Overview Of Uganda’s Proposed Tax Amendments For Financial Year 2020/21

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By Obedgiu Samuel

The Tax Amendment Bills 2020 have been tabled to Parliament by the Hon. Minister of Finance, Planning and Economic Development and are to be discussed. These include:

The Income Tax (Amendment) Bill,

The Value Added Tax (Amendment) Bill,

The Excise Duty (Amendment) Bill,

and Stamps Duty (Amendment) Bill.

The amendments originated from president MUSEVENI, who under the law is under principle minister of finance. The minister only works on delegated authority

NOTE: Please note that these are proposals to be discussed in parliament and therefore additions and subtractions are expected before they are passed into law. However, if the bills are passed by Parliament and assented to by the President, they will become law effective 1st July 2020. Below we give you an overview of some of the new tax proposals;

Income tax Act

Taxes on Rentals

Land lords might end up raising rent. Rental tax for individuals who own rentals is up to 30% from previous 20%

For purposes of rental tax, the bill proposes that a tax rate of 30% (from 20%) will be applicable to individual persons earning rental income.

Allowable expenses for rental income up to 50% from 20%

Under the current principal Act, 20% of the rental income is allowed as expenditures and losses incurred by an individual in the production of the rent. However, the bill is now proposing that for rental income purposes, 50% (fifty percent) of the rental income should be allowed as expenditures and losses incurred by persons in the production of such income. This means that whether an individual or company, the expenses or losses allowable for purposes of determining chargeable income will be 50% of the rental income. The bill also proposes that if a partnership has rental income, the tax shall be imposed on the individual partners.

Property owners to account for rental tax for each building separately

The bill proposes that a person who earns rental income from more than one building shall account for the income and expenses of the buildings separately and shall pay rental tax for each of the buildings separately.

Introduction of Withholding tax on purchase of land

The bill proposes that a resident person who purchases land, other than land which is a business asset, from a resident person shall withhold tax at a rate of 0.5% of the purchase price. This implies that practically, every purchaser of land has become a withholding agent.

Withholding tax on agricultural supplies reinstated

The Income Tax (Amendment) Act, 2019 provides that withholding tax under section 119 does NOT apply to agricultural supplies. However, the bill now proposes that withholding tax on agricultural supplies be reinstated.

Introduction of a new tax regime for small businesses

The bill proposes new tax rates for small businesses as follows:

Gross turnover Tax rate per annum without records ‘ Ushs Tax rate per annum with records ‘ Ushs
Where the gross turnover of the taxpayer does not exceed ten million shillings per annum NIL NIL
Where the gross turnover of the taxpayer exceeds ten million shillings but does not exceed thirty million shillings per annum 80,000 0.4 % of the annual turnover in excess of ten million shillings
Where the gross turnover of the taxpayer exceeds thirty million shillings but does not exceed fifty million shillings per annum 200,000 Shs 80,000 plus 0.5% of the annual turnover in excess of thirty million shillings
Where the gross turnover of the taxpayer exceeds fifty million shillings but does not exceed eighty million shillings per annum 400,000 Shs 180,000 plus 0.6% of the annual turnover in excess of fifty million shillings
Where the gross turnover of the taxpayer exceeds Eighty million shillings but does not exceed one hundred and fifty million shillings per annum 900,000 Shs 360,000 plus 0.7% of the annual a turnover in excess of eighty million shillings

THE VAT (AMENDMENT) BILL, 2020

VAT is an indirect tax. However, the ordinary person will feel it through increase of manufactured goods. VAT on water from national water and Sewerage Corporation still remains. Its 18%

However, VAT will increase the cost of rent. Therefore, land lords will charge tenants doing business on those buildings for it. Owners of more than one commercial building to account for VAT for each building separately

The new bill is proposing that an owner of more than one commercial building shall account for tax(VAT) for each commercial building separately and shall not claim tax credits on inputs used in the construction of an incomplete building against the tax collected from a completed commercial building.

EXCISE DUTY (AMENDMENT) BILL, 2020

It’s an indirect tax that will increase the cost of manufactured goods. The cost will be finally pushed to the ordinary consumers. Especially oil and fuel.

The bill proposes to amend Schedule 2 to the Excise Duty Act to vary excise duty in respect of certain excisable goods as follows;

Item Current duty Proposed duty
Motor spirit (gasoline) Shs 1200 per litre Shs 1350 per litre
Gas oil (automotive, light, amber for high speed engine) Shs 880 per litre Shs 1030 per litre
Illuminating kerosene Shs 200 per litre Shs 300 per litre
Motorcycles at first registration Shs 200,000 Shs 300,000