Investment Safety and Tax Efficiency – by Jon Pedley

January was an unusually busy month in terms of client enquiries. It is clear that our Ugandan clients are concerned about the economy, inflation, the strength of the Ugandan shilling, and about how to preserve wealth. It is obvious that if the Ugandan economy, currency, and macro-economic climate are unfavourable then investing outside Uganda makes sense. But two concerns that we often hear about off-shore investment from investors in Uganda are:

·         Security: how can I be sure that my money is safe – particularly if it is invested thousands of miles away in a foreign country?

·         Tax: URA is squeezing me dry here – but how do I avoid tax on my investments when I bring money back to Uganda?

And so I wanted to address these two questions in a more detail……………

Securing off-shore investments

Investment Owl specialises in finding investments where there is no risk to capital. It is only possible to achieve this in jurisdictions where the legal system is clear and developed – and where the courts are not under the influence of government and/or the rich and powerful. Even then it is key that the structure of the investment is clear and simple, governed by a contract that protects investors, and managed by an independent, regulated entity who acts only in the interest  of our clients. The simplest and best financial instrument to achieve this is a “loan note” where our investors make a loan to an asset rich UK business which enters a contract to repay the loan at a fixed time with a fixed return on the loan. The loan is backed by a charge against the borrower´s assets and the interests of our clients is managed by a UK government appointed security trustee. If there is a default the security trustee communicates with the investors that he serves, liquidates assets to repay investors capital and interest, and ensures repayment in the shortest possible time. The security trustee has a charge over all the borrowers assets.

In most cases we are securing investments against assets that are valued at more than THREE times the total monies invested. Compare this to a bank in Uganda where BoU guarantees just 10 million Shillings of all the money in your current, deposit and foreign currency accounts!

Avoiding Tax

Avoiding tax is legal and advisable where evading tax is not! We help our clients to avoid tax. As well as better security a major attraction of the offshore investments that we source is that they do NOT attract any withholding tax. The interest rates of 10-15% per annum on $ and £ deposits are what you actually receive. It is highly unlikely that the quarterly interest payments that you receive from any investments will attract the interest of URA as they are transferred to your Ugandan bank account. However, clients often ask me what happens when they bring money back into Uganda at the end of an investment. Many of our clients now choose to keep their money outside Uganda after a successful investment and we can help to set up banking facilities so that they can receive capital and interest outside Uganda and access their money through internet banking and debit cards. The money remains in tax neutral jurisdictions.

We explained some of these ideas at a seminar for SACCOs last week where we screened this short video that explains loan notes – have a look here 


And get in contact if you have any questions or want to meet to discuss all things financial……


Written by Jon Bennion-Pedley