1. Rental Tax Compliance and Penalties

James:

“I am a small rental taxpayer who has voluntarily complied for the past four years. Recently, I filed my rental return late but later paid all taxes due. However, I am now receiving daily reminders to pay penalties and interest, amounts that are almost three times the principal tax.

Does URA consider the burden such penalties place on compliant taxpayers? Wouldn’t it be fairer and more encouraging to waive or review such high penalties, especially where taxpayers have paid their principal obligations?”

Dear James,

Thank you for complying with your tax obligations. However, if a return is received later than its due date, a penalty will arise in accordance with the law. Similarly, tax paid after the due date of payment attracts interest. Kindly note that interest payable does not exceed the sum of principal and penal tax.

Unfortunately, you have not stated the period in which the interest and penalty arose. Otherwise, Government has provided for waiver of interest and penalty outstanding as at 30^th June 2024 where the taxpayer pays the principal tax by 30^th June 2026.

2. I supply super markets with items like honey, simple snacks like daddies etc. On payment the supermarket is requesting me to furnish them with a fiscalised document. I succeeded in generating an e- receipt and took it to the supermarket, they declined in receiving it and told me, all they need is an e- invoice, yet am not registered for VAT.

Dear Reader,

URA rolled out the Electronic Fiscal Receipting and Invoicing Solution [EFRIS] on the 1^st of July 2020. Currently, an e-invoice can only be generated by a VAT registered taxpayer. Therefore, a taxpayer who is not registered for VAT can only generate an e- receipt.

Please note that the supermarket as a VAT registered person, prefers to transact with VAT registered entities to enable it claim input tax on purchases. You may consider registering for VAT voluntarily to enable you meet the demands of the supermarket.

3. If importers source goods from the same countries, why do some sell at significantly lower prices than others?

Dear Reader,

There are number of factors that might lead to price differences since everyone has their business model. These may include;

Cost of shipment/transportation.

• Handling charges.
• Buying and selling in bulk vs retail.
• Having a distribution agreement with the manufacturer.
• Bargaining power
• Credit terms with the suppliers
• Operational costs
• Source of funds.

4. Is there a website where we can access updated import duties and other related information?

Dear Reader,

Yes, there is a website where you can access updated import duties and other related information.  To access the required information, visit the URA web portal on www.ura.go.ug and select ‘Legal and Policy’’, then click on ‘’Laws, Acts and Regulation.’’

Look for the CET- Common External Tariff.

5. Navigating Difficult Economic Conditