This sector includes both the wholesale and retail sale (i.e. sale without alteration) of any type of goods. Wholesaling and retailing are the final steps in the distribution of goods. Also included is the repair of motor vehicles and motorcycles.
Wholesale is the resale (sale without alteration) of new and used goods to retailers, business-to- business trade, resale to other wholesalers, etc. Examples of wholesale trade includes
• Non specialized wholesale trade
• Wholesale on a fee or contract basis
• Wholesale of agricultural raw materials and live animals
• Wholesale of food, beverages and tobacco
• Wholesale of household goods
• Wholesale of machinery, equipment and supplies
• Other specialized wholesale
A wholesaler will often assemble, sort and grade goods in large lots, and repack and redistribute in smaller lots. The goods are frequently destined for retailers.
Retailing is the resale (sale without alteration) of new and used goods – often referred to as consumer goods – mainly to the general public for personal or household consumption via shops, department stores, stalls, mail-order houses, door-to-door sales persons, etc.
Retailers consist of small and large for-profit businesses that sell products directly to consumers.
To realize a profit, retailers search for products that coincide with their business objectives and find suppliers with the most competitive pricing. Generally, a retailer can buy small quantities of an item from a distributor or a wholesaler. For instance, a retail trader who wanted to purchase 24 boxes of books could contact stationery distributors to inquire about pricing.
The whole sale and retail sector faces a number of challenges and these includes:-
• Illiteracy of the players
• Numerous small segmented players.
• Poor records keeping.
• The sector is highly dominated by middle men who swindle traders’ money.
N.B
• All players in this sector are required to account for their incomes and register for the applicable tax types.
Any expense that exceeds 5 million in regard to an unregistered supplier is not tax deductible. The players in this sector should therefore endeavor to register for TINs and also transact with businesses that are registered too.
All businesses in Uganda are required to register with URSB, KCCA/LOCAL GOVERNMENT and URA. The Legal registration status with Uganda Registration Services Bureau (URSB) as a whole sale or retail trader determines the taxes you will register for when acquiring a TIN.
At URSB, upon approval of Business Registration application, you will receive either a Certificate of Registration (if registered in Personal Name or Business Name or incorporated outside Uganda) or a Certificate of Incorporation (if the entity is registered as Limited by shares or guarantee). This will enable you to get a TIN either as an individual (in your Personal Name, or Business Name) or Non Individual (Limited Partnership or Trust or Government Body or Public Institution) name.
At URA, upon approval of a TIN application, you will be given a Tax Identification Number (TIN) for tax purposes. It is a 10-digit number which acts as an account of a taxpayer with Uganda Revenue Authority (URA). All traders are required to quote this number in all their communications with URA and business transactions.
A TIN is obtained free of charge and therefore no one should charge you for it.
At KCCA/LOCAL GOVERNMENT, upon approval of a Trading License application, you will be given a Trading License to enable you operate your business in a delineated Local Authority country wide.
Any trader generating income in Uganda is required to register for taxes.
Taxation in this sector depends on your Legal registration status with Uganda Registration Services Bureau (URSB) as a trader. Once you acquire a TIN, then you must always use it when transacting with Uganda Revenue Authority for tax purposes.
Note that your business/company name must be registered by Uganda Registration Services Bureau (URSB).
TIN stands for Tax Identification Number. It is a 10-digit number which acts as an account of a taxpayer with Uganda Revenue Authority (URA). All taxpayers are required to quote this number in all their communications with URA and business transactions.
A person’s TIN shall be indicated on any return, notice, communication, or other document furnished, lodged, or used for the purposes of a tax law.
A TIN is personal to the person to whom it has been issued and shall not be used by another person. Please note that a TIN is obtained free of charge and therefore no one should charge you for it.
A TIN can be acquired through any of the processes below:
- Through the URA Web portal:
a. Visit the URA web portal
b. Download the appropriate registration form (Individual or Non Individual),
c. Complete the form by filling in the mandatory fields (boxes)
d. Upload and submit online the completed form
e. Receive an acknowledgment notice
f. Print a copy of the form and sign it and together with the necessary attachments submit to the nearest URA office.
g. Receive notification of approved or rejected TIN application
h. Print TIN Certificate sent to the email registered with URA from anywhere - Visiting a URA designated office
In case a taxpayer cannot register online, he or she can walk into any of the URA offices or One Stop Centre located in any Municipality or KCCA division and assistance shall be provided to complete the registration process. Ensure that you move along with the necessary attachments as listed above.
In case of failure to do any of the above, call the Contact Centre: 0800217000 or 0800117000 (Toll free) or send an email to services@ura.go.ug
The key requirements for TIN registration include;
• For an individual: A National ID or any two of the following identification documents; Village ID, Employment ID, Passport, Driving permit, Voter’s Card, Bank Statement, Work Permit, Financial Card, Visa, NSSF Card etc. This is also applicable to company directors
• For an individual with business, a business registration certificate is required.
• For a non-individual: Certificate of Incorporation/Certificate of Registration, Company Form 20 showing the directors of the company, and any other legal documents that confirms existence.
• In case the directors do not have TIN’s, then their application(s) must be submitted together with the company application form under “group registration”.
• A valid email address and a mobile telephone number
• A referee – any person known to applicant and has a TIN
• An employee shall attach proof of employment
i. Acquiring a TIN enables you to:
• Import or export goods within and outside Uganda.
• Claim tax benefits that accrue to you e.g. tax refunds etc.
• Access bank loans.
• Acquire a trading license from Local Government / KCCA to undertake business in their jurisdiction.
• Register your Motor Vehicle
• Process land transactions above 50 Million Shillings.
The TIN acts as a security measure on transactions regarding some assets e.g. already validated motor vehicles, titled land since a notification is automatically sent to the owner’s TIN account and registered email.
NOTE:
A local authority, government institution or regulatory body shall not issue a license or any form of
authorization necessary for purposes of conducting any business in Uganda to any person who does not have a Tax Identification Number including one issued by foreign tax authorities with whom Uganda has a tax treaty or agreement for the exchange of information.
TREP is the Taxpayer Register Expansion Program set up by Government of Uganda with the objective of formalizing the informal businesses leading to an expansion of the tax base and improvement in tax administration.
