Amendments for the Financial Year 2018/19
Effective 1 July 2018, the following changes were made to the tax laws:
The Income Tax (Amendment) Act 2018 introduced the following changes:
- A new income tax exemption was introduced for the following:
- Income of developers or operators of industrial parks or free zones. The minimum capital is 100 million United States dollars (USD) for a period of five years from the date of construction.
- Income of an operator in an industrial park or free zone or other business outside the industrial park or free zone whose investment capital is at least USD 15 million in the case of a foreigner or USD 5 million in the case of a Ugandan citizen for five years from the date of commencement of the business.
- Allowed individuals a deduction in respect of interest incurred on mortgages obtained from financial institutions to acquire or construct premises that generate rental income.
- Limited the amount of deductible interest in respect of all debts owed by a taxpayer who is a member of a group to 30% of the tax earnings before interest, tax, depreciation, and amortisation (EBITDA). A taxpayer whose interest exceeds 30% of the tax EBITDA may carry forward the excess interest for not more than three years. This amendment replaces the thin capitalisation rules.
- Introduced an amendment to treat a change in ownership by 50% or more in an entity within a period of three years as triggering a deemed realisation of all assets and liabilities equal to market value. Under a related change to Section 79, the related gain on the deemed disposal is treated as income sourced in Uganda.
- Broadened the definition of immovable property to include any intangible asset that is a business asset or any part of the business.
- Widened the meaning of an 'international agreement' to include the Inter-Government Agreement on the East African Crude Oil Pipeline.
- Substitution of the definition of 'mining exploration right' to mean a prospecting exploration or retention licence granted under the Mining Act.
- Introduction of 10% withholding tax (WHT) of the gross amount of the payment of commissions paid by telecom service providers on airtime distribution and mobile money services.
- Introduced the African Trade Insurance Agency to the list of listed institutions, which is the list of organisations exempt from tax.
- Introduced a 1% WHT to apply on payments for agricultural supplies.
Vale-added tax (VAT)
The VAT (Amendment) Act 2018 introduced the following changes:
- The definition of mining operations was broadened to include mineral exploration and development operations undertaken pursuant to a mining lease or mineral agreement entered into under the Mining Act, 2003.
- Widened the definition of electronic services so that it is no longer restricted to services provided on or through a telecom network.
- Excluded VAT payable on passenger automobiles, repairs and maintenance of such automobiles, and entertainment from eligibility of deemed for mining and petroleum licensees.
- Capped the interest due and payable on over payments and late refunds to a maximum of the principal tax.
The Excise Duty (Amendment) Act 2018 provides for the following changes:
- Introduced time of supply rules for excise duty on services to include the earlier of the date on which the performance of the service is completed, the date on which payment for a service is made, or the date on which an invoice is issued.
- Imposition of excise duty of 200 Ugandan shillings (UGX) per user per day was introduced on over-the-top services supplied by telecom service providers.
- Introduction of excise duty of 30% or UGX 650 per litre, whichever is higher, on opaque beer.
- A specific rate of excise duty of UGX 1,500 or 80% on ready-to-drink spirits, whichever is higher.
- A specific rate of excise duty of UGX 2,000 or 60% on undenatured spirits made from locally produced law materials, whichever is higher.
- A specific rate of excise duty of UGX 2,000 or 20% on wine made from locally produced law materials, whichever is higher.
- An increase on the excise duty rate applicable to other wines from 60% or UGX 6,000 per litre, to 80% or UGX 8,000 per litre, whichever is higher.
- Increase of the rate applicable to motor spirit (gasoline) from UGX 1,100 per litre to UGX 1,200 per litre and gas oil (automotive, light, and amber for high speed engines) to UGX 780 per litre to UGX 880 per litre, respectively.
- A decrease of the excise duty on non-alcoholic beverages, not including fruit or vegetable juices, from 13% or UGX 240 per litre, to 12% or UGX 200 per litre, whichever is higher.
- Introduction of 1% excise duty rate on mobile money transactions received, paid, and withdrawn.
- Increase of ledger fees, ATM fees, withdrawal fees, and periodic charges and other transaction and non-transaction charges, excluding loan-related charges periodically charged by financial institutions, from 10% to 15% of the fees charged.
- Introduction of excise duty of 15% of the value on powder for reconstitution to make juice or dilute-to-taste drinks, excluding pulp.
The Tax Procedures Code (Amendment) Act 2018 introduced the following changes:
- Introduced an electronic receipting and invoicing system where a taxpayer may issue an e-invoice or e-receipt, or employ an electronic fiscal device that shall be linked to a centralised invoicing and receipting system or a device authenticated by the Uganda Revenue Authority (URA).
Amendments for the Financial Year 2017/18
Effective 1 July 2017, the following changes were made to the tax laws:
The Income Tax Act (Amendment) Act 2017 introduced the following changes:
- A body established by law for the purpose of regulating the conduct of professionals was included on the list of exempt organisations, and, as such, their income is exempted from income tax. This includes bodies like Uganda Law Society, Institute of Certified Public Accountants, etc.
