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25 May 2022 Uganda issues Tax Amendment Bills for 2022 On 30 March 2022, Uganda’s Minister of Finance Planning and Economic Development tabled the Tax Amendment Bills, 2022 before Parliament for debate. Once passed into law by the Parliament and assented to by the President of the Republic of Uganda (Uganda), the Bills will take effect from 1 July 2022. Passage of the Bills is anticipated in early June. “Beneficial owner” means a natural person who ultimately owns or controls a customer or the natural person on whose behalf a transaction is conducted, including a person who exercises ultimate control over a legal person or arrangement.
This proposal intends to clarify who is the beneficial owner under Double Taxation Agreements in order to prevent treaty abuse and tax avoidance. The bill proposes to amend the definition of an exempt organization to include a research institution whose object is not for profit. The bill proposes that expenditures and losses incurred by a person (other than an individual or partnership) in generating rental income be allowed as a deduction. The deduction allowed in a year of income is capped at 50% and the excess of that amount is carried forward to the subsequent year of income. The expenditure and gross rental income of a partnership has been proposed to be addressed in accordance with the rules governing taxation of partners which relates to the geographical source of the income and the percentage sharing ratio in the partnership. The current allowable deduction for individuals which relates to the deduction of interest expense incurred on a mortgage from financial institutions and applied towards the acquisition or construction of premises from which rental income was generated has been proposed to be repealed. There is a proposed change in computation of rental tax for individuals from 30% of chargeable income to 12% of gross rental income.
= The total amount of investment made by the investor from the beginning of the year in which the tax incentive was established by the Income Tax Act Cap 340 (as amended). The proposed amendment seeks to clarify the parameter of taxation under Ugandan-source service contracts by excluding income derived from the carriage of passengers, or cargo or mail not embarked in Uganda. The bill proposes that if the cost of acquiring an intangible asset is treated as petroleum exploration expenditure then that asset should be amortized at the rate of 100%. The bill clarifies that a taxpayer who files a tax return for mining or petroleum revenues will be required to pay the assessed tax by the due date of filing the return. Substitution of the penalty for a licensee who fails to furnish a return or to provide any other document in the prescribed time frame A licensee who fails to furnish a return or provide any other document in the prescribed time is subject to a penal tax of at least US$50,000 but not exceeding US$500,000 The bill defines a “business asset” to mean land, the whole or any part of it which is used or held for use in any business but excluding land held as trading stock and includes land that is used in business to generate income other than land of an individual that is subject to rental tax and land owned by a company, trust or partnership. The Bill also proposes an exemption from withholding tax for the sale of a business asset where: (i) the Commissioner is satisfied that the taxpayer has complied with their tax obligations under the Act; or (ii) the disposal of land is by means of gift, bequest, devise or inheritance that does not generate gain in business, employment or property income. It is proposed to exempt the income of the institutions below by listing them under the First Schedule to the Income Tax Act: The bill proposes to amend the definition of exempt import of service to exclude “imported services which would be used in the provision of an exempt supply.” If enacted, VAT on imported services will become a cost on taxpayers who deal in exempt supplies and import services used to provide exempt supplies. Extension of Public International Organizations under the First Schedule to the Value Added Tax Act Cap 349 It is proposed to include the institutions below on the list of Public International Organizations under the First Schedule to the Value Added Tax Act Cap 349 thus entitling them to VAT refunds in accordance with Section 45 of the Act: Extension of the investment incentive (VAT exemption) for the supply of services to conduct a feasibility study, design and construction; the supply of locally produced materials for the construction of premises and other infrastructure, machinery and equipment or furnishings and fittings to a hospital facility developer whose investment capital is at least US$5 million The bill proposes that the VAT exemption should apply if the supply is to a qualifying hospital facility developer notwithstanding that the hospital is not at the level of a national referral hospital. The bill proposes to widen the definition for the supplies of educational materials that are zero rated to include those educational materials manufactured in a Partner State of the East African Community. It also proposes that the supply of sanitary towels, menstrual cups, tampons, and inputs for their manufacture should be zero rated for VAT purposes. “Fruit juice” is defined to mean unfermented liquid extracted from the edible part of a fresh fruit whether the extracted liquid is diluted or not. “Un-denatured spirits” is defined to mean spirits, that are not mixed with any substance to render the spirit unfit for human consumption or capable of being rendered unfit for human consumption, including neutral spirits or alcoholic beverages made from neutral spirits that are fit for human consumption. “Vegetable juice” is defined to mean unfermented liquid extracted from the edible part of a vegetable whether the extracted liquid is diluted or not.