The collaborating Institutions include:
• Uganda Registration Services Bureau (URSB) for Business name registration, Company Incorporation, Certification and Name Reservation.
• Uganda Revenue Authority for tax registration and collection.
• Kampala Capital City Authority and Ministry of Local Government for Trading License and collection of Local Service Tax, Local Hotel Tax and Property Rates
The TREP program has Setup one stop shops (OSS) in the following areas: Since its inception, one stop shops (OSS) have been established as follows.
- At KCCA divisional offices;
• KCCA Nakawa Division Offices – Kimera Road Behind Uma Grounds
• KCCA Central Division Offices – Basement, Plot 86/88 William Street
• KCCA Head Office Kampala – Plot 1-3 Sir Apollo Kaggwa Road
• KCCA Kawempe Division Offices – Plot 1041 Nabweru Road
• KCCA Rubaga Division Offices – Plot 360 KabaKa Anjagala Road
• KCCA Makindye Division Offices – Plot 465 & 1081 Mubutu Road - At URA offices in Kampala;
• URA Tower –Nakawa
• Finance Trust Bank- Katwe
• Diamond Trust Bank- Bombo Road
• Post Bank-William street
• Diamond Trust Bank- Ham Shopping mall
• United Bank of Africa- Aponte Hotel Building
• Diamond Trust Bank -opposite Cham Towers - URSB offices in Kampala;
• URSB head offices at Georgina House, Plot 5 George Street. Kampala - Ministry of Local Government Municipal Divisions
| 1. | Arua | 13. | Kasese | 25. | Torero |
| 2. | Busia | 14. | Kira | 26. | Mbarara |
| 3. | Entebbe | 15. | Kisoro | 27. | Mityana |
| 4. | Fort-Portal | 16. | Kitgum | 28. | Moroto |
| 5. | Gulu | 17. | Kumi | 29 | Mubende |
| 6. | Hoima | 18. | Kumi | 30. | Mukono |
| 7. | Iganga | 19. | Lira | 31. | Nansana |
| 8. | Ishaka-Bushenyi | 20. | Lugazi | 32. | Ntungamo |
| 9. | Jinja | 21. | Makindye-Sssabagabo | 33. | Rukungiri |
| 10. | Kabale | 22. | Masaka | 34. | Soroti |
| 11. | Kamuli | 23 | Soroti | ||
| 12. | Kapchorwa | 24. | Mbale |
When you visit any One Stop Shop (OSS), you will find officials in the order below who will facilitate you accordingly.
| URSB | URA | KCCA/LOCAL GOV’T |
| If your business is already registered, you will be expected to present your Business Registration Certificate and Statement of Particulars form to a URSB Officer, who will validate them and refer you to the next desk (URA). If your business is not registered with URSB, you will be required to propose a Business name such that you are assisted to complete a URSB Business Registration form to reserve one. You will then be allocated a Business Registration Number (BRN) and issued with a Payment slip for Business Name Registration and referred to the next desk (URA) | At the URA Desk, you will be required to present a Business Registration Certificate and Statement of Particulars Form and your TIN or TIN Certificate if you are already registered for taxes. If the officer confirms the validity of your registration, you will move on to the next desk (KCCA). In case you don’t have a TIN, you will be required to present the following before you can be registered and issued a TIN: a) Business Name Registration certificate and a copy of Statement of Particulars form. b) Photo copies of any two valid identification documents. You will be assisted to register and issued with a TIN / TIN Certificate; and a Payment slip for Income Tax and referred to the next desk (KCCA) | At this point, you must be having a Business Name Registration Certificate or a copy of statement of particulars and a TIN or TIN certificate. KCCA At the KCCA desk, you will be required to present a valid City Operator Identification Number (COIN).In case you don’t have one, the officer will capture your details in the KCCA system, and issue you a COIN and a Payment slip for Trade license. LOCAL GOVERNMENT At the municipality, you will be required to present a Customer Identification Number (CIN) In case you don’t have one, your details will be captured in a manual Single data collection form. You will then be issued with a CIN; and a Payment slip for Trade license. |
| Rights | Obligations |
| • To object to tax assessments where you are not contented with the tax assessed and even appeal for a review or to the Commissioner General, or to courts of law where you feel you have not been given satisfactory hearing. • You have a right to equity: Tax laws and procedures shall be applied consistently to you All your tax affairs handled with impartiality You and your agent(s) shall be presumed honest until proven otherwise You shall always pay the correct tax • Your tax affairs shall be kept secret and any tax information in our possession shall be used in accordance with the law. • You and your authorized agent(s) shall be provided with clear, precise and timely information. • You will receive courteous and professional services at all time | • Comply with all the taxation requirements and regulations. • Make full disclosure of information and correct declaration of all transactions at all times. • Pay the correct tax at the right time and place as required by the relevant laws. • Not indulge in any form of tax evasion and other illegal practices. • In handling your tax matters, you and or your appointed agent(s) shall be expected to deal and cooperate only with the Authority’s authorized staff. • Quote your Tax Identification Number (TIN) for all dealings with URA. |
- It is very important for taxpayers to;
– Keep proper records of all business transactions in English language;
– Keep records such that it is easy to determine their tax liability;
– Keep records for five years after the end of the tax period to which they relate for future reference. - In case a record is necessary for a proceeding which started before the end of the 5 year period, a taxpayer shall keep the record until the end of the proceedings.
- The records kept should contain sufficient transaction information and should be saved in a format that is capable of being recovered and converted to a standard understandable record format.
- A taxpayer who wishes to keep records in a different language or currency shall apply in writing with clear reasons to the commissioner for permission.
- Where a record is not in English, the taxpayer will be required to meet the cost of translation into English by a translator approved by the Commissioner.
However, the taxpayer shall file a tax return or provide other correspondence with the Commissioner in English.
A person who no longer fulfills the registration conditions may, in the prescribed manner, apply to the Commissioner to be deregistered.
The Commissioner shall by notice in writing, deregister a person if he is convinced that the person no longer satisfies the registration conditions.
A person who temporarily closes a business with an intention of resuming, shall not be deregistered but apply to the commissioner in writing to have his TIN deactivated and later on reactivated when they resume business.
