Franchising Contract in Uganda

This type of contract is widely used in Uganda, where, for the stipulation of the franchise agreement, reference can be made not only to the contractual law but also to the investment code and the Common Law acts. The sector in which franchise agreements are signed most is the telecommunications sector. However, the renewable energy sector also appears to be growing and increasingly adopting this model.
In Ugandan practice, any contract that transfers a technology or expertise may include a franchise agreement, however, for the contract to be effective, it must be registered with the Investment Authority.

Necessary requirements and standard clauses of the Franchise Agreement in Uganda. Pursuant to the legislation governing investments, in order for a franchise agreement to produce legal effects between the parties, it must contain the following requirements, including some mandatory clauses, which are indicated by way of example and not exhaustive: a) start date of the agreement;
b) name of the parties;
c) assignment of rights;
d) confidentiality agreement;
e) royalties expected at the time of payment;
f) intellectual property rights;
g) clause governing the resolution of disputes;
h) date of termination of the contract.

From a fiscal point of view, a foreign “franchisor” is subject to taxation as a non-resident person. This is due to the rule that an agreement entered into with a non-resident person in Ugandan territory cannot be assimilated to a domestic franchise. In this perspective, the foreign franchisor is a taxpayer subject to a withholding tax of 15% on profits, with the consequence that from a fiscal point of view for a foreign economic operator it is more convenient to maintain the non-resident status, rather than adopt that as a resident. This is because in recent years the State has gradually eliminated the tax incentives previously provided for in favor of economic operators resident in the national territory. In fact, currently a domestic franchise is subject to a withholding tax of 30%, a circumstance that makes this form of contract economically unbalanced.