Taxation Handbook FY 2023-24 PDF

SIXTH EDITION FY 2023-24 TAXATION HANDBOOK A Guide to Taxation in Uganda © Uganda Revenue Authority 2023 Second published 2017 First published 2011 All rights reserved. No part of this publication may be reprinted or reproduced or utilized in any form or by any means, electronic, mechanical or other means now known or hereafter invented, including copying and recording, or in any information storage or retrieval system, without permission in writing from Uganda Revenue Authority. Layout, design: ………. ISBN 978-9970-02-977-8 DISCLAIMER This Information is strictly for purposes of guidance to our clientele and should not at any one time be used in place of the substantive law; and is subject to change on amendment of tax legislation and any other regulations governing tax administration. Table of contents Foreword................................................................................................ 6 PART A........................................................................... 7 Background to Taxation.......................................................... 10 1.0 Introduction to Taxation........................................................................ 10 2.0 History of Taxation in East Africa..................................................... 10 3.0 Legality of Taxes collected by the Central Government …………………….…....................................... 11 4.0 Principles of Taxation.............................................................................. 12 4.1 Equity/Fairness........................................................................................... 12 4.2 Convenience................................................................................................. 13 4.3 Certainty......................................................................................................... 13 4.4 Economical................................................................................................... 13 4.5 Simplicity........................................................................................................ 14 4.6 Ability to Pay................................................................................................ 14 5.0 Characteristics of a good Tax System........................................... 14 5.1 Progressive Tax........................................................................................... 14 5.2 Regressive Tax............................................................................................. 14 5.3 Proportional Tax......................................................................................... 14 6.0 Classification of Taxes............................................................................. 14 7.0 Role of Taxation.......................................................................................... 15 8.0 About Uganda Revenue Authority................................................. 16 8.15 Taxpayers’ Charter.................................................................................... 24 8.15.1 Rights of the Taxpayer …………………………........................................ 25 8.15.2 Obligations of the Taxpayer................................................................ 26 9.0 Brief on E-Tax............................................................................................... 27 9.1 E – Registration........................................................................................... 27 9.2 E – Filing.......................................................................................................... 27 9.3 E – Payment.................................................................................................. 28 10.0 Definition of Key Terms......................................................................... 29 11.0 Scope of Tax Liability………………….....…………………………................ 30 Table of contents 12.0 Sources of Income………......………………………………………….............. 30 12.1 Business Income………......……………………………………………............... 30 12.2 Employment Income………......……………………………………............... 32 12.3 Property Income.…......………………………………………………................. 36 12.4 Exempt Income………..………………………………………………................. 36 PART B........................................................................... 37 Domestic Taxes…………………………………………..................... 38 1.0 Tax Registration………………………………………….................................... 39 2.0 Return filing…………………………………………............................................ 44 3.0 Assessments………………………………………….......................................... 47 4.0 Objections and Appeals………………………………………….................. 48 5.0 Payment and recovery of Tax……………………………………............. 51 6.0 Determination of Tax liability……………………………………............... 53 7.0 Persons Assessable to tax.…………………………………………............ 54 7.1 Taxation of Small Business Taxpayers…………………….…........... 54 7.2 Individual Income Tax…………………………………………………............. 57 7.3 Corporation Tax…………………………………………………………............... 59 7.4 Pay As You Earn…………………………………………………..……................ 60 7.5 Withholding Tax…………………………………….…………………….............. 62 7.6 Rental Tax………………………………………………………………..…................ 65 7.7 Value Added Tax…………………………………………………………............. 67 8.0 Income Tax Clearance Certificate (TCC)…………….................... 77 9.0 Tax stamps………………………………………….............................................. 78 10.0 Non-Tax Revenue (NTR)…………………………………………................. 78 PART C…………………………………………........................... 80 Customs…………………………………………................................... 81 1.0 Introduction…………………………………………............................................ 83 2.0 Clearing Imports………………………………………….................................. 84 Table of contents 3.0 Customs Clearing Agent…………………………………………................. 84 4.0 Declaration of Goods…………………………………………........................ 94 5.0 Assessment of duties and taxes……………………………….............. 95 6.0 Customs Valuation.……………………………………………………............... 97 7.0 Payment of Customs taxes ………………….…………………................ 104 8.0 Objection and appeals…………………………………………..................... 105 9.0 Clearance of Passengers and Baggage……………………............ 107 10.0 Post parcel and courier………………………………………….................... 108 11.0 Warehousing of goods & motor vehicles on arrival.............. 111 12.0 Groupage cargo clearance procedure…………………….............. 112 13.0 Auction at customs warehouse........................................................ 114 14.0 Temporary Importation…………………………………………................... 115 15.0 Transit and Transshipment………………………………………................ 117 16.0 Export Procedure…………………………………………................................ 122 17.0 Prohibited and Restricted Goods……………………………............... 126 18.0 Clearance of Temporary Exports……………………………................ 128 19.0 Exports unedr a simplified regime………………………................... 129 20.0 Exemption Regime…………………………………………............................. 130 21.0 Single Customs Territory…………………………………………................. 132 22.0 Automated System for Customs Data (ASYCUDA)............. 138 23.0 Customs Trace Facilitation Initiatives…………………….................. 155 23.1 Security and Facilitation in a global Environment (SAFE)............................................................................... 141 23.2 Authorised Economics Operator (AEO)..................................... 142 23.3 Regional Electronic Cargo Tracking System ……….................. 148 23.4 Uganda Electronic Single Window (UESW) …………............... 151 23.5 Document Processing Center …………………………..….................... 155 PART D..................................................................................... 156 1.0 Special Features of the Taxes Administered by the URA.................................................................................................... 158 1.1 Payment of Tax…………………………………………..................................... 158 1.2 Regulations…………………………………………............................................. 158 Table of contents 1.3 Rulings…………………………………………....................................................... 158 1.4 Remission of tax……………………………………………………….................. 159 1.5 Double Taxation Treaties …………………………………………............... 159 Foreword Fellow Citizens We are glad to bring you the sixth edition of the URA Taxation Handbook, ‘A Guide to Taxation in Uganda’. From the various interactions we have had with you, the need for more engagements in taxpayer education to equip you with more knowledge about your rights and obligations is very clear. On our part, we are committed to not only listen to your concerns, but to re-spond to your needs in a dynamic and innovative way. This handbook is one of the many ways we are equipping you with all information related to tax, in a simplified manner to enable you be complaint as you grow your businesses. It is from a healthy business environment that we collect taxes for the development of our country – which is a win-win for all of us. In here you will find the overall summary of the structure of Uganda’s tax system from tax policy issues, international trade and customs and domestic taxes, recent tax amendments, examples from the small business taxpayers, employment, and multinational operations that answer all of the frequently asked tax challenges. The handbook also equips you with a step-by-step taxpayer rights and obligations all aimed at aiding you to be tax alert and look at tax as part of a legitimate business expense and not as a burden. I encourage you to embrace this bank of tax knowledge as we move together in developing Uganda into an economically independent nation. If you have any feedback on other ways we can support you, please do not hesitate to contact us. Contact details are at the back of the handbook. John Rujoki Musinguzi Commissioner General – Uganda Revenue Authority N IS FREE TIN IS FREE TIN IS FR N IS FREE TIN IS FREE TIN IS FR N IS FREE TIN IS FREE TIN IS F N IS FREE TIN IS FREE TIN IS F TIN N IS FREE TIN IS FREE TIN IS F N IS FREE TINIS IS FREE TIN IS F N IS FREE TIN IS FREE TIN IS F FRE IN IS FREE TIN ISE ! TIN IS F FREE IN IS FREE TIN IS FREE TIN IS F IN IS FREE TIN IS FREE TIN IS F IN IS FREE TIN IS FREE TIN IS F IN IS FREE TIN IS FREE TIN IS F... AND INSTANT “URA has unveiled a simpler TIN registration process” e t yo u r fre e TIN today at G g www.ura.go.u Call us on (Toll free): 0800 - 117000 or 0800 - 217000 WhatsApp: (256) - 772140000 | Email: [email protected] PART A BACKGROUND TO TAXATION Background to Taxation Compulsory Public Works Gun and Hut Tax Graduated Tax Income Tax and Customs Duty Uganda Revenue Authority (1991) 10 A Guide to Taxation in Uganda | Sixth Edition Background to Taxation 1.0 | Background to Taxaton 1.1 Introduction to Taxation The evolution of taxation is attributed to the development of the modern state, which called for increased expenditure for infrastructure and public services. 