The penalty for a person who fails to apply for registration, cancel a registration or notify the Commissioner of a change in registration or circumstances is;
i. a fine not exceeding Shs. 3,000,000 or imprisonment not exceeding six years or both on conviction if the failure/act was done knowingly or recklessly.
ii. to a fine not exceeding Shs. 1,000,000 or imprisonment not exceeding two years or both on conviction in any other case.
• The penalty to be paid under this section shall be recovered and collected as unpaid tax.
A TIN is personal to the person to whom it has been issued and shall not be used by another person.
• A person who uses a false TIN on a tax return or other document prescribed or used for the purposes of a tax law, knowingly or recklessly or not, commits an offence and is liable on conviction to a fine not exceeding Shs. 3,000,000 or imprisonment not exceeding six years or both.
The penalty for knowingly or recklessly or not failing to maintain records as required under any tax law is a fine not exceeding Shs. 2,000,000 or imprisonment not exceeding six years or both on conviction.
Note: A taxpayer, who cannot effectively handle his tax matters, can appoint a tax agent to transact with URA on his/her behalf.
A tax agent is a person licensed by the Tax Agents Registration Committee (TARC) to handle tax related issues on behalf of the tax payer. An agent can be an individual, partnership, or company. An agent engages in the following activities on behalf of the taxpayer:
• Preparation, certification, and filing tax returns, or other statements or reports required by the Authority.
• Preparation of requests for ruling, petitions for reinvestigation, protests, objections, requests for refund or tax certificates, compromise settlements and/or reductions of tax liabilities and other official papers and correspondences with the Authority.
• Attending meetings and hearings on behalf of the taxpayer in all matters relating to a taxpayer rights, privileges or liabilities under the laws administered by the Authority
Taxpayers who need tax advisory services.
This is tax imposed on a trader’s taxable income at specific rates and is charged on every person who has chargeable income for each year of income. (Section 4 of the Income Tax Act).
This may be categorized into:
a) Presumptive tax for small tax payers.
A simplified process called IT Presumptive (Small Business) Declaration was designed to enable registration of payments and filing of returns for taxpayers under this category.
The Assessment year is a period of 12 months for the current or next period and shall be in line with the registered accounting date.
This is imposed on small taxpayers (both individuals and non-individuals) whose annual turnover is below UGX 150 million.
The presumptive tax rates are based on turnover, however there is a standard of record keeping. Small businesses with no records will pay tax on a fixed basis whereas those with records will pay tax as a percentage of turnover.
| Gross turnover per annum | With records | Without records |
| Not exceeding UGX 10 million | NIL | NIL |
| Exceeding UGX 10 million but does not exceed UGX 30 million | 0.4% of annual turnover in excess of 10 million | UGX 80,000 |
| Exceeding UGX 30 million but does not exceed UGX 50 million | UGX 80,000 plus 0.5% of annual turnover in excess of UGX 30 million | UGX 200,000 |
| Exceeding UGX 50 million but does not exceed UGX 80 million | UGX 180,000 plus 0.6% of annual turnover in excess of UGX 50 million | UGX 400,000 |
| Exceeding UGX 80 million but does not exceed UGX 150 million | 360,000 plus 0.7% of annual turnover in excess of UGX 80 million | UGX 900,000 |
The trader must have a TIN in order to self-assess and register a payment in relation to “IT -Small Business”. This can be done either within or outside the trader’s login.
A trader can also declare multiple businesses in a single declaration. The trader will be required to provide the following details when making a declaration or registering payments.
i. Taxpayer Details
ii. Assessment Period
iii. Business Assessment Details
iv. Business Location And Other Details
v. Payment Registration Details.
After submission of the declaration on the URA portal, the client shall be able to receive the following.
i. Income Tax assessment Notice
ii. Payment registration slip
iii. Mail Notification.
After payment of the tax, the taxpayer is required to print a certificate for the given tax period and display it in his/her premises. All the business names relating to the declaration shall be displayed to be selected by the taxpayer for certificate generation.
Note:
No deductions are allowed in respect of any expenditure or losses and the assessed tax is the final tax for presumptive tax payers, however one has an option of filing returns.
The basis for determination of the Income tax liability for an individual trader is the gross income generated reduced by allowable deductions and any income tax paid or withheld at source on the gross Income for that year.
N.B CY represents chargeable income.
| ANNUAL CHARGEABLE INCOME (CY) IN UGX | RATE OF TAX Residents |
| 0 to 2,820,000 | Nil |
| 2,820,000 to 4,020,000 | (CY – 2,820,000UGX) x 10% |
| 4,020,000 to 4,920,000 | (CY – 4,020,000UGX) x 20% + 120,000UGX |
| 4,920,000 to 120,000,000 | (CY – 4,920,000UGX) x 30% + 300,000UGX |
| Above 120,000,000 | [(CY – 4,920,000UGX) x 30% + 300,000UGX] + [(CY – 120,000,000UGX) x 10%] |
| ANNUAL CHARGEABLE INCOME (CY) IN UGX | RATE OF TAX Non-residents |
| 0 to 4,020,000 | CY x 10% |
| 4,020,000 to 4,920,000 | (CY – 4,020,000UGX) x 20% + 402,000UGX |
| 4,920,000 to 120,000,000 | (CY – 4,920,000UGX) x 30% + 582,000UGX |
| Above 120,000,000 | [(CY – 4,920,000UGX) x 30% + 582,000UGX] +[(CY – 120,000,000UGX) x 10%] |
That where the trader declares a loss, the tax payable is Nil (Zero) Illustration for computation of the tax:
Illustration for individual business.
Ms. Nakirunda received 160 million UGX from the sale of clothes during 2014/2015 of which 9.6 Million UGX (6% of 160 Million) was withheld by URA at importation of the clothes.
From the beginning of the year, he incurred the following costs
Direct costs… 33
Annual salary for 2 employees… 24
Annual rent for store… 12
Other Operation expenses… 14
Renovating her home 9
Calculate his Income Tax Liability for 2014/2015.