The bill proposes the introduction of an expiry date for tax agent licenses as 31 December every calendar year. The bill proposes the introduction of a new obligation on taxpayers who are required to use digital tax stamps. The penal sanctions of double the tax due on goods or UGX50 million, whichever is higher, which are imposed on persons who don’t affix digital tax stamps, are proposed to be extended to persons who fail to activate the affixed stamps. The bill proposes to extend the Uganda Revenue Authority’s (URA) duty to issue a notice of intention to temporarily close a taxpayer’s business for failure to comply with the requirements of electronic receipting and invoicing or tax stamps. The bill seeks to extend the URA’s right of temporary closure to businesses that don’t comply with the requirements of electronic receipting and invoicing or tax stamps. The bill obligates the URA to immediately remove a notice of temporary closure of business if the taxpayer complies with the tax obligations that necessitated the closure. The Bill proposes to introduce a requirement on a person engaged in the construction or extractive industry to disclose to the URA the names of persons contracted during the performance of their duties or business within seven days. The Bill proposes the introduction of a penalty of UGX20 million for persons that fail to comply with this mandatory disclosure requirement. The Bill proposes the introduction of an increased penalty for making false and misleading declarations while complying with one’s tax obligations. The proposed penalty is UGX110 million from UGX4 million. The Bill proposes criminal sanctions for a taxpayer who fails to affix or activate a tax stamp thus creating an offense punishable by a fine of UGX30 million or a prison sentence not exceeding 10 years or both. The Bill proposes criminal sanctions for a person who prints over or defaces a tax stamp thus creating an offense punishable by a fine of UGX30 million or a prison sentence not exceeding 10 years or both. The Bill proposes criminal sanctions for a person who forges or if found in possession of forged tax stamp thus creating an offense punishable by a fine of UGX30 million or a prison sentence not exceeding 10 years or both. The Bill proposes criminal sanctions for a taxpayer who fails to deploy and use the Electronic Fiscal Receipting and Invoicing System (EFRIS) system thus creating an offense punishable by a fine of UGX30 million or a prison sentence not exceeding 10 years or both. The Bill proposes criminal sanctions for a person who is found in possession of forged EFRIS documents thus creating an offense punishable by a fine of UGX 30 million or a prison sentence not exceeding 10 years or both. The Bill proposes criminal sanctions for a person who conducts unauthorized interference with EFRIS hardware and software thus creating an offence punishable by a fine of UGX 30 million shillings or a prison sentence not exceeding 10 years or both. Criminal sanctions for failure to comply with automatic exchange of information requirements (section 62H) The Bill proposes criminal sanctions for a person who fails to provide information for purposes of automatic exchange of information or fails to maintain records for purposes of automatic exchange of information or makes a false or misleading declaration in an automatic exchange or information return and omits some information while making an automatic exchange of information thus creating criminal offences for each of the above-mentioned scenarios punishable by a fine of UGX50 million or a prison sentence not exceeding 10 years or both. Where the informer provides information leading to identification of unassessed tax or duty: 1% of the tax or duty assessed or UGX15 million, whichever is less. Where the informer provides information leading to the recovery of unassessed tax or duty: 5% of the tax of the tax or duty recovered or UGX100 million, whichever is less. The bill proposes to increase the number of members of the Tribunal from four to eight in addition to the chairman. The bill proposes to grant to the Minister of Finance Planning and Economic Development authority by statutory instrument to amend the First and Second Schedules to the Uganda Revenue Authority Act Cap 196. The Bill also proposes to amend section 11 of the URA Act to substitute the word manager with that of Assistant Commissioner. The proposed amendment to item 6 seeks to introduce a nil duty rate for the agreement relating to deposit of title-deeds, pawn pledge. Item 6 is currently taxed at a duty rate of 1% of the total value. Proposed amendment to item 56 seeks to introduce a nil stamp duty rate for security bond or mortgage deed executed by way of security for the due execution of an officer to account for money or other property received by virtue of security bond or mortgage deed executed by surety to secure a loan or credit facility– of entry total value. Item 56 is currently taxed at a duty rate of 1%. The proposed amendment to item 63 seeks to widen the taxing scope for a trust under Item 63 to include, any property made by any writing including a transfer from a holder of letters of administration or Probate orders to a beneficiary which attracts a duty of UGX15,000. The proposed amendment to item 60A (f) seeks to reduce the minimum investment capital thresholds from US$50 million to US$35 million for manufacturers to qualify for stamp duty exemption on instruments executed under strategic investment projects.
Document ID: 2022-5511 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