1.2 Origin of Taxation Tax is the price we pay for civilization, which goes hand in hand with an organized society. For a society to be organized, it needs a well-financed administrative structure. Therefore, taxation in its different forms has existed as long as society had the minimum elements of government. Tax is a monetary charge imposed by the government on persons, entities, transactions or property to generate government revenue. Where payment is not monetary, a wider embracing definition has been adopted as: “Enforced proportional contributions from persons and property levied by the State by virtue of its sovereignty for the support of government and for all public needs” - Thomas. M. Cooley: The Law of Taxation One of the main characteristics of a tax is that the payer does not demand something in return equivalent to the payment made to government. Taxes are collected and used by government for a public good and not just for those who make the payment. 2.0 History of Taxation in East Africa Taxation was introduced in East Africa by the early British colonial administrators through the system of compulsory public works such as road construction, building of administrative headquarters and schools, as well as forest clearance and other similar works. The first formal tax, the hut tax, was introduced in 1900. This is when the first common tariff arrangements were established between Kenya and Uganda. Through this, Ugandans started paying customs duty as an indirect tax, which involved imposition of an ad valorem import duty at a rate of 5% on all goods entering East Africa, through the port of Mombasa and destined for Uganda. A similar arrangement was subsequently made with German East Africa (Tanganyika) for goods destined for Uganda that entered East Africa through Dar-es- Salaam and Tanga ports. This gave rise to revenue which was remitted to Uganda. The Protectorate government heavily relied on customs duties to fund its A Guide to Taxation in Uganda | Sixth Edition 11 Background to Taxation programs. Most indigenous Africans were not engaging in activities that would propel the growth of the monetary economy. Accordingly, government introduced a flat rate Poll tax that was imposed on all male adults. The requirement to pay tax forced the indigenous Ugandans to enter the market sector of the economy through either selling their agricultural produce or hiring out their services. The tax burden was later increased by the introduction of an additional tax to finance local governments. This culminated into the first tax legislation in 1919 under the Local Authorities’ Ordinance. In 1953, following recommendations by a committee headed by Mr. C.A.G Wallis, Graduated personal tax was introduced to finance local governments. Income tax was introduced in Uganda in 1940 by a Protectorate ordinance. It was mainly payable by the Europeans and Asians but was later on extended to Africans. In 1952, the ordinances were replaced by the East African Income Tax Management Act, which laid down the basic legal provisions found in the current income tax law. The East African Income Tax Management Act of 1952 was repealed and replaced by the East African Income Tax Management Act of 1958. The administration of both income tax and customs duty was done by departments of the East African Community (EAC) until its collapse. Under the EAC dispensation, there were regional taxing statutes and uniform administration but the national governments (or partner states, as they were called) retained the right to define tax rates. After the collapse of the EAC, the tax departments were transferred to Ministry of Finance with the transfer of the Income Tax Department in 1974; followed by the Customs Department in 1977. In 1991, the function of administering Central government taxes was shifted from the Ministry of Finance to the Uganda Revenue Authority, a corporate body established by an Act of Parliament. The EAC was re-established in 1999 by Tanzania, Kenya and Uganda. Rwanda and Burundi joined the EAC in 2007. The EAC in December 2004 enacted the East African Community Customs Management Act 2004 (EAC-CMA). This Act governs the administration of the EA Customs union, including the legal, administrative issues and operations. 3.0 The Legality of Taxes collected by the Central Government Articles 152 (1) of the Uganda Constitution provides that “No tax shall be imposed except under the authority of an Act of Parliament”. Therefore, the Uganda Revenue Authority Act. 12 A Guide to Taxation in Uganda | Sixth Edition Background to Taxation Cap 196 was put in place to provide the administrative framework in which taxes under various Acts are collected. Uganda Revenue Authority administers the tax laws (Acts) on behalf of the Ministry of Finance, Planning and Economic Development under the following legislations: i. Customs Tariff Act. Cap 337. ii. East African Community Customs Management Act, 2004 iii. East African Excise Management Act Cap 28 iv. Excise Tariff Act Cap 338 v. Income Tax Act Cap 340 vi. Stamp Duty Act Cap 342 vii. The Finance Acts viii. The Gaming and Pool Betting (Control and Taxation) Act Cap 292 ix. The Tax Procedures Code Act, 2014 x. Traffic and Road Safety Act Cap 361 xi. Value Added Tax Act Cap 349 xii. All other taxes and non-tax revenue as the Minister responsible for Finance may prescribe. 4.0 Principles of Taxation The principles of taxation are concepts that provide for guidelines towards a good tax system. Since many view taxation as a necessary evil, it should be administered in a way that creates minimum pain to the payer, just like the proverbial honey bee which collects nectar from the flower without hurting the flower. Economists over time have laid down the principles that policy makers should take into account when making tax laws; these principles are referred to as the canons of taxation. The following are the common canons of taxation: 4.1 Equity/Fairness Tax should be levied fairly so that: (i) The same amount of tax is paid by persons or entities that are equal in earnings or wealth (horizontal equity). Illustration If B is a shopkeeper and makes a profit of Shs 10,000,000 in a year and is taxed at 10%, which is equal to Shs 1,000,000, and C who is a cattle trader makes a profit of Shs 10,000,000 in a year, he should also be taxed at 10%. Likewise, any other person who earns an income of Shs 10, 000,000, should pay the same tax. A Guide to Taxation in Uganda | Sixth Edition 13 Background to Taxation 1. The contribution in tax should increase as the taxable income increases (vertical equity). The principle behind vertical equity, which is most applicable in income taxes, is that the burden among taxpayers should be distributed fairly, taking into account individual income and personal circumstances. Vertical equity is to be taxed proportionate to the income one earns. The strongest shoulders should carry the heaviest burden. Illustration B and C in illustration 1 were taxed at 10% because they both earned 10,000,000; if D earned Shs 15,000,000 this person may be taxed at 15%. 4.2 Convenience Under normal circumstances, a taxpayer should not undergo undue difficulty to pay tax. Therefore, the place, medium, mode, manner and time of payment should not be a burden to the taxpayer. Illustration A person doing business in Tororo should not be inconvenienced to travel to Kampala to pay his/her taxes. An office should be created nearby to ease the process. 4.3 Certainty A good tax system is one where the taxes are well understood by both tax payers and tax collectors. The time and reason of payment as well as the amount to be paid by an individual should be well documented and certain or known. The tax should be based on laws passed by parliament. 4.4 Economical The administrative cost of collecting taxes should be kept as low as possible to both the collecting agent and the taxpayer. The general principle is that the cost of collection and administration of taxes to the collecting agent should not exceed 5% of the tax revenue. Likewise, the cost of compliance to the taxpayer should be as low as possible and must not be seen to hinder voluntary compliance. Illustration URA collected about shillings 16Tn in the financial year 2018/19. By the principle of Economy; the cost of collecting and administrating taxes should not exceed 5% of shillings 16Tn. 4.5 Simplicity The type of tax and the method of assessment and collection must be simple enough to be understood by both the taxpayers and the collectors. Complicated taxes lead to disputes, delays, corruption, avoidance and high costs of collection 14 A Guide to Taxation in Uganda | Sixth Edition Background to Taxation in terms of time and resources. 4.6 Ability to Pay The tax levied should not exceed the taxable income of a person. This is to avoid discouraging the person’s performance or participation in the tax base. Other canons of taxation include; Diversity, Productivity, and Elasticity. 5.0 Characteristics of a good Tax System In complying with the canons of taxation, taxes are characterized as proportional, progressive or regressive. 5.1 Progressive Tax This tax is structured in such a way that the tax rate increases as the person’s income increases. Most income taxes are progressive so that higher incomes are taxed at a higher rate. A progressive tax is based on the principle of vertical equity. 5.2 Regressive Tax This is a tax not based on the ability to pay. A regressive tax is structured that the effective tax decreases as the income increases. 5.3 Proportional Tax This is a tax whose rate remains fixed regardless of the amount of the tax base. A proportional tax may be considered regressive despite its constant rate when it is more burdensome for low income payers than to high income payers. 6.0 Classification of Taxes Taxes are classified as either direct or indirect. Direct Taxes are imposed directly on a person’s income arising from business, employment, property and the burden of the tax is borne by the individual or business entity. Examples of direct taxes include Corporation tax, Presumptive (Small business) tax, Individual Income Tax, such as Pay As You Earn, capital gains tax and rental income tax. Indirect Taxes are taxes levied on consumption of goods and services. The taxes are collected by an agent and some of them include Value Added Taxes (VAT), excise duty, import duty among others. Illustration Shopkeeper B sells bread to K for Shs 2,000, on which VAT has been charged. The VAT on the bread therefore is Shs 305 (18% of 2,000). The tax is remitted to the Government by the seller. Although K has paid the Shs 305 on bread that A Guide to Taxation in Uganda | Sixth Edition 15 Background to Taxation was priced at Shs 1,695, the tax is accounted to URA by B and K need not follow up the transaction with URA. 7.0 Role of Taxation a) To finance Government re-current and development expenditure, i.e. paying salaries for civil servants and funding long term projects such as construction of schools, hospitals and roads. b) It can be used to regulate demand and supply in the economy in times of inflation. c) It encourages development of local industries with a view to providing employment and saving foreign exchange, by imposing high duties on competing imports. It encourages export of goods and services by reducing or removing tax on the export in order to make them more competitive in the world market. d) It protects society from undesirable or harmful products and industries by imposing high taxes on them, for instance excise duty on cigarettes and beer as well as environmental levy on used vehicles. e) To achieve greater equality in the distribution of wealth and income, the government may impose a progressive tax on the incomes and wealth of the rich. The revenue raised is then used to provide social services for the benefit of the society. 8.0 About Uganda Revenue Authority Uganda Revenue Authority (URA) is a Statutory Authority established by the Uganda Revenue Authority Act, Cap 196 with the mandate of assessment, collection and administration of taxes, fees and Non- Tax revenue in Uganda. 8.1 Vision A transformational Revenue Service for Uganda’s Economic Independence 8.2 Mission Mobilize revenue for National Development in a Transparent and Efficient manner. 8.3 Core Values Patriotism Integrity Professionalism 8.4 Client Value Proposition We promise excellent revenue services everywhere, all the time at the lowest cost possible. 16 A Guide to Taxation in Uganda | Sixth Edition Background to Taxation 8.5 Tagline Developing Uganda Together 8.6 How URA is organized to serve its clients Uganda Revenue Authority is administered by a Board of Directors, which is the policy making body entrusted with general oversight of the organisation. The Management of URA is headed by the Commissioner General, who at the same time is responsible for three divisions namely: (i) Public and Corporate Affairs Management: This division manages Uganda Revenue Authority’s interface with the Public through Client’s Relations, Public Relations and Publicity, Corporate Brand Management and Tax Education. (ii) Staff Compliance: Handles staff behaviour and adherance to the URA code of conduct (iii) Executive Office: This division is entrusted with managing the Commissioner General’s office and duties of that office. 8.7 Departments in URA Administratively, URA has Eight departments, as follows: 8.7.1 Legal Service and Board Affairs The main role of the Department is to serve as an in- house legal firm to provide legal services on all issues that may arise in the day-to-day operation of the organisation. The Department represents URA in the courts of law as well as quasi courts. 8.7.2 Customs Services Department This department is responsible for handling all customs issues including assessing and collecting international trade revenues in accordance with the relevant tax laws. 8.7.3 Domestic Taxes Department This department is charged with the responsibility of administering all domestic tax affairs; registration, receipt of returns, filing, auditing, assessments, collections, and refunds. In addition to tax revenue, it also administers non-tax revenue as mandated by Ministry of Finance, Planning and Economic Development. 8.7.4 Corporate Services Department This department is responsible for all the support service functions in the organisation. These include; Finance, Administration, Information Technology and Human Resources. A Guide to Taxation in Uganda | Sixth Edition 17 Background to Taxation 8.7.5 Internal Audit Department This department offers audit assurance services to other departments on the adequacy of internal control systems 8.7.6 Tax Investigations Department This department is charged with monitoring and pursuing all cases of tax crime and evasion-related activities. 8.7.7 Information Technology and Innovation This department is charged with development, planning and im- plementation of enterprise Information Technology systems 8.8 Specified Targets Uganda Revenue Authority receives annual revenue targets from its parent Ministry, The Ministry of Finance, Planning and Economic Development. URA’s long-term goal is to collect Revenue that will fully finance the Government recurrent and Development expenditure. 8.9 Feedback management URA values feedback and shall continue to inculcate a communication culture through the following initiatives: Taxpayer outreach program Stakeholder engagements The Annual Taxpayers’ Appreciation Day The Annual Client Satisfaction Surveys and the Media Other tools used to generate feedback from clients include: The URA Web portal The URA Toll Free line 0800117000/0800271000 URA WhatsApp 0772140000 Suggestion boxes The Client Feedback Form Email: [email protected] Social media e.g Facebook, Twitter, Instagram and YouTube The Taxman Blog Feedback is invaluable to URA for the following reasons; It enables us to know how well we are performing against the parameters put in place. Through this, we are constantly kept in a position to determine our strategic direction It also provides a basis for the short term activities we must carry out in order to satisfy our client URA is committed to placing the customer first and shall 18 A Guide to Taxation in Uganda | Sixth Edition Background to Taxation undertake all possible measures to achieve this. 8.10 Managing Complaints URA recognizes that managing feedback is a critical factor in Client Service and is therefore committed to giving instant responses to all complaints raised using established feedback tools. 8.11 Accountability Accountability is a primary tool of ensuring continuity in any relationship. URA shall: Uphold zero tolerance to corruption e.g through the Integrity Enhancement function that oversees integrity issues in URA Avail all the necessary information to all our stakeholders Be responsive to the environmental and societal needs of the community in which we operate through comprehensive Corporate Social Responsibility programs. Hold periodic press briefs to keep the public informed in regard to tax and tax related issues Disseminate information to the public on demand through established channels Establish strong internal controls to check on the performance of our procedures 8.12 Dissemination of information Is key in the relationship between URA and the Public; and this will be achieved through: i. Appointed Regional Spokespersons who deal with all public relations issues in a bid to improve information flow to all stakeholders. ii. Developed a Web portal to cater for our vast clientele. This is aimed at giving our clients one quick access to handy material in regard to URA, its processes and procedures. iii. Profiled and segmented all sectors of the business community to enable a focused approach iv. Participate in Exhibitions where Tax Information Centers are established to handle client issues. v. Partner with the media to take the tax message to the grass roots. vi. Hold periodic press briefings to enlighten the public on current issues pertaining to the Authority or its dealings. vii. Produce simplified tax materials to benefit its vast clientele. viii. Translate simplified tax materials to local languages to empower all the taxpayers with tax information. ix. Implemented the Taxation course units in the Ugandan School Curriculum A Guide to Taxation in Uganda | Sixth Edition 19 Background to Taxation 8.13 Monitoring and evaluating performance URA shall continue to monitor and evaluate performance through a number of avenues. These include; (i) Periodic client satisfaction surveys – Feedback from such surveys will be used to improve on our service delivery. (ii) The URA Client Service Standards. These Standards detail how URA shall relate with all her stakeholders. They are an open commitment on what the ‘customer’ should expect as the minimum service levels from all URA staff. Our stakeholders are encouraged to know the provisions therein and give feedback relating to staff performance. 8.14 Performance improvement URA has embraced several initiatives aimed at improving organizational effectiveness and efficiency including the following: 1. Restructuring: URA reorganized itself to provide a leaner, more efficient and focused institution with a highly motivated and proactive workforce. 2. Attitude Change: URA shall uphold the Organizational Core Values while undertaking Team Building Events and staff Training to achieve positive behavioral change. 