Gross Income from sales… 160
Less:
Direct costs… 33
Gross Profit… 127
Less: Allowable deductions:
Annual salary for 2 employees… 24
Annual rent for store… 12
Operation expenses… 14- 50
Chargeable Income… 77
Income Tax Liability
Since his chargeable income falls in the fourth category, then
Tax Liability = (77,000,000-4,920,000) *30% +300,0000… 21.924
Less withholding Tax at source… 9.6
Net tax liability (Income Tax – Withholding tax) Million UGX
Note that the expense for renovating his home (9m) is not considered (disallowed expense) because it is not incurred in the generation of gross income from trading
This is imposed on all corporate entities (Companies) engaging in wholesale and retail trading activities. Income Tax is charged at a rate of 30% on the profits from business (Chargeable Income).
Illustration on the Determination of the Tax liability for companies (Non- individuals)
| SALES /Revenue | UGX | UGX |
| Sanitary towels | 5,000,000 | |
| Stationery | 3,000,000 | |
| Liquid soap | 2,000,000 | |
| Toilet paper | 3,200,000 | |
| Detergent | 2,800,000 | |
| Total Sales | 16,000,000 | |
| COST OF SALES | ||
| Total Cost Of Sales | ||
| EXPENSES | ||
| Salaries and Wages | 500,000 | |
| Rent | 1,500,000 | |
| Utilities (water, electricity) | 700,000 | |
| Total Expenses | (2,700,000) | |
| Profit Before TAX | 10,300,000 | |
| TAX = 30% of 10,300,000 | 3,090,000 |
Note. A company earning a gross turnover below 150 million UGX has an option of either filing a return and pay using the rate of 30% or make a presumptive payment as in I(a) above.
All whole sale and retail companies earning a gross turnover above 150 million UGX should file a return and calculate tax payable using the tax rate of 30%.
If a company does not pay rent but owns the building whether under lease or not, the value of the building is capitalized.
All one off costs paid to URSB and KCCA should be expensed.
PAYE is a monthly return furnished by an employer for an amount withheld from their employees who earn employment income or an associate as tax.
Employment refers to a;
• Position of an individual in employment of another Person,
• Directorship of a company, a position entitling the holder to a fixed or ascertainable remuneration.
• Holding or acting in a public office.
All traders that employ staff that are paid monthly salaries are required to withhold PAYE under section 19 of the income tax Act.
This tax is deducted from the total salary of employees (earning income above 235,000 UGX) by employers and then remitted to URA on behalf of the employees.
Employment income includes gross cash received in form of; salary, leave pay, payment in lieu of leave, overtime pay, fees, commission, gratuity, bonus, allowances (entertainment, duty, utility, welfare, housing, medical, sitting ,transport or any other allowances).
Benefits in kind include use of employer office Motor vehicle for personal errands, free accommodation, use of driver, domestic workers and free utilities (power, water, etc.) paid by the employer on behalf of the employee. The benefits in kind are computed using particular formulae in Part 1 of the 3rd Schedule of the Income Tax Act.
The PAYE is tax withheld from all employees earning a salary income above the stated threshold as per the Income Tax Act and filed by the employer to URA by the 15th of the following month.
Please Note:
1) It is an obligation of the employer (not the employee) to deduct PAYE on a monthly basis and furnish the return by the 15th of the following month.
2) The amounts withheld should also be paid over to URA by the 15th of the following month to avoid interest charges.
The PAYE rates are applied based on the person’s resident status as shown in the table below. PAYE Tax rates that apply for both Residents and Non Residents.
| CHARGEABLE INCOME (CY) IN UGX (MONTHLY) | RATE OF TAX RESIDENTS |
| CHARGEABLE INCOME (CY) IN UGX (MONTHLY) | RATE OF TAX NON-RESIDENTS |
| 0 to 335,000 UGX | CY x 10% |
| 335,000 to 410,000 | (CY – 335,000UGX) x 20% + 33,500 |
| 410,000 to 10,000,000 | (CY – 410,000UGX) x 30% + 48,500 |
| Above 10,000,000 | [(CY – 410,000UGX) x 30% + 48,500UGX] +[(CY – 10,000,000UGX) x 10%] |
| 0 to 235,000 | Nil |
| 235,000 to 335,000 | 235,000 to 335,000 |
| (CY – 335,000UGX) x 20% + 10,000UGX | |
| (CY – 410,000UGX) x 30% + 25,000UGX | |
| [(CY – 410,000UGX) x 30% + 25,000UGX] +[(CY – 10,000,000UGX) x 10%] |
- Kamonde is a resident employed by ABC Enterprises. He earns a monthly salary of UGX 200,000. Is the company obliged to deduct PAYE tax from Kamonde?
Solution; No, because Kamonde’s monthly salary is less than the threshold UGX 235,000 so his salary does not attract PAYE.
- If Kamonde in addition to the monthly salary of UGX 200,000 is given travelling monthly allowance of UGX 95,000 and medical monthly allowance of UGX 55,000. Monthly allowance for accommodation UGX 150,000
Compute his monthly amount of PAYE to be deducted from Kamonde’?
| Salary Travelling allowance Medical allowance Accommodation allowance Total {chargeable income} | UGX 200,000 95,000 55,000 150,000 500,000 |
{UGX 500,000 falls under the bracket (Exceeding UGX 410,000 but not exceeding UGX 10,000,000)} Thus the PAYE applicable will be (30% of the amount by which chargeable income exceeds UGX 410,000) + UGX 25,000
| Chargeable Income | 500000 |
| Less | 410000 |
| Balance | 90,000 |
| 30 % | 27,000 |
| Add | 25,000 |
| Tax there on in Shs. | 53,000. |
NOTE. For information on how to calculate the employee benefits, please refer to the income tax act section 19 and the fifth schedule
Local service tax paid to KCCA and local government is exempted from PAYE.
This is a tax withheld at source at the point of making a payment to the supplier/service provider.
Total payments to a supplier in respect of a supply of goods or services as provided for in a transaction amounting to one million shillings and above in aggregate attracts WHT of 6% to residents and 15% to non-residents under Section 119 of the Income tax Act.
Note that the amount withheld on any payment is part of your annual tax payment and thus reduces on your annual tax liability.
Illustration
If Muban and Sons a sole proprietorship supplies Capital Shoppers (Designated Withholding Agent) with taxable supplies worth 100 Million UGX, then he will receive a net of 94 million UGX and the 6 million UGX (6% of 100Million) will be Withheld and remitted to URA by Capital shoppers on his behalf.
