By Paul Epodoi
Proposed Amendments to the Tax Laws (FY 2020-21)
Uganda Revenue Authority will implement Five (5) Tax Amendment Laws for the FY 2020-21 once the Bills pass into Law and are assented to by the President. Here are highlights of the Bills, their status and proposed amendments. The commencement date should have been 1st July, 2020.
|Bill or Act||Status|
|The Income Tax (Amendment) Bill, 2020||Presented for Assent, Bill at Third Reading/passed on Mon. May 25, 2020|
|The Stamp Duty (Amendment) Act, 2020||Assented to by the President on Sat. Jun 06, 2020.|
|The Excise Duty (Amendment) Bill, 2020||Bill at Second Reading, in Committee of whole House- Mon. Apr 20, 2020|
|The Value Added Tax (Amendment) Bill, 2020||Presented for Assent on Mon. May 25, 2020|
High lights of the proposed Amendments in the various Bills:
- The Income Tax (Amendment) Bill, 2020
a) Minimum Income Tax.
There’s a proposal to impose a minimum income tax equal to 0.5% of gross turnover. It will apply to businesses whose declared tax liability over a period of 5 consecutive years is an average of less than 0.5% of gross income. Taxpayers that are subject to this will therefore pay the higher of their income tax liability calculated on their taxable profit at 30% and the 0.5%.
The proposal will penalize business with low profit margins or tax losses and also targets those that are making high profits but are suspected to be producing two sets of accounts; one set of accounts for management and another for the tax body.
A similar proposal to tax businesses which consecutively register losses for a period of seven years was deleted from the Income Tax (Amendment) Bill 2019 at the Committee Stage on the justification that the proposal is both cumbersome and costly for the tax payer.
b) Withholding tax
The following categories of withholding tax are proposed:
- This is closely related to an amendment introduced in the Income Tax (Amendment) Act, 2019 requiring every resident person who purchases a business asset to withhold tax at 6% on the gross amount of the payment
- Commissions to insurance and advertising agents will be subject to 10%.
c) Income from rental property
- The tax rate for individuals earning rental income is to be increased from 20% to 30%;
- There will be no more tax relief for interest incurred by individuals on mortgages to acquire or construct premises for rental;
- Tax payers owning more than one property will pay tax calculated on each property separately;
- A tax payer will not able to offset tax losses arising from one property against profits from his/her other properties;
- For property owned by partnerships, the tax on rental income applies to the partners individually.
d) Documents to support expenses
In cases where the service provider or goods supplier is designated to use the e-invoicing system, expenses of the tax payer will only be deductible if supported by e-invoices and/or e-receipts.
2. The Stamp duty (Amendment) Bill 2020
The Bill received presidential assent into law and contains the following amendments:
a) Professional Licences or certificates
Payment of stamp duty on professional licences or certificates. The applicable duty is Ugx. 100,000/= per licence or certificate.
b) Modification of criteria for Tax incentives on strategic investments projects.
- The requirement to employ at least 100 Ugandan citizens will be amended to refer to the capacity to employ at least 100 Ugandan citizens.
- b) The requirement for at least 70% of raw materials to be locally sourced will be reduced to the capacity to use at least 50% locally sourced raw materials.
3. The VAT (Amendment) Bill
It introduces the following proposals:
a) Input VAT-Supporting documentation.
Restricts a taxable person from claiming input VAT without the support of e-invoices or e-receipts on purchase of goods and services from a supplier designated to use the e-invoicing system.
- Excise Duty (Amendment) Bill
The amendment varies excise duty in respect of excisable goods and introduces new categories of excisable goods. Below are some of the changes:
|Specified plastic sacks and bags, except vacuum bags for food, juices, tea and coffee. Sacks and bags used in manufacture of sanitary pads*||120%||Higher of 120% or UGX 10,000 per kilogram of plastic bags or sacks|
|Motor vehicle and other*lubricants (excluding those for aircraft)||10%||15%|
|Gas oil (automotive)||UGX 880 per litre||UGX 1,030 per litre|
|Gasoline/motor spirit||UGX 1,200 per litre||UGX 1,350 per litre|
|Fruit and vegetable juices (unless at least 30% of pulp from locally grown source)||Higher of 13% or UGX 300 per litre||Higher of 12% or UGX 250 per litre|
|Non-alcoholic beverages excluding fruit and vegetable juices||Higher of 12% or UGX 200 per litre||Higher of 12% or UGX 250 per litre|