3. URA Client Service Standards: The standards will provide a benchmark for the measurement of performance levels across the organization SERVICES STANDARDS Physical URA shall attend to taxpayers and/or its cleints on a Queues first come, first serve basis to give assistance and/or clarification to taxpayers regarding their tax obligations Acknowledge URA services shall be available between and resolve 8:00 am – 5:00 pm from Monday to Friday (except complaints public holidays), with the exception of the following where URA Services shall be available between; a) Twenty four hours/Seven days of the week (24/7) for One Stop Border Posts b) 8:00 am – 8:00 pm on Weekdays and 9:00 am – 3:00 pm on Weekends except on public holidays for URA call-center services 20 A Guide to Taxation in Uganda | Sixth Edition Background to Taxation Duty drawbacks URA will endeavor to process duty drawbacks / / refunds refunds within the following stipulated timelines from the date of submission of requests for refunds; Income Tax - 30 days VAT - 15 days Other Non Tax Revenue -10 days Audits and URA will give the taxpayer at least ten (10) days’ notice Assessments of its intention to conduct an audit. However, no prior notice shall be given where an investigation is to be conducted. Objections An objection notice will be served to the taxpayer within decisions 90 days from the date of receipt of the objection for Domestic Taxes. An objection notice will be served to the taxpayer within 30 days from the date of receipt of the objection for Customs Duties Licensing URA shall provide an updated list of licensed Tax and of Tax and Clearing agents annually using available communication Clearing Agents channels. TIN After fulfilling all requirements and procedures as Registration per the existing law Tax Identification Number will be processed within 2 business day Processing of After fulfilling all requirements and procedures as Exemptions per the existing law Tax Exemption Process will be completed within 30 business days, subject to availability of all the relevant information. Processing of Tax Clearance Certificate processing shall be done Tax Clearance within 2 working days. Certificate Approval and After fulfilling all requirements and procedures as per Cancellation the existing law Approval and Cancellation of Agency notice shall be processed within 24 business days. URA online URA online systems will be available twenty four hours / systems seven days a week (24/7). Taxpayers will be notified in the event of system intermittence. A Guide to Taxation in Uganda | Sixth Edition 21 Background to Taxation Contact Person For all correspondences, we shall provide a contact person and their direct telephone and official email for the taxpayer to follow up. Engagements For all routine engagements, taxpayers and stakeholders shall be informed on the time and venue at least one week in advance. Inquiries and Inquiries and complaints lodged through URA’s available Complaint platforms, will be responded to within 2 business days. Management 8.15 Taxpayers’ Charter The URA Taxpayers’ Charter spells out the rights and obligations of the Taxpayer, guides URA in upholding these rights and facilitates the Taxpayer to meet his or her obligations. It was launched in 2002 and first revised in April 2006 to accommodate the developments in Uganda Revenue Authority (URA) and later in December 2006 to align it with the Public Service Client Charter then in June 2011 and the latest revision in 2015. The Charter derives authority from the various Tax laws and Regulations governing the administration of taxes in Uganda and clearly outlines the expectations of both the Taxpayer and the Tax Authority. It acts as a reference point for the Taxpayers in managing their interaction with URA and provides the Tax body with the necessary benchmark for its Client Service Standards. This is done by recognizing its clients as viable partners in the administration and collection of taxes. The Taxpayers charter is therefore a set of guidelines that guarantees a meaningful relationship between URA and its various stakeholders. 8.15.1Rights of the Taxpayer a) Right to fair treatment Taxpayers have a right to be treated fairly in all their dealings with URA. Tax laws and procedures shall be applied consistently to all taxpayers. b) Right to finality Taxpayers have the right to know the maximum amount of time required to challenge URA’s tax related decisions, as well as the maximum amount of time 22 A Guide to Taxation in Uganda | Sixth Edition Background to Taxation URA has to audit a particular tax year. Taxpayers have the right to know when URA has finalized an audit c) Right to Privacy Taxpayers have the right to expect that any URA inquiries, examinations, investigations or enforcement actions will comply with the law and be no more intrusive than necessary and will respect all due process rights, including search and seizure protections d) Right to confidentiality Taxpayers have the right to expect that any information they provide to URA will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect appropriate action to be taken against URA employees who wrongfully use or disclose taxpayer information e) Right to be informed Taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the law and URA procedures in all tax forms, instructions, publication, notices and correspondences. They have the right to be informed of the URA decisions about their tax accounts and to receive clear explanations of the outcomes. f) Right to timely, quality and professional services Taxpayers have the right to receive prompt, courteous and professional assistance in their dealings with URA and to receive clear and easily understandable communications from URA. g) Right to representation Taxpayer reserves the right to appoint and retain an authorised representative such as a tax agent or clearing agent to represent them in their dealings with URA. h) Right to challenge and/or object Taxpayers have the right to raise objections and provide additional documentation in response to tax decision and to expect that URA will consider their objections promptly and fairly, and to receive a response from URA within the period stipulated in the Law. i) Right to appeal Taxpayers have a right of appeal to an independent tax tribunal or courts of law in accordance with the law on any matter A Guide to Taxation in Uganda | Sixth Edition 23 Background to Taxation 8.15.2 Obligations of the Taxpayer a) Registration All eligible taxpayers should voluntarily register with URA. b) Refund Claims Taxpayers have the obligation to submit their tax refund claims using prescribed forms and attach required evidence to support the claim. c) Keeping of proper records The Taxpayer is obliged to keep accurate records of accounts, documents and any other relevant information as prescribed under the law d) File tax returns Taxpayers are obliged to file accurate and timely tax returns, customs entries or any information relating to their tax obligations e) Payment of Taxes Taxpayers are obliged to pay tax in accordance with the law. f) Avoid Tax Evasion Taxpayers should not indulge in any form of tax evasion and/or other illegal practices that cause revenue leakages. g) Compliance Taxpayers must comply with their tax obligations as stipulated by the relevant laws Taxpayers must comply with all processes and procedures as stipulated by law and administratively to facilitate revenue collection h) Update personal information Taxpayers are required to regularly update personal information and payment details with URA. i) Due diligence in tax matters The taxpayer is solely responsible for managing his/her tax obligations and affairs. j) Be respectful to URA staff The taxpayer is expected to behave respectfully at all times when dealing with all URA staff. k) Dealing with authorized staff The taxpayer and/or his/her authorised agent(s) shall be expected to deal and 24 A Guide to Taxation in Uganda | Sixth Edition Background to Taxation cooperate with URA’s authorized staff. l) Quote your TIN The Taxpayer must always quote their Taxpayer Identification Number (TIN) for any dealings with URA. m) The need for an interpreter The Taxpayer shall inform URA of their need for an interpreter. Response to tax notices and any other URA communication The Taxpayer is obliged to respond to notices and information requests received from URA in a time bound manner. 9.0 | Brief on E-Tax 9.1 E – Registration URA, through its modernization process introduced an electronic/online system (eTAX) to cater for registration of taxpayers, filing of returns, assessments and payment of taxes. eTAX is a name given to an Integrated Tax Administration System that provides online services to the taxpayer on a 24-hour basis. eTAX enables taxpayers to lodge their Tax Identification Number (TIN) applications online through the web por- tal, from anywhere on the globe as long as they are connected to the internet. URA has further simplified the TIN registration process by introducing Instant Tin application for individuals and TIN application online web forms besides getting a TIN using the downloadable excel template. The taxpayer upon receipt of a TIN is able to log into their account on the URA web portal for any further transactions, using the password that comes with the approval notice. Some of the benefits of e registration include: a streamlined and less time wasting process, application easily done on the web portal. Besides registration, the taxpayer is able to amend his / her registration details with URA in case of any changes. Taxpayer will always receive feedbacks on the application and this is possible especially when accurate email addresses and telephone numbers (of the taxpayers) are indicated in the application. 9.2 E – Filing A taxpayer registered with URA for any tax type other than PAYE has an obligation to submit a return for the tax period defined by the respective tax law. URA A Guide to Taxation in Uganda | Sixth Edition 25 Background to Taxation facilitated the taxpayer to fulfill this obligation by introducing electronic filing in eTAX. The taxpayer obtains a return from the web portal (http:// ura.go.ug), save a template on any storage devise, take time to fill in the return and validate the return before they finally upload it on the web portal. If the upload is successful, the taxpayer will receive an auto generated e-acknowledgement receipt which is evidence of submission. In case of any problems in filling the respective returns, do not hesitate to send an email about the challenge to URA on the email address; [email protected] or call the toll free lines. In case there are errors in the return detected by the system, the taxpayer is given a chance to amend the errors when he/she is issued a Return Modified Advice Notice. The return must be submitted by the due date to avoid penalties for late filing and it must also be submitted for each tax period to avoid estimated assessments that arise out of non-submission of returns. In case the taxpayer is unable to submit a return on time, he or she can apply for the extension of time to submit a return late using an application form for late filing also found on the web portal. Some of the benefits accruing from e-filing are that the return process was clearly separated from the payment process and the taxpayer can now file returns before/ after making the payment, or make the payment before/ after filing the return. NB: Both Payment and Return should be made on or before the deadline. 