In cases where a trader has rental properties and earns rental income or sublets
It is a tax on consumption charged on value added to “taxable” goods and services (Standard Rated Supplies), at different stages in the chain of distribution and is charged at a rate of 18% on all supplies made by taxable persons i.e. persons registered or required to register for VAT purposes. The threshold for VAT registration is an annual turnover of 150 million UGX and above or turnover of 37.5 million UGX in any 3 consecutive months.
Some transactions are beyond the scope of VAT and these are classified as Exempt Supplies (Second Schedule of the VATA). Supplies on which VAT is charged at 0% are classified as Zero Rated Supplies (Third Schedule of the VAT Act).
If a trader is registered for VAT, he can claim for his Input tax when selling a zero rated product/service.
Note
• Traders dealing in taxable supplies with a gross turnover 150 million UGX and above are required to register for VAT.
• Traders dealing in exempt supplies are not subject to Value Added Tax (VAT) and so suffer VAT as a cost but must register for Income tax. However, traders who deal in taxable supplies with a gross turnover below 150 million UGX can voluntarily register for VAT if they meet the registration criteria.
• All taxpayers registered for VAT are required to file VAT returns for each month by the 15th day of the following month.
The Commissioner General shall register a person who applies for registration and issue to that person a certificate of registration including the VAT registration number (TIN) unless the Commissioner General is satisfied that;
(a) the person has no fixed place of abode or business; or
(b) the Commissioner General has reasonable grounds to believe that that person :–
• will not keep proper accounting records relating to any business activity carried on by that person;
• will not submit regular and reliable tax returns as required by Section 31; or
• is not a fit and proper person to be registered
It is mandatory for all VAT registered taxpayers to issue e-invoices or e-receipts as no tax credit is allowed or claimable on purchases unless they are supported by e-invoices or e-receipts.
The law allows a period of six (6) months from the date of issue of the invoice within which a person can apply for an input tax credit.
Gadhafi is an importer of children’s shoes. In June 2012 he imported 50 cartons of shoes at UGX 5,000,000 for the entire consignment. He sold to a wholesaler at UGX 7,200,000. The wholesaler sold to a retailer at cost plus mark-up of 20%. The retailer sold to the consumers at a mark-up of 10%.
Assume that all the above figures were VAT exclusive, and that only VAT was liable.
Determine the VAT collected at each stage in the distribution chain.
| Stage/dealer | Cost price (UGX) | Selling price (UGX) | Input tax (UGX) | Output tax (UGX) | Tax Payable (UGX) |
| Gadhafi at importation | 5,000,000 | – | 900,000 | – | 900,000 |
| Gadhafi at domestic level | 5,000,000 | 7,200,000 | 900,000 | 1,296,000 | 396,000 |
| Wholesaler | 7,200,000 | 8,640,000 | 1,296,000 | 1,555,200 | 259,200 |
| Retailer | 8,640,000 | 9,504,000 | 1,555,200 | 1,710,720 | 155,520 |
| Final Consumer | 9,504,000 | – | 1,710,720* | – | – |
| Total payable to URA | 1,710,720* |
NOTE: The mechanism of VAT is such that, for goods that are imported and consumed in a particular state, the first seller (importer) pays the first point tax, and the next seller pays tax only on the value- added – leading to a total tax burden exactly equal to the last point tax.
This is a tax that is imposed on specified imported or locally manufactured goods, and services. Initially Excise Duty was meant for “luxury” or prohibited items. However excise duty is now treated as any other source of revenue for Government. The applicable rates may be specific or ad valorem.
The tax is imposed on the value of the import; and in the case of locally manufactured goods, the duty (local excise duty) is payable on the ex-factory price of the manufactured goods.
Exported but locally manufactured goods are exempt from excise duty.
Persons supplying excisable goods and services are required to register and file monthly returns to the tax authority by the 15th day of the month following the month in which delivery of the goods was made.
Note
Excise duty is charged on deliveries (Goods and services) made out of the factory as well as on payment regardless of whether payment is made or not.
Excise duty return is submitted on a monthly basis and the due date for both filing the return and payment is the 15th day of the subsequent month.
Computation of excisable duty payable
| ITEM | AMOUNT |
| cost of materials | XXXX |
| add: other related costs (overheads) | XXXX |
| Total Cost | XXXX |
| Add: PROFIT | XXXX |
| Ex- Factory Price | XXXX |
Sipi Waters limited produced and delivered 400 cartons of bottled water to WIZKID Kampala concert. The ex-factory price per carton was 20,000 Shs. and the excisable duty rate was 10%.
Required: Determine the excisable duty payable?
= (400X20,000UGX) X 10%
= 800,000 UGX
These are taxes which are charged on all goods entering into or leaving our country. The taxes charged depend on the Value and nature of the item imported.
Below are the Steps we follow when Computing Customs Duties.
• Step 1 Determine Customs Value (CV);
• Step 2 Convert the Customs Value to Local Currency (Shs.);
• Step 3 Classify the item (HSC) as per the common external tariff;
• Step 4 Determine taxes collectable
• Step 5 Apply the duty rates on the Customs Value
a) Import duty(ID)
This is a tax collected on imports and some exports not listed in the exemption schedule by URA. It is based on the customs value of the goods that are imported. The customs value is Cost, Freight and Insurance up to Mombasa or cost and insurance if by Air. The rate of import duty is either 0%, 10%, 25% or more for sensitive items like wheat and powdered milk.
NB. For more information on import duty rates, please refer to our common external tariff book on the portal under tax assistant, A-Z tax topics.
Formulae for calculating import duty
• Import Duty (ID) = ID rate x Customs value
• VAT = VAT value x 18%= (ID+EXD+CV) x 18%
b) Excise duty(EXD) at Importation
This tax is only charged on specific goods imported at varying rates.
Formulae for calculating excise duty
• Excise duty (EXD)= EXD value x EXD rate= (ID + Customs value ) x EXD rate
c) VAT at importation.
