EnterUganda

. Kampala, Uganda.

Brief Guide to Taxation in Uganda:

Principal Taxes:
Uganda's principal taxes are income tax both on individuals and companies, Value Added Tax, customs, and excise duty levied by the Central Government through the Uganda Revenue Authority and Graduated Tax and land rates, which are levied by local authorities.

Filing:
All registered business organizations are under obligation to send a provisional return of income for any year of income as follows: -

Individuals:
not later than three months from the commencement of the 12 months ending in such year of income for which such individual makes up his or her accounts and in any other case of an individual, not later than March 31 of such year of income;

Corporate bodies:
Not later than six months from the commencement of the period of 12 months ending in such year of income for which the body prepares the accounts and in any case not later than June 30 in such year of income.

The returns are based on income of the year immediately preceding the year of income in respect of which the provisional return is made or on the last assessment which has by then becalm final and conclusive, whichever is greater, or a considered estimate of income liable to tax if the former two are inappropriate. A final return of income is due within four months from the end of the accounting period together with any further tax due.

Categories of Taxes in Uganda:

Both direct and indirect taxes apply in Uganda. Direct taxes are levied on individual and corporate income. Indirect taxes are levied on certain transactions such as sale and purchase of land, goods and services.

1. Income Tax:
· Income tax is payable by individuals. It is calculated on the individual's net assessable income after making allowance for deductible expenses. The sources of assessable income for individuals include employment, business and property.

Different tax rates apply depending on whether the individual is a resident or non- resident of Uganda for tax purposes.

Pay as You Earn (PAYE) Tax and Taxation of Employment Benefits:
PAYE is not a separate tax. It is an instalment income tax system under which employers are required to deduct tax instalments from their employees' salary or other employment income. The instalments so deducted are remitted to the Uganda Revenue Authority (URA) and based on the PAYE tax return lodged by the employer, the total amount deducted from the individual employee is offset against the employees' tax liability upon the lodgement of the annual tax return by the employee at the end of the tax year. Every employer must, therefore, register for PAYE as well as be familiar with the rules relating to filing of PAYE returns and the computation of PAYE.

Penalties apply where the employer fails either to deduct or remit PAYE, or deducts and remits incorrect amounts. For example, the URA can require the Employer to pay any PAYE shortfalls.

Taxation of Companies and other Business Entities:
A corporate tax is levied on companies, partnerships and sole proprietorships. Any income arising out of any trade, profession, vocation or adventure in the nature of trade is taxable under special rules applicable to business entities.

The income of all companies accruing or derived from Uganda is taxable. A company is liable to pay tax separate from its shareholders. The sources of income of a company on which the tax can be levied include profits and gains from any business carried on for whatever period of time. Other sources include dividends from shares in other companies, and interest from use of the company's property.

Taxation of Partnerships:
Income tax assessments for a partnership can be made either in respect to individual partners or in the partnership's name. The profits of a partnership, including a firm carrying on a trade or profession are taxable.

Taxation of Sole Proprietorships:
A sole proprietor is taxed in the same way as an individual

Taxation of Trusts:
The income tax rate applicable to trusts is 30% of the chargeable trust income for the year of income. A trust is exempt from income tax where income of the trust is paid directly to the beneficiary without passing through the hands of the trustee; or where a trustee relies on the ground that a share or part of income to be assessed accrues or arises for the benefit of the beneficiary.

2. Value Added Tax (VAT):
VAT is a consumer expenditure tax. It is payable by individuals and firms. The business sales turnover threshold for VAT is Shs 50,000,000 per year. Individuals and firms whose business sales turnover is below Shs 50,000,000 are exempt from VAT. It does not matter whether the business is profitable or not. VAT registration for individuals and firms with business sales turnover of above the Shs 50,000,000 VAT threshold must register with URA for VAT.

A person who has registered for VAT can charge VAT on customers as an output tax. When a VAT payer buys goods and services he pays VAT as an input Tax. When the output tax (what a person registered for VAT pays) exceeds the input tax (what he charges customers as VAT), a refund of the difference from the URA can be claimed.

On the other hand when the input tax is greater than the output tax, the difference is payable to URA within 15 days after the end of the month in which the transaction took place.
Certain goods and services are exempt from VAT. A person registered for VAT cannot claim an input tax on exempt goods and services. Similarly, such person cannot charge VAT (as an output tax) on goods and services exempt from VAT.

Zero rated supplies are goods and services which are exempt from VAT but in respect of which a VAT (output tax) is claimable.
All imported goods attract VAT of 17% or the Zero rate except if they fall in the exempt category. VAT on imports is paid at the time of clearing the goods and is calculated on the CIF (cost Insurance, Freight) value of the imports.

VAT on exports is Zero-rated. Investors interested in export trade are however advised to register for VAT. This is helpful in that the inputs, which are used to produce the exports, might be attract VAT. Once registered as a VAT payer, one can claim input tax and in order to claim input tax on exports, the Customs Certified copy of the Export entry must be attached to the VAT return.

3. Stamp Duty:
Stamp duty is an indirect tax levied on a number of commercial transactions.

4. Taxation of Rental Income:
Rental income of an individual is segregated from other income and is taxed at a rate of 20% of gross rental income in excess of Shs. 1,560,000 per year.

5. Withholding Tax:
Certain payments are liable to withholding tax. Any payment to a person in Uganda from the Government of Uganda, a Government institution, a local authority, any company controlled by the Government of Uganda or any person designated in a notice issued by the Minister responsible for finance of an amount in aggregate exceeding one million shillings for the supply of goods or materials of any kinds or any service is subject to a 4% withholding tax. The Minister for Finance has powers to exempt companies from paying withholding tax. Non-resident entertainers and sports personnel are supposed to have 15% withheld as tax on their payments.