9.3 E – Payment A taxpayer required to make payments to URA for any tax type can do so using the e payment process. All the taxpayer needs to do is to go onto the URA web portal (http://ura. go.ug), access the payment registration slip, register the payment and go to the bank to make the actual payment over the counter. The taxpayer in future may even not need to go to the bank as such facilities like, mobile money, Payway, VISA Cards are enabled for use Benefits accruing from e-payment are that the taxpayer can utilize the service on a 24-hour basis, the taxpayer’s costs of movement between his/her premises and URA or the bank are reduced; and thus saving time. Taxpayers can also monitor the status of their payments online through the web portal. 26 A Guide to Taxation in Uganda | Sixth Edition Background to Taxation 10.0 | Definition of Key Terms A Person - Includes an individual, a partnership, a trust, a company, a retirement fund, a government, a political subdivision of government, and a listed institution. Chargeable Income - is the gross income of a person for the year less total deductions allowed under the Income Tax Act Cap 340 for the year. Gross Income of a person for a year of income - is the total amount of business income, employment income and property income other than exempt income. In case of resident persons, Gross income is a person’s income from all geographical sources; and in the case of non-resident persons, gross income includes only the income derived from Uganda. Residency for tax purposes is defined in relation to individual, partnership and Company as follows: A resident individual is a person who has a permanent home in Uganda; or is present in Uganda: for a period of 183 days or more in any twelve (12) months period that commences or ends during the year of income; or during the year of income and in each of the two preceding years of income, for periods averaging 122 days in each such year of income; or is an employee or official of the government of Uganda posted abroad during the year of income. A resident company is one which: a) Is incorporated in Uganda under the laws of Uganda b) Is managed or controlled in Uganda at any time during the year of income. c) Undertakes a majority of its operations in Uganda during the year of income. A resident partnership - is one where any of the partners was a resident person in Uganda during the year of income. Year of Income - means the period of twelve months ending on June 30, and includes a substituted year of income and a transitional year of income. A substituted year of income - is a period of 12 months ending on a date other than June 30. A transitional year of income - is a period of less than 12 months that falls between the person’s previous accounting date and a new accounting date. This results from a change in a person’s accounting date. A Guide to Taxation in Uganda | Sixth Edition 27 Background to Taxation 11.0 | Scope of Tax Liability The scope of liability to tax depends on a person’s residence status. Income tax is imposed on Income from business, employment and property. For a resident person, income tax is charged on gross income from all over the world while for a non- resident person is only charged on income derived from sources within Uganda. Income tax is charged on every person who has chargeable income for each year of income. Chargeable income is derived from three main sources of income, namely; business, employment and property. Income tax is administered under the Income Tax Act (1997) Cap 340 on chargeable income. As earlier noted, chargeable income is the gross income of a person for the of income less total deductions allowed under the income tax act. 12.0 | Sources of income 12.1 Business Income Business is defined in the Income Tax Act to include any trade, profession, vocation or adventure in the nature of trade. Business income means any income derived by a person in carrying on a business and includes the following amounts, whether of a revenue or capital nature: The amount of Gains or losses from the disposal of business assets such as land and buildings. Any amount derived by a person as consideration for accepting a restriction on the person’s capacity to carry on business. For example, if Mama Rhoda gives Senkubuge Shs 100,000 to relocate his shop to another area, the Shs 100,000 becomes business income to Senkubuge. The gross proceeds derived by a person from the disposal of trading stock, i.e. sales. The value of any gifts derived by a person in the course of, or by virtue of, a past, present, or prospective business relationship. Interest derived by a person in respect of trade receivables or by a person engaged in the business of banking or money lending. Rent derived by a person whose business is wholly or mainly the holding or letting of property. The definition of business is therefore inclusive rather than specific such that there can be business which does not arise from trade, profession vocation or 28 A Guide to Taxation in Uganda | Sixth Edition Background to Taxation adventure in the nature of trade. 12.1.1 Trade Trade has the same meaning as commerce and it involves buying and selling or bartering of goods. There are many exceptions to this general definition but the following elements are crosscutting: The element of profit The regularity of the transactions. The arrangements and effort, and, Compliance with statutory obligations made to make the transactions work. Any of the above may determine whether a trade is carried out. However, depending on the facts of each case, the existence of these conditions could generally lead to the likelihood of a trade. 12.1.2 Adventure in the Nature of Trade This refers to transactions where profits arise from activities such as gambling, speculative dealings in commodities, single or one off transactions or unconventional transaction e.g. smuggling. The definition of an adventure of trade may appear sometimes to overlap with trade, but if either is proved, the requirements for business definition are satisfied. The following characteristics may point to an adventure in the nature of trade. Profit seeking. The way in which the asset was acquired. The nature of the asset. Modification of the asset prior to sale or use. Interval between purchase and sale of the asset. Way in which the sale is effected. Number of transactions. Existence of trading interest in the same field. Method of financing the transaction. 12.1.3 Profession This is a paid occupation especially one which requires advanced education and training, e.g. architecture, accounting, law and medicine. This is how one passes one’s life when earning a living. More often, it is referred to as a special calling and qualification for a certain kind of work especially for social or religious work. It can thus be used to bring within the scope of income tax any form of regular and continuous profit earning, which does not fall within the A Guide to Taxation in Uganda | Sixth Edition 29 Background to Taxation categories of trade, business, profession or employment. Earnings from activities related to religion can fall in this category. Business income is considered if it is ‘derived’ during the year of income. ‘Derive’ has been judicially determined to be equivalent to ‘accrue’ or ‘arising’, which also relates to the source of income. 12.1.4 Capital Gains Capital gains arise from the disposal of a business asset that is not a depreciable asset, such as land and buildings. A disposal of an asset occurs when an asset has been sold, exchanged, redeemed, distributed, transferred by way of gift, destroyed or lost by the taxpayer. The Capital gain is the excess of the consideration over the cost base of the asset. Conversely, there may also be a loss when the cost base of the asset is higher than the consideration received for the business asset. Cost base of an asset is the amount paid or incurred by the taxpayer in respect of the asset, including incidental expenditures of a capital nature incurred in acquiring the asset, and includes the market value at the date of acquisition of any consideration in kind given for the asset. Capital gains are included in the gross income of the taxpayer and assessed as a business income. Calculation of capital gains tax In the calculation of capital gains tax, indexation is provided for in order to account for inflation. This means that before determining Capital Gains tax on a business asset, one will factor in inflation among others that influence the asset value. However, indexation only applies where the asset is sold after 12 months from the date of purchase of that Asset. The prescribed formula is: CB x CPID/CPIA, where; CB is the amount of an item of cost or expense incurred; CPID is the Consumer Price Index number published for the calendar month of sale; and CPIA is the Consumer Price Index number published for the month immediately prior to the date on which the relevant item of cost or expense was incurred. Illustration: A piece of land was purchased in June 2015 for shs.10, 000,000 and sold in January 2016 for shs.25, 000,000. The Consumer Price Index for 2015 is 153.25 and for 2016 is 181.67 30 A Guide to Taxation in Uganda | Sixth Edition Background to Taxation In this case, the indexed cost of acquisition would be 10,000,000 x 181.67/153.25 = 11,854,486 Where CB=10,000,000 CPID=181.67 CPIA=153.25 So, the taxable capital gain would be 25,000,000 – 11,854,486 = 13,145,514 And tax at 30% would be Shs.3, 943,654. If the land was purchased and sold within 12 months from the date of the purchase, the capital gains would be computed by deducting the original purchase price (cost base) from the selling price. So, the taxable capital gain would be 25,000,000 – 10,000,000 = 15,000,000 and tax at 30% would be Shs.4, 500,000. Therefore, indexation creates a tax saving of shs.556, 346. 