This is a tax on consumption charged on taxable goods imported into the country and is charged at a rate of 18% if the importer is registered for VAT and at 15% on the 18% of the value if the importer is not registered for VAT but importing taxable goods of a value of shillings 4,000,000 and above.
NB. If the importer is registered for VAT, he/she can claim any VAT incurred at importation through her/his monthly VAT returns.
Formulae for calculating VAT at importation
• VAT = VAT value x 18%= (ID+EXD+CV) x 18%
• Domestic VAT = 15% (VAT value x 18%) = 15% ((ID+EXD+CV) x 18%)
d) WHT at importation
This is income tax withheld at importation of a good. It is at a rate of 6% of customs value. It can be claimed by the importer when he/she is filing his/her final income tax return as advanced tax already paid.
NB. If the importer is exempted from WHT, he/she should not be charged this tax at importation
Formulae for calculating WHT at importation
• WHT = Customs value x 6%
e) Infrastructural levy
This levy is only applicable to dutiable items imported from outside EAC Region.
NB: The following will not attract the 1.5% Infrastructure Levy
- Items that are at 0% Import duty rate
- All items imported under conditional Exemptions as indicated in the 5th Schedule of the EACCMA (East African Community Customs Management Act)
Formulae for calculating infrastructural levy
• WT = Customs value x 1.5%
f) Environmental levy
This is tax levied on imports that may be harmful to the environment for example on used clothes and used vehicle.
Formulae for calculating Environmental levy
• EL on used clothes = Customs value x 10%
• EL on used vehicles of YOM between 5 and 10 years = Customs value x 35%
• EL on used vehicles of YOM 10years and above = Customs value x 50%
i. The suppliers of stock: These are expected to have the following;
o Valid TINs that are clearly shown on invoices issued to their clients every time they supply.
o File income tax returns or the simplified returns under Part 1 of the second schedule of the Income Tax Act.
o They may opt to use presumptive rates where applicable
o Where their turnover is above 150 million UGX, they are required to register for VAT
o Where their employee(s) is/are earning above 235,000 UGX per month, they should register and withhold PAYE at the appropriate rates.
ii. Other suppliers: These could either be local suppliers or foreign suppliers.
o Local suppliers: where the trader withholds tax on behalf of government (Section 119 (1)), he/she is required to file a WHT return, remit the payment to URA and issue the PAYEE a Withholding Tax Credit Certificate. The payees could be transporters, cleaning firms, land lords/ladies or any other vendors. Take note that separate supplies of goods or materials or supplies amounting to above 1 million may attract the 6% WHT.
o International payments: this is applicable where a trader makes foreign payments for management fees, or makes payments to a non-resident contractor or professional under sections 83 and 85 of the Income Tax Act respectively
| VAT | |
| Type of incentive | Conditions for granting exemption |
| Exporters | Zero rated |
| VAT registered persons claim all the VAT incurred. | Turnover of UGX 150m in any 12 month period for first time registration, ability to keep proper books of accounts and making taxable supplies. |
| A tax refund of 5% of the VAT amount, to be paid back to consumers who purchase goods or services from a taxable person and is issued with an electronic receipt or invoice. | Purchase should be worth five million shillings within a consecutive period of thirty days. |
| The supply of drugs, medicines and medical sundries manufactured in Uganda are zero rated | Manufactured in Uganda |
| VAT exemption at importation. | Importers of medicines |
| INCOME TAX | |
| Type of incentive | Conditions for granting exemption |
| 6% WHT exemption | 6 months renewable Where the Commissioner is satisfied that the taxpayer has regularly complied with the- |
| obligations under the tax laws | |
| Indexation in the calculation of capital gains in order to account for inflation. | Before determining Capital Gains tax on a business asset, one will factor in inflation among others that influence the asset value. However, indexation shall not apply to an asset that is sold within twelve months from the date of purchase. |
| Preferential treatment of capital gains tax for a venture capital fund registered under the Capital Markets Authority Act. | A venture capital fund shall be entitled to a non- recognition of a gain or loss equivalent to the percentage of reinvested proceeds. |
| Recognition of losses | If for any year of income, the total business income earned by a taxpayer is less than the total expenses relating to the generation of the business income, the excess (loss) shall be carried forward and allowed as a loss in the following year. Note that it must be declared and proved by URA in the current year of income as a loss. |
| Wear and Tear | Wear and Tear allowance is granted for assets and equipment’s owned by the entity and registered in the business names. The rates are as provided for in the Income Tax Act. |
| Allowable deduction of purchase expense from a supplier designated to use e-invoicing system | Allowable deduction of purchase expense from a supplier designated to use e-invoicing system. These suppliers will be gazetted and these expenses should be supported by e-invoices or e-receipts. |
| 100% deduction of training expenditure | Employers who train permanent residents or provide tertiary education not exceeding in the aggregate 5 years |
| Income tax exemption for Collective Investment Schemes | Must be licensed to operate as a collective investment scheme. Participants in the scheme should not have day to day control over the management of the property. Participants contributions and ultimate income/ profits must be pooled Property must be managed as a whole by the operator of the scheme |
| Double Taxation Agreements (DTA): Investors from countries with active DTA’s with Uganda i.e. United Kingdom, Denmark, Norway, South Africa, India, Italy, Netherlands and Mauritius. Withholding tax rates applicable to dividends, interests, management fees and royalties are 10% except UK at 15% | Beneficial owner of investment as defined in the Income Tax Act established with economic Substance in a country with which Uganda has a DTA. |
| Deduction of 2% Income tax for employers that employ PWDs | 5% of employees must be PWDs |
 | Cash registers and other Electronic Fiscal Device (EFD) machines and Point of Sale (POS) | Import duty rate of 0% for one year |
You will be required to meet your tax obligations through filing returns and making payments
RETURNS
• A tax return is the tax format of reporting business income for the year to URA and declares business profits or losses for tax purposes.
• A Tax period is the duration for which a return is required i.e. a year, month or week.
