Corporate Tax News Issue 62 - May 2022

Definition of beneficial ownership may be expanded

The definition and scope of a beneficial owner (BO) in Uganda’s Income Tax Act has been revised twice since 2019 and may be subject to more changes under a bill (Income Tax (Amendment) Bill 2022) proposed by the Minister of Finance on 30 March 2022. The goal is to ensure clarity about the scope of the term to facilitate the implementation of Uganda’s commitments to exchange information with other jurisdictions. For example, Uganda is a signatory to the Multilateral Convention on Mutual Administrative Assistance on Tax Matters, it has committed to implement the International Standard for the Automatic Exchange of Financial Account Information in Tax Matters (AEOI) by 2023 and domestic law has been revised to enable the Uganda Revenue Authority to facilitate the automatic exchange of information. Access to information on BO is key to fully realizing the objective of the exchange of information framework of curbing tax avoidance and evasion. It is because of this that Uganda has sought to define BO through a series of legislative changes, with each change aiming to provide more clarity.

This article summarises the evolution of the BO concept in Uganda and the proposed amendments and assesses the potential implications of these changes, particularly in the context of Uganda’s tax treaty network.


Beneficial ownership is a key concept found in tax treaties that is used to restrict access to tax benefits under treaties (such as reduced withholding tax rates) to persons who qualify as BOs. For example, agents and conduit companies typically cannot be considered BOs and, therefore, will not qualify for tax treaty benefits. BOs under domestic rules of a country are used to prevent tax avoidance and evasion, as well as money laundering, etc. A BO is the person that has the right to use and enjoy income even though the title to a form of property may be in the name of another person; the term can also be used to refer to an individual or group of individuals who have the power to vote or control directly or indirectly the decisions of an entity. 

Before 2019, Uganda’s income tax law neither defined nor made any direct reference to the term “beneficial owner,” but the law was amended in that year to include a definition. Under this first definition, a BO was an individual who owned or had a controlling interest in a legal person and exercised control over the management of that person. Two years later in 2021, the definition was revised and expanded as follows: 

  • The general tests to determine beneficial ownership were changed to an individual who has “final ownership or control,” the individual on whose behalf a transaction is conducted or an individual who exercises “absolute control” over a legal person; and
  • A specific reference is made to trusts so that a BO can be a settler, trustee, protector, beneficiary or other individual exercising absolute control of the trust. 

The Income Tax (Amendment) Bill 2022 would further expand the definition of a BO. First, the “final ownership or control” test would be replaced with an “ultimately owns or controls” test when determining whether an individual is a BO. Additionally, the “absolute control” test would be replaced with the “ultimate control” test when determining whether an individual is a BO of a trust or other legal arrangement. The bill also would clarify that a “legal person” includes an individual who directly or indirectly holds at least 10% of the shares or voting rights of an entity; an individual who exercises control of the legal person through other means, including personal or financial superiority; or an individual who has power to make or influence the decision-making of the legal person. These proposed changes follow a general policy pattern of lawmakers as they endeavour to clarify how to identify a BO with a view to closing any loopholes that could allow certain structures to escape the automatic exchange of information.

Relationship with double taxation treaties 

Notwithstanding the policy justifications for the changes to the definition of a BO, the income tax law raises some issues of concern regarding its relationship with Uganda’s nine double tax agreements. The first issue is whether the term BO as used in tax treaties has the same meaning as under domestic law and, therefore, is subject to the legislative changes previously enacted and those under consideration. None of Uganda’s treaties define the concept of a BO, which ordinarily would imply that local meanings could be used. However, the OECD commentaries on the model tax treaty note that the term as used thereunder does not necessarily carry the same technical meaning as under domestic law. Furthermore, any different interpretation would have the effect that a law enacted by Uganda unilaterally changes the scope of the treaty, which cannot be the lawmakers’ intention. For these reasons, it is unlikely that Uganda’s codified definition of BO will be interpreted as having an effect on the provisions in Uganda’s tax treaties.

The second issue relates to the anti-avoidance provision in Uganda’s income tax law that limits tax treaty benefits to persons who are resident in the treaty state and who must be the BO of Uganda-source income. This raises a question of whether the domestic law definition of BO and relevant amendments also apply to the tax treaty BO concept. We would argue no given that domestic law does not override an international tax treaty since Uganda cannot unilaterally change the scope of a treaty. The Uganda Revenue Authority has not yet released any clarifications on this matter. 


The scope of the BO concept already has been amended twice in Uganda and may be subject to more revisions in 2022. These changes are designed primarily to make the term as clear as possible to ensure the smooth and efficient implementation of the international exchange of information standards. Potentially affected taxpayers should consider taking actions to ensure consistency with these laws regarding the beneficial owner information they share with the tax authorities.

James Nuwagaba
[email protected]