12.2 Employment Income Any income derived by an employee from any employment, whether past, present or in future, including the value of any benefit, advantage or facility granted to an employee constitutes employment Income. An amount or benefit is derived in respect of employment if it is provided in respect of past, present or prospective employment. It also includes an amount or benefit provided by a third party under an arrangement with an employer or an associate of the employer; and it does not matter whether it is paid to the employee or to his associates. Employment is regarded to exist where there is a contractual relationship between master and a servant for a pay. Employment refers to: Position of an individual in employment of another person. Directorship of a company. A position entitling the holder to a fixed or ascertainable remuneration. Holding or acting in a public office. It is important to distinguish between an employee and an independent contractor. As a general rule, an individual who does not satisfy the definition above automatically becomes an independent contractor. Factors to consider when distinguishing between employees and contractors Who has control over hours of work? Who has control over location of place of work? Who has control over sequence of work? Who furnishes the tools, equipment and materials? A Guide to Taxation in Uganda | Sixth Edition 31 Background to Taxation Whether the work has a risk of profit or loss? An employer means a person (individual or corporate) whoemploys/remunerates an individual while an employee is an individual engaged in employment 12.2.1 Composition of Employment Income According to the Income tax Act cap 340, Employment income includes: Wages, salary, leave pay, payment in lieu of leave, overtime pay, fees, commission, gratuity, bonus, allowances (entertainment, duty, utility, welfare, housing, medical, or any other allowances) The value of any benefits in kind provided by/on behalf of the employer to the employee Amount of private/personal expenditure discharged or reimbursed by the employer Employment terminal and retirement benefits Insurance premiums paid by the employer for the employee and/or his dependants Payments in respect of change of employment/contract terms Discounts in shares allotted to an employee and any gain derived on disposal of a right or option to acquire shares under an employee share acquisition scheme Note: It should be noted that all or any of the above in combination comprise employment income. 12.2.2 Benefits in Kind A benefit in kind is the facilitation not by way of cash by an employer to an employee as part of past, present or future employment terms. Such benefits need not have been in the written employment terms. Taxable non-cash employment benefits include: Private use of an official motor vehicle Provision of domestic servants and utilities Meals, refreshment, entertainment Relief of debt obligations/interest Provision of property by employer to employee (at no arm’s length terms) Provision of residential accommodation Any other benefits as determined by the Commissioner General. 12.2.3 Valuation of Benefits in Kind As a general rule, the value of a benefit in kind is the fair market value of the benefit on the date it is taken into account for tax purposes less any amount paid by the employee for the benefit. 1. Motor Vehicle – Where a benefit provided by an employer to an employee 32 A Guide to Taxation in Uganda | Sixth Edition Background to Taxation consists of the use or availability for use of a motor vehicle wholly or partly for the private purposes of the employee, the value of the benefit is calculated according to the following formula: (20% × A × B/C) – D where, A is the market value of the motor vehicle at the time when it was first provided for the private use of the employee. B is the number of days in the year of income in which the motor vehicle was used or available for use for private purposes by the employee for all or a part of the day. C is the number of days in the year of income D is any payment made by the employee for the benefit 2. Domestic Assistants (housekeeper, driver, gardener or other domestic assistant) – The benefit is the total employment income paid to the domestic assistants, reduced by any payment made by the employee for the benefit. 3. Meals, refreshment or entertainment – The benefit is the cost of the meals, etc. to the employer less any payment by the employee. 4. Utilities (Electricity, Water, Telephone, Internet) – The benefit is the cost of the utility to the employer less any payment by the employee. 5. Low interest on loans exceeding one million shillings – The benefit is the difference between the interest paid by the employee and the inteerest payable using the statutory interest rate (Bank of Uganda discount rate at commencement of the year of Income). 6. Debt waiver – The benefit is the amount of the debt waived. 7. Transfer or use of property or provision of services (Furniture and transportation) – The benefit is the market value of the property or services less any payments by the employee. 8. Accommodation or housing other than by way of reimbursement, discharges or allowances – Where a benefit provided by an employer to an employee consists of the provision of accommodation or housing, the value of the benefit in kind is the lesser of: (a) the market rent of the accommodation or housing (b) reduced by any payment made by the employee for the benefit; or (b) 15% of the employment income, including the amount referred to in paragraph (a), paid by the employer to the employee for the year of income in which the accommodation or housing was provided. 9. Any other benefit – The benefit is the market value of the benefit less any payments by the employee. 12.2.4 Employee’s Relief A Guide to Taxation in Uganda | Sixth Edition 33 Background to Taxation This refers to gains or income that is not included in the chargeable income of the employee and therefore not taxable on the employee: a. The employee’s income that is below the taxable threshold, currently at Shs 235,000 per month b. Pension c. Discharge or reimbursement of medical expenses actually incurred by the employee d. Life insurance premiums paid by a taxable employer (company individual) for the benefit of the employee e. Expenses incurred by the employee; discharge or reimbursement for the employee on official duty of the employer f. Meals and refreshments or value thereof provided to all employees at equal terms g. Employer’s contribution to a retirement fund for the benefit of the employee h. Any non-cash benefits whose value is less than Shs 10,000 a month i. Relief of 25% on terminal benefits for employees who have served the employer for at least 10 years j. Passage costs k. The employment income of an expatriate employee in a listed Institution, under a technical assistance agreement subject to the Minister’s approval l. Official employment income of persons employed in the armed forces, Uganda Police Force and Uganda Prisons. It however excludes persons serving there in civilian capacity m. Employment income of a prosecutor in the Office of the Directorate of Public Prosecution (“ODPP”) n. Employment income of persons employed by East African Development Bank (EADB) 12.3 Property Income Property Income is defined in the Income Tax Act as; a) Any dividends, interest, natural resource payments, rents, royalties and any other payments derived by a person from the provision, use or exploitation of property b) The value of any gifts derived by a person in connection with the provision, use or exploitation of property c) The total amount of any contribution made to a retirement fund during a year of income by a tax exempt employer d) Any other income derived by a person but does not include an amount which is business, employment, or exempt income e) Any amount included in business income of the person under any other section of the Income Tax Act Note: Rent is classified under business income if it’s derived by a person whose 34 A Guide to Taxation in Uganda | Sixth Edition Background to Taxation business is wholly or mainly the holding or letting of property. However, if rent is derived by the person whose business is not wholly or mainly the holding or letting of property, then it is classified under property income. For example if a company receives rent from its properties, then it is classified as property income because it is not in the business of holding or letting of property. 12.4 Exempt Income Certain incomes by law are not taxed and they are referred to as exempt income. Exempt income is listed in section 21 of the Income Tax Act. A Guide to Taxation in Uganda | Sixth Edition 35 Background to Taxation 36 A Guide to Taxation in Uganda | Sixth Edition Background to Taxation PART B DOMESTIC TAXES A Guide to Taxation in Uganda | Sixth Edition 37 Domestic Taxes 38 A Guide to Taxation in Uganda | Sixth Edition Domestic Taxes 1.0 | Tax Registration URA, through its modernization process improved the registration process through providing online services on a 24-hour basis. The registration process enables taxpayers to obtain a Taxpayer Identification Number (TIN). Any person engaging in any business generating income in Uganda is required to have a TIN. 1.1 Taxpayer Identification Number (TIN) A TIN is an identifying number used for tax purposes in Uganda; t is one’s personal account with URA and it can be obtained through any of the following processes; Through the URA Web portal: i. Visit the URA web portal - https//ura.go.ug ii. Download the appropriate registration form (Individual or Non Individual), iii. Complete the form by filling in the mandatory fields (boxes) iv. Upload and submit online the completed form v. Print a copy of the form and sign it off and together with the necessary attachments submit to the nearest URA office. vi. Receive an acknowledgment notice of approval of TIN Visiting a URA designated office In case a tax payer cannot register online, he or she can walk into any of the URA offices or One Stop Centre located in any of the Municipality or KCCA division and assistance shall be provided to complete the registration process. Ensure that you move along with the necessary attachments as listed above. In case of failure to do any of the above, call: 0800117000 (Toll free)/ 0417444602, or WhatsApp 0772140000 or send an email to [email protected]. On approval of the application, the taxpayer will receive a notice containing the TIN and a default password to enable him/her log into their URA Account on the web portal. This will enable him/her create his/her own password. All taxpayers should jealously protect details about their TIN account since they are responsible for all the transactions conducted through their TIN account. 