UGANDA
Uganda has taken a major step towards embracing Islamic banking with the successful passage of the Income Tax Amendment Bill No.2 of 2023 by Parliament. This marks a significant milestone in introducing Islamic banking products to the country. Initially, the bill faced delays due to disagreements over the definition of interest in its initial clause. However, extensive consultations between Shadow Finance Minister Hon. Muhammad Muwanga Kivumbi and Attorney General Hon. Kiryowa Kiwanuka led to a consensus being reached.
A crucial amendment within the bill, clause 1(c), brings about changes to Section 2(kk) of the Income Tax Act, providing a precise definition of Islamic financial business as “financial business undertaken by a person that conforms to Shari’ah principles.” This definition sets the stage for the incorporation of Islamic banking practices in Uganda. Additionally, the amendment includes provisions for Islamic insurance, known as ‘takaful,’ and reinsurance, referred to as ‘re-takaful,’ within the realm of Islamic banking.
Moreover, Section 67 of the Principle Act has been revised to mandate the withholding of tax by non-resident partners engaged in Islamic partnerships, aligning their obligations with those of other taxpayers. The passage of this amendment received commendation from Members of Parliament, with Hon. Asuman Basalirwa expressing appreciation for Speaker Anita Among’s instrumental role in ushering in these historic legislations. He emphasized the significant stride made with the introduction of Islamic banking in Uganda.
Recognizing the need to address concerns and enhance awareness about the advantages of Islamic banking, Speaker Among stressed the importance of conducting mass education on the subject. She called upon Finance State Minister, Hon. Henry Musasizi, to organize workshops for Members of Parliament, providing them with in-depth insights into the potential opportunities presented by Islamic banking.
Once signed into law by the President, this pivotal amendment will empower financial institutions and individuals in Uganda to actively engage in Shari’ah-compliant banking practices, including insurance (takaful) and reinsurance (re-takaful). This development marks a significant leap forward in expanding Uganda’s financial sector, embracing diverse banking practices, and fostering a more inclusive and equitable economic landscape.