- Gave powers to the Minister of Finance to prescribe estimates of rent based on the rating of the rental property in a specific location. The amendment applies to persons who fail to file a return of rental income or whose return is misleading on the face of it and has been contested by the Commissioner. Further, the Act requires all rental agreements to be executed and effected in Ugandan shillings.
- Exempted the income of Bujagali Hydro Power Project from tax up to 30 June 2022, and the income of a savings and credit co-operative society up to 30 June 2027.
- Re-introduced the initial allowance deduction at 50% of the cost base of plant and machinery wholly used in the production of income included in gross income. The initial allowance deduction is applicable to plant and property placed into service for the first time during a year of income outside a radius of 50 kilometres from Kampala.
- Re-introduced initial allowance on industrial buildings at 20% of the cost base of a new industrial building or extension of an industrial building on which construction was commenced on or after 1 July 2000 and placed into service for the first time during the year of income. Previously, the initial allowance provisions were repealed in July 2014.
- Gave power to the tax authority to make adjustments to transactions between persons who are in an employment relationship although the Transfer Pricing Regulations do not apply to transactions between employers and employees.
- Waiver of interest on unpaid tax that is in excess of the aggregate of the principal tax and penal tax.
The VAT (Amendment) Act 2017 introduced the following changes:
- Extended the special VAT treatment for aid-funded projects to include taxable supplies made to a government ministry, department, or agency by a contractor executing an aid-funded project where the supply is for use solely or exclusively for the aid-funded project. Previously, the special treatment only applied to supplies made to contractors.
- Capped the interest payable on unpaid tax to a maximum of the aggregate of the principal tax and penal tax.
- Reinstatement of the VAT at 18% on the supply of wheat grain.
- Provided for VAT exemption of certain goods and services, including the supply of animal feeds and premixes, the supply of crop extension services, the supply of irrigation works, sprinklers, and ready to use drip lines, the supply of deep cycle batteries and composite lanterns, as well as raw materials for their manufacture, the supply of menstrual cups, and the supply of agriculture insurance premium or policy.
The Excise Duty (Amendment) Act 2017 introduced the following changes:
- Increase in excise duty on certain cigarettes and a distinction between locally manufactured and imported cigarettes. Locally manufactured soft cup and hinge lid cigarettes are now subject to duty of UGX 55,000 to UGX 80,000 per 1,000 sticks respectively. On the other hand, imported soft cup and hinge lid cigarettes are now subject to duty of UGX 75,000 to UGX 100,000 per 1,000 sticks respectively.
- Increase in duty on furniture imported or assembled in Uganda from foreign materials (excluding specialised hospital furniture) from 10% to 20%.
- Introduction of a new specific rate regime for certain beverages where excise duty will be calculated as the higher of a specific rate (i.e. based on volume) and an ad valorem rate (based on value). These items are currently subject to an ad valorem rate. The new changes are as follows:
- A specific rate of excise duty of UGX 1,860 per litre on malt beer as an alternative to the ad valorem rate of 60%, whichever is higher.
- A specific rate of excise duty of UGX 650 per litre on beer whose local raw material content, excluding water, is at least 75% by weight of its constituent as an alternative to the ad valorem rate of 30%, whichever is higher.
- A specific rate of excise duty of UGX 950 per litre on beer produced from barley grown and malted in Uganda as an alternative to the ad valorem rate of 30%, whichever is higher.
- A specific rate of excise duty on non-alcoholic beverages (excluding fruit or vegetable juices) of UGX 240 per litre as an alternative to the ad valorem rate of 13%, whichever is higher.
- Introduced excise duty on fruit juice and vegetable juice, except juice made from at least 30% of pulp from fruit and vegetables grown in Uganda at 13% or UGX 300 per litre, whichever is higher.
- Revised the excise duty rate on un-denatured spirits from UGX 1,000 per litre or 100%, whichever is higher, to UGX 2,500 per litre or 100%, whichever is higher.
The Tax Procedure Code (Amendment) Act 2017 introduced the following changes:
- Clarification that the due date for filing of provisional returns is the date of payment of tax.
- Introduced a requirement for persons dealing in locally manufactured and imported goods to affix on the goods a tax stamp to be prescribed by the Minister of Finance with a penalty for failure to affix a tax stamp.
- Clarification on the hierarchy of payment of taxes where a taxpayer is liable for penal tax and interest in relation to a tax liability and the taxpayer makes a payment less than the total amount of tax, penal tax, and interest. The amount paid will be used to first offset the principal tax, then the penal tax, and the balance is applied to the interest due.
- Introduced a penal tax of UGX 50 million for failure to provide records requested by the Commissioner in respect of transfer pricing and UGX 20 million in respect of other information (other than transfer pricing) within 30 days after the request.