• Due date is the deadline for filing a return beyond which a person is required to pay a penalty for late filing.
| ANNUAL RETURNS |
| Tax Type | Provisional return due date | Final Return Due date |
| • Individual Income tax • Rental Income tax –Individual | The last day of the 3rd month after the start of the year of Income. | The last day of the 6th month after the end of the year of Income. |
| • Corporate income tax • Rental Income tax- Non individual | The last day of the 6th month after the start of the year of Income. | The last day of the 6th month after the end of the year of Income. |
| • Presumptive/Small business income tax | – | The last day of the 6th month after the end of the year of Income. |
| Trust Income tax(Chargeable in the hands of beneficiary) | The last day of the 3rd month after the start of the year of Income. | The last day of the 6th month after the end of the year of Income. |
| Trust Income tax(Chargeable in the hands other than beneficiary) | The last day of the 6th month after the start of the year of Income. | The last day of the 6th month after the end of the year of Income. |
| Partnership Income tax | – | The last day of the 6th month after the end of the year of Income. |
| MONTHLY RETURNS |
| • With Holding Tax • PAYE • Excise Duty(Goods & Services) | – | By the 15th day of the following month. |
Note:
The law provides for a separate quarterly return for non-resident suppliers of services deemed to be supplied in Uganda when made to non-taxable persons.
A taxable person who is providing services to a non-taxable person in Uganda and is engaged in providing services in connection to.
• Immovable property in Uganda;
• Radio or television broadcasting services received at an address in Uganda;
• Electronic Services delivered to a person in Uganda;
• Transfer, assignment, or grant of a right to use a copyright, patent, trademark, or similar right in Uganda;
• Telecommunication services other than those by a supplier of telecommunication services or services to a person who is roaming while temporarily in Uganda
| Key return issues |
| Advance return. | Advance Income Tax return is a return of income submitted by a taxpayer before the end of a given year of Income. Instances when an advance Return is required. i. Before the end of the period for which it is due ii. At any time of any year of income, where a taxpayer has died, is bankrupt, wound up, gone into liquidation, is about to leave Uganda permanently or any other reason where the Commissioner considers appropriate that such a taxpayer may be required to file an advance return by a specified date. Where an Advance Return is not furnished by the due date, an Advance Assessment is issued. Note: A notice requesting for such a return shall be in writing specifying the due date for filing the return. |
| Extension of Return Filing date. | If a person is not able to file a return, he can apply for an extension to file his return providing reasons justifying the extension. The extension if granted will not exceed 90 days and does not change the due date for payment of the tax due. Interest will therefore accrue on any outstanding tax liability. However multiple extensions can be applied for provided the number of days does not exceed 90 days. Note: If the taxpayer is dissatisfied with the Commissioner’s decision about the extension, he may challenge it under the objection and appeals procedure. |
| Offences and penalties on returns |
| Failure to furnish a return by the due date | The penalty for failure to furnish a tax return by the due date or within a further time allowed by the Commissioner to a fine not exceeding Shs. 1,000,000 and failure to furnish the return within the time prescribed by court to a fine not exceeding Shs. 2,000,000 on conviction. |
| Understating provisional tax estimates | If you understate provisional chargeable income by more than 10% of the actual chargeable income, the penalty is 20% of the difference in tax on your estimated income and 90% of the actual chargeable income. Penalty = 20% (Tax on Estimated chargeable Income-Tax on 90% of actual Changeable income) |
| Providing False statements | If you provide misleading information, the penalty will be twice the amount of the excess or additional tax that arises. |
| WHAT HAPPENS IF A TAXPAYER DOESN’T FILE HIS RETURN? | He will receive an assessment from the URA officer. |
| TAX ASSESSMENTS |
| • An assessment is a document/ form showing the estimated taxable income of a person and the tax payable on it including any penalty |
| DEFAULT ASSESSMENT | This is a tax assessment made to a person based on estimated taxable income of that person. It is generated and issued by the Commissioner due to failure by the taxpayer to furnish a self-assessment return for any given tax period. |
| ADVANCE ASSESSMENT | Is a declaration issued if the Commissioner is satisfied that there is a risk that a taxpayer may delay, obstruct, prevent, or render ineffective payment or collection of tax that has not yet become due. It may be made before the date on which the taxpayer’s tax return for the period is due. It can be issued if a taxpayer defaults in submitting an advance return when requested by the Commissioner. However the Commissioner can also issue this assessment without notice. This assessment can be objected to and can also be amended. Where the taxpayer files a returns for a given period on which a Default or Advance assessments was issued, the taxpayer’s return for that period shall be accepted and takes precedence over the default assessment. Taxpayer is allowed to submit his/her return together with the objection. This is an amendment of an original tax assessment issued by the commissioner for any tax period to ensure that correct tax liability is obtained. It is made at any time where fraud or any gross or wilful neglect has been Committed by, or on behalf of the taxpayer or new information has been discovered in relation to the tax payable for a tax period. |
| RETURN AMENDMENT | A taxpayer may amend the tax return on condition the return is not under investigation and amendment is done within 3 years from the date on which the original return was lodged by the taxpayer. |
| PAYMENT OF TAX |
| WHAT NEXT AFTER FILING THE RETURN? HOW DOES ONE REGISTER A PAYMENT? | The taxpayer will be required to register a payment and then pay. Note; The due date of making the payment is the due date of filing the return |
| HOW DOES ONE REGISTER A PAYMENT? | To register a tax payment, Visit the web portal (ura.go.ug) Click on eservices, select Payment Registration under payments. Select the tax head, go to details of Tax Type, select the tax head from the drop down and input the tax amount. Fill in the details of the Taxpayer and mode of payment (VISA, MasterCard, American Express, Union Pay, Mobile Money, EFT, RTGS and Swift, Cash, Cheque, Demand draft, or Point of Sale), enter the given image and click Accept and Register. Print out the Payment Registration Slip that appears on submission and take the form to the bank to effect payment. |
| MODES YOU CAN USE TO PAY TAX. | Payment for any tax type can be done using; VISA, MasterCard, American Express, Union Pay, Mobile Money, EFT, RTGS and Swift, Cash, Cheque, Demand draft, Point of Sale. |