1.2 General Registration requirements These depend on the registration Category i.e. as an individual or non-individual (E.g. Company). An active email address and mobile telephone. For an Individual, TIN registration requires a National ID or any other two of the following valid identification documents; Village ID, Employment ID, Passport, Driving permit, Voter’s card, recent Bank A Guide to Taxation in Uganda | Sixth Edition 39 Domestic Taxes statement, Work permit, financial card, Visa, NSSF card etc. For a non-individual, TIN registration requires Certificate of Incorporation/certificate of registration, Company Form 20 showing the Directors of the company, the TINs of the directors or any other persons with legal capacity to bind the entity, and any other legal documents that confirms existence. 1.3 Business type identification criteria A business type is identified basing on the mode of operation and the activities involved. In case it involves more than one business activity (a mixed business); it is categorized depending on the core activities that generate more revenue i.e. the principal business that contributes the largest portion of the total Business Income. 1.4 Taxes imposed on registration 1.4.1 Income Tax Income Tax (IT) is tax imposed on a person’s taxable income atspecific rates and is charged for each year of income. Taxable income is derived from three main sources of income as explained in part (A) of this book Income Tax may be categorized into: Individual Income Tax that is imposed on all individuals engaging in income generating activities/businesses. Corporation Tax that is imposed on all corporate entities engaging in income generating activities/businesses. Pay As You Earn (PAYE) that is charged on employees (earning monthly income above 235,000) by employers and then remitted to URA on behalf of the employees. Withholding Tax (WHT) that is withheld at source. This tax is an advance tax and as such the taxpayer needs to clearly declare it in the applicable tax return such that it reduces the tax liability of the period it relates to. Rental Tax that is imposed on the total amount of rent derived by a person for the year of income from the lease of immovable property (land and/or buildings) in Uganda. Note that ground rent and property fees charged by local authorities do not affect rental tax for individuals; however, where applicable they are allowed as expenses for non-individuals when computing their rental tax. 1.4.2 Value Added Tax (VAT) This is a tax imposed on the supply of taxable goods and services made by a taxable person and imports of taxable goods or services other than exempt goods or services as listed in section 19 and 20 of the VAT Act Cap 349. All persons dealing in taxable supplies with a gross turn over above 150 million 40 A Guide to Taxation in Uganda | Sixth Edition Domestic Taxes are required to register for VAT. General Requirements for VAT Registration include; The applicant must be already in business of supplying taxable goods or services The applicant must have a fixed place of abode or business. The applicant should be able to keep proper books of accounts. The applicant should be able to submit regular and reliable tax returns The applicant should be a fit and a proper person in the opinion of the Commissioner General 1.4.3 Local Excise Duty (LED) This is a tax charged on specific goods and services (excisable goods and services) manufactured locally or imported using the rates listed in schedule 2 of the Excise duty Act 2014. All persons dealing in excisable goods and services must obtain a license from URA for the purpose of local excise management and regulation. This license is valid for one year and thus should be renewed annually. Note: A manufacturer of excisable goods becomes liable to pay excise duty when the goods are removed from his premises. A person providing an excisable service becomes liable to pay excise duty on the date of provision of the service An importer of excisable goods pays excise duty on importation of the goods 1.4.3.1 Digital Tax Stamps A person dealing in goods, whether locally manufactured or imported is required to attach a tax stamp on goods manufactured or imported. The Minister prescribes, by statutory instrument, the locally manufactured or imported goods on which tax stamps shall be affixed. This means that such products are not allowed on the Ugandan market unless they have digital tax stamps. The following excisable products are gazetted for initial implementation of the Digital Tax Stamps namely; wines, spirits, mineral water or bottled water, tobacco products, beer, soda, bottled water, Sugar, cement , cement bulker, cooking oil, fruit juice and vegetable juice, other alcoholic, other non-alcoholic and any other fermented beverages. The commissioner of URA recommends the manner in which a tax stamp is to be affixed to goods. Note that the commissioner can register a person for an additional tax type when satisfied that he/she fulfills the registration requirements therein. A Guide to Taxation in Uganda | Sixth Edition 41 Domestic Taxes 1.4.4 Gaming Tax This a tax imposed on an operator of a casino, gaming or betting activity issued with a license under the Lotteries and Gaming Act. 1.4.5 Digital Service Tax This a tax imposed on every non-resident person deriving income from providing digital services in Uganda to a customer in Uganda at a rate of 5% on gross earnings 1.5 Benefits of acquiring a TIN i. Obtaining a TIN enables you to: Import or export goods within and outside Uganda Claim tax benefits that accrue to you e.g. tax refunds etc Access bank loans Acquire a trading license from Local Government / KCCA to undertake business in their jurisdiction. Register your Motor Vehicle Process stamp duty on land transactions above 50 Million Shillings. etc ii. A TIN acts as a security measure on transactions regarding some assets e.g. motor vehicles, land or any other property since a notification is sent to the owner using their TIN whenever a transaction occurs in regard to the same asset Note: In case a taxpayer is not in position to effectively handle his tax matters, he can appoint a tax agent to transact with URA on his/her behalf In case a taxpayer temporary closes business with the intention of resuming, he can deactivate his TIN and later on reactivate it when the business resumes In case the commissioner is convinced that a taxpayer no longer satisfies the registration conditions, he can always deregister that person 1.6 Tax Agents A tax agent is a person licensed by the Tax Agents Registration Committee (TARC) to handle tax related issues on behalf of the tax payer. An agent can be an individual, partnership, or company. Tax related issues may include; Preparation, certification and filing of tax returns and reports required by the authority. Preparation of requests for ruling and correspondences with the Authority. Attending meetings and hearings on behalf of the taxpayer. 42 A Guide to Taxation in Uganda | Sixth Edition Domestic Taxes A Tax Agents Registration Committee (TARC) is a committee that handles registration, renewal and cancellation of the registrations of tax agents and it comprises of 5 members and these are; The commissioner General of Uganda Revenue Authority. A representative from the accountancy profession nominated by the institute of Certified Public Accountants (ICPAU) A representative from the legal profession appointed by the Uganda Law Society 2 members from the private sector 1.7 Accounts and record keeping All taxpayers are required to keep proper records of all business transactions in English language such that they can easily determine their tax liability. It is recommended that records should be kept for at least 5 years from the end of the tax period to which they relate and for future reference. Where a record is not kept in English, the taxpayer will be required to meet the cost of translation into English by atranslator approved by the Commissioner. However, the tax returns and other correspondences with the Commissioner must be in English. 1.8 Changes in registration details All registered tax payers are required to update their registration details using their accounts on the URA website (or through submission of signed manual amendment forms to any nearest URA office if they fail to access their account online) as soon as an amendment is made in the registration details. This will enable timely and accurate dissemination of correct information to the parties concerned regarding the taxes whenever need arises. Some of the registration amendment indicators include; Errors in registration details. Changes in ownership/directorship of the business. Changes in location or nature of business. Changes in business contact or contact person details. Changes in registered tax types. etc. 1.9 Penalties and Offences under registration The penalty for a person who fails to apply for registration, cancel a registration or notify the Commissioner of a change in registration or circumstances is; A fine not exceeding Shs. 3,000,000 or imprisonment not exceeding six years or both on conviction if the failure/act was done knowingly or recklessly. A Guide to Taxation in Uganda | Sixth Edition 43 Domestic Taxes A fine not exceeding Shs. 1,000,000 or imprisonment not exceeding two years or both on conviction in any other case. A person who uses a false TIN on a tax return or other document prescribed or used for the purposes of a tax law, knowingly or recklessly or not, commits an offence and is liable on conviction to a fine not exceeding Shs. 3,000,000 or imprisonment not exceeding six years or both. The penalty for knowingly or recklessly or not failing to maintain records as required under any tax law is a fine not exceeding Shs. 2,000,000 or imprisonment not exceeding six years or both on conviction. Note that Taxpayers will always receive feedback on their applications through accurate email addresses and telephone numbers indicated in the applications. 