exceeding six currency points or imprisonment not exceeding three months or both. As per the notice from the PDPO, if it is possible to identify an individual directly from the information one is collecting and processing, then that information is personal data and therefore one is required to register with the Personal Data Protection Office. All persons, institutions and public bodies collecting and processing personal data are encouraged to comply and register with the PDPO.

Notice on Practice of the Surveying Profession
The Surveyors’ Registration Board (SRB), a statutory body with the mandate to regulate the surveying profession in Uganda issued a public notice in October 2021. The board brought to the attention of registered members and the public that some registered surveyors were practicing the profession in contravention of parts of the Surveyors Registration Act Cap 275. The Act restricts the practice of surveying to registered surveyors practicing either as sole proprietors or partnerships with other registered surveyors. This announcement will drive registered surveyors to register new partnerships in line with the statute whilst reserving the brands by which they have been widely known.

By Nancy Birungi,
Head Legal Counsel and Company Secretary, Knight Frank Uganda.

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