| PAYMENT OF TAX | All taxpayers are required to pay the tax liable by the due date. Any unpaid tax shall be collected by the Commissioner through serving a notice of demand on the person liable. The taxpayer will be given at least 28 days from the date of service of the notice within which they can pay any outstanding amount specified in the demand notice. |
| FAILURE TO PAY TAX | Failure to pay attracts interest at a rate of 2%.per month the tax is not paid. |
| EXTENSION OF PAYMENT OF TAX | A taxpayer can apply in writing to the Commissioner for an extension to pay tax at a later date. The date of payment can be extended but the payment due date is maintained. Interest shall accrue from the due date of the payment. |
| OBJECTIONS AND APPEALS |
| WHAT HAPPENS TO A TAXPAYER WHO HAS BEEN ASSESSED AND IS DISSATISFIED? | The taxpayer has an option and a right to object to the decision against her/him. |
| WHAT IS AN OBJECTION? | An objection is a communication from a taxpayer to the Commissioner expressing dissatisfaction with either an assessment raised on him/her or any other tax decision made by the Commissioner. This is always presented in the format prescribed by the Commissioner. |
| OBJECTION TIMELINES | • A person who is dissatisfied with any tax decision may lodge an objection with the Commissioner within 45 days after receiving notice of the tax decision. • A person may apply in writing to the Commissioner for an extension of time to lodge an objection and wait for the Commissioner’s decision. |
| • The Commissioner will serve a notice of an objection decision to the person objecting within 90 days from the date of receipt of the objection. • In case an objection decision has not been served within 90 days, the person objecting may, by notice in writing to the Commissioner, consider the Commissioner as having allowed his objection decision. This is called “electing” • The time limit for making an objection decision is waived in case a review of a taxpayer’s records is necessary for settlement of the objection and the taxpayer is notified. • A person dissatisfied with an objection decision may; | |
| a) Apply to the Commissioner to resolve the dispute using alternative dispute resolution procedures. This may present other avenues for taxpayers who would like to review tax decisions issued by URA without necessarily lodging an appeal to the Tax Appeals Tribunal. b) Lodge an application to the Tax Appeals Tribunal (TAT) for review of the objection decision. • A person dissatisfied with a decision of the Tribunal may, within 30 days after being served with a notice of the decision, lodge an application with the High Court for review of the decision. • A person dissatisfied with a decision of the High Court, arising from appeals to the TAT, may, within 30 days after being served with a notice of the decision or within further time as the Court of Appeal may allow, lodge an application with the Court of Appeal for review of the decision. This appeal will be on questions of law only. • The Court of appeal shall inquire and determine the appeal expeditiously and shall declare its findings not later than 60 days from the date of filing the appeal. • An appeal to the Supreme Court may be lodged with a certificate of the court of appeal that the matter raises questions of law of great public importance or if the Supreme Court in its overall duty to see that justice is done, considers that the appeal should be heard. • The Supreme Court shall inquire and determine the appeal expeditiously and shall declare its findings not later than 30 days from the date of filing the appeal.” • Where the decision maker is required to refund an amount of tax to a person as a result of a decision of a reviewing body, the tax shall be repaid with interest at the rate specified in the relevant law on the amount of the refund for the period commencing from the date the person paid the tax refunded and ending on the last day of the month in which the refund is made. Reviewing body means the Tribunal, the High Court, the Court of Appeal and the Supreme Court. | |
| BURDEN OF PROOF | In any objection proceeding; (a) It is upon the tax payer to prove that the assessment is incorrect. OR (b) In case of a decision made to prove that the decision should not have been made or should have been made differently. |
| ENFORCEMENT OF TAX |
| RECOVERY OF TAX | When a person refuses or fails to comply with payment of taxes as and when required, the commissioner may collect the outstanding tax using various methods, such as: • By Distress: Goods on which the assessed person has a claim are sold in order to recover tax. • By Agency Notice: Any other person who has money or other liabilities of the person to whom tax is assessed and being demanded from , is required to pay the amount held directly to URA. • Temporary closure of business premises. • Charge over immovable property: The Commissioner writes to the Registrar of Titles, directing the Registrar to the effect that the land or buildings in the notice are a subject of a security for unpaid tax. • Seizure of goods in cases where there is proof that the taxes due have not been paid especially in respect of the supply, removal or import of the goods. Note: If there is reason to believe that; |
| (a) a taxpayer establishing a business in Uganda intends to carry on the business for a limited time only; or (b) A taxpayer may not pay tax when it becomes payable. The Commissioner may write to a taxpayer to give security by bond, deposit, or anything else that is satisfactory to the Commissioner for the payment of tax that may become payable. |
| OTHER IMPORTANT INFORMATION |
| WHO REQUIRES A TAX CLEARANCE CERTIFICATE? | • A tax payer providing a passenger transport service; or a freight transport service with a goods vehicle with a capacity of two tones or more. • A tax payer providing ware housing or clearing and forwarding services. • A taxpayer supplying goods or services to the Government. |
| WHAT OTHER OFFENCES CAN BE COMMITTED? | • Failure to furnish a return or any other document. • Failure to comply with an agency notice or the requirements of a receiver. • Failure to maintain proper records. • Failure, without good cause, to comply with a request for information. • Improper use of a taxpayer identification number. • Making false or misleading statements. • Obstructing an officer. • Aiding and abetting another person to commit an offence. • Offering bribes to officers. |
| IS THERE ANY ADVICE TO THE PLAYERS IN THE SECTOR? | i. For Associations, mobilize your members and invite URA to sensitize them. ii. For Tax payers in the Wholesale and Retail sector • Register for taxes, • Periodically assess yourselves by filing returns and Pay liabilities due (or claim refunds) by the due dates to avoid any penalties and interest that may accrue due to non-compliance. • Always attend URA Tax clinics whenever called upon. • Engage URA as much as possible to avoid being misled about taxes. |
| ARE THERE ANY INITIATIVES TO TRAIN TRADERS? | • One of URA’s focus areas this Financial Year is going to be wholesale and retail sector thus we urge traders to fully participate and attend Tax clinics and workshops when called upon. • Taxpayer Registration Expansion Program is being implemented to ease the registration process and compliance process. |
i. THE TAX PROCEDURES CODE ACT, 2014.
ii. THE INCOME TAX ACT (IT A), CAP.340
iii. THE VALUE ADDED TAX ACT (VAT A), CAP.349
iv. THE EAST AFRICAN CUSTOMS MANAGEMENT ACT (EACMA)
v. THE EXCISE DUTY ACT,2014