2.0 | Return filing A tax return is a declaration in a form prescribed by the Commissioner, on which a taxpayer reports his or her income for the tax period as a way of self-assessment for taxation purposes. A tax period is the duration for which a return is required i.e. a year, month or week. A due date is the deadline for filing a return beyond which a person is required to pay a penalty. 2.1 Furnishing of returns A taxpayer registered with URA for any tax type other than Pay as you earn (PAYE) has an obligation to submit a return for the tax period fined by the respective tax law. URA has facilitated the taxpayers to fulfill this obligation by introducing electronic filing of tax returns. Return type Due date and filing remarks Income tax Every tax payer is required to furnish a return of provisional tax estimate (i) On or before the last day of the third, sixth, ninth and twelfth months of the year of income in respect of an individual taxpayer’s liability; for a period of three, six, nine or twelve months; and (ii) On or before the last day of the sixth and twelfth monthsof the year of income in respect of a taxpayer’s liability other than an individual; for a period of six or twelve months. 44 A Guide to Taxation in Uganda | Sixth Edition Domestic Taxes All tax payers are required to submit final Income tax returns (including rental income returns where applicable) for each year of income not later than the sixth month after the end of the year of income. Those with an annual turnover above 500 million shillings must file their income tax returns with audited financial statements prepared by an accountant registered by the Institute of Certified Public Accountant of Uganda. VAT All VAT registered taxpayers are required to submit Value Added Tax returns (VAT) for each month by the 15th day of the following month. PAYE All PAYE registered taxpayers are required to submit Pay As You Earn (PAYE) tax returns for each month by the 15th day of the following month. Excise duty All taxpayers registered for Excise duty are required to file Excise duty returns for each month by the 15th day of the following month. Gaming Tax All tax payers registered under Gaming and Pool Betting are required to submit their weekly returns by Wednesday of the following week. Others In case of any return required to be submitted under the tax law, it must be done within the specified period in the notice Note that all tax returns must be submitted in the prescribed format and the commissioner can appoint any other person to assist a taxpayer who fails to file at his/her cost. Note: The law provides for a separate quarterly return for non-resident suppliers of services deemed to be supplied in Uganda when made to non-taxable persons. A taxable person who is providing services to a non-taxable person in Uganda and is engaged in providing services in connection to. Immovable property in Uganda; Radio or television broadcasting services received at an address in Uganda; Electronic Services delivered to a person in Uganda; Transfer, assignment, or grant of a right to use a copyright, patent, trademark, or similar right in Uganda; Telecommunication services other than those by a supplier of telecommunication services or services to a person who is roaming while A Guide to Taxation in Uganda | Sixth Edition 45 Domestic Taxes temporarily in Uganda. These shall be required to file returns within 15 days after the end of the three consecutive calendar months. 2.2 Certification of tax returns All tax agents are required to provide the taxpayers with a signed certificate stating the documents used in preparation of their returns and must certify that all documents have been examined and thus reflect the correct data and transactions for the return period. Note that; Tax agents who do not provide the certificate will be required to write to the taxpayer clearly explaining the reasons. Tax agents who prepare or assist in the preparation of tax returns are required to make a declaration in the taxpayer’s return stating whether a certificate or a statement has been provided to the taxpayer and he may be requested to provide a copy. Tax agents are required to keep copies of certificates and statements provided to taxpayers for a period of five years from the date of filing the related tax return. 2.3 Advance returns The commissioner may by notice in writing at any time during the tax period require a tax payer to file a return for the stated tax period by the date specified in the notice (the date may be before the end of the tax period) if there is proof that; A taxpayer has died, A taxpayer has become bankrupt or gone into liquidation, A taxpayer is about to leave Uganda permanently or any other reason the Commissioner considers appropriate. Note that the taxpayer is also required to pay any tax due under the return by the stated date in the notice. 2.4 Extension of Return Filing date If a taxpayer is not able to file a return by the required date, he can apply for an extension to file his return providing reasons justifying the extension. Note that; The extension if granted will not exceed 90 days and does not change the due date for payment of the tax due. Interest will therefore accrue on any outstanding tax liability. Multiple extension applications are allowed provided the number of days does not exceed 90 days in aggregate. If the taxpayer is dissatisfied with the Commissioner’s decision 46 A Guide to Taxation in Uganda | Sixth Edition Domestic Taxes about the extension, he may challenge it under the objection and appeals procedure. 2.5 Offences and penalties on returns The penalty for failure to furnish a tax return by the due date or within a further time allowed by the Commissioner is a fine not exceeding Shs. 1,000,000 and failure to furnish the return within the time prescribed by court is a fine not exceeding Shs. 2,000,000 on conviction. If you understate provisional chargeable income by more than 10% of actual chargeable income, the penalty is 20% of the difference in tax on the taxpayer’s estimate and 90% of the actual chargeable income. The penalty for knowingly or recklessly making false or misleading statements or omitting from a statement to a tax officer, a matter or thing is a fine not exceeding five thousand five hundred currency points that is Shs. 110,000,000 or imprisonment not exceeding ten years or both on conviction. 2.6 Return filing procedure Returns can be filed online when you visit the URA web portal (https:// www. ura.go.ug), click on download online forms to access the respective return forms, Fill the form to generate an upload file, log into your account to upload and submit. If the upload is successful, the taxpayer will receive an auto generated e-acknowledgement receipt which is evidence of submission. In case of any challenges in filling the respective returns, send an email about the challenge to the official email address [email protected] or call the toll free line 0800117000/0800217000. NB: Both Payment and Return should be made by the filing due date. 2.7 Return Ammendments A taxpayer may amend the tax return on condition the return is not under investigation and amendment is done within 3 years from the date on which the original return was lodged by the taxpayer. 3.0 | Assessments An assessment is a tax form showing the estimated taxable income generated and the tax payable on it including any penalty. 3.1 Self-Assessment This is a tax form prepared by the tax payer showing the taxable income generated and the tax payable on it. A Guide to Taxation in Uganda | Sixth Edition 47 Domestic Taxes Note; If a tax payer has submitted a self-assessment for a tax period, he is treated as having declared the amount of tax payable for the period. This is done through return filing. If a tax payer declares a loss for a return period, he is treated as having made an assessment of the amount of the loss for that year, being that amount in his return. 3.2 Default Assessment This is a tax form showing the estimated taxable income generated and the tax payable on it issued by the Commissioner due to failure to furnish a self- assessment by the required date. The taxpayer will receive a notice in writing showing the amount of tax assessed, and any penal tax and interest payable in respect of the amount assessed, assessed period, the due date for payment and the objection criteria. 3.3 Additional Assessment This is an amendment of an original tax assessment issued by the commissioner for any tax period to ensure that the correct tax liability is obtained. It is issued at any time, if fraud or any willful neglect has been committed by, or on behalf of the taxpayer or new information has been discovered in relation to the tax payable for a tax period. Note: All self-assessment returns filed before 1st July 2016 can be amended within a three year period form the filing date while those filed after 1st July 2016 can only be amended within a twelve months period from the filing date provided the return is not under investigation. An additional assessment notice will show the amount of tax assessed, and any penal tax and interest payable in respect of the amount assessed, the assessed period, the due date for payment and the objection criteria. Note that the service of a notice of an additional assessment does not change the due date for payment of the tax payable under the assessment and thus the penal tax and interest is payable based on the original due date. 48 A Guide to Taxation in Uganda | Sixth Edition Domestic Taxes 4.0 | Objections and Appeals 4.1 Objections The Objections and Appeals procedure is a procedure for challenging an assessment or any other matter based on discretion by the Commissioner and is provided for under; The Tax Procedures Code Act - Sections 24 & 25 A person dissatisfied with a tax decision for example an assessment, may within 45 days after receiving notice of tax decision, lodge an objection with the Commissioner. The objection should be in a prescribed form and state precisely the grounds upon which it is made. There should be sufficient evidence to support the objection. Where a taxpayer has lodged an objection to a tax assessment for the tax period, the Commissioner may consider the objection if the taxpayer; 1. Has filed the return to which the assessment relates in the case of a default or advance assessment; 2. Has paid the tax due under the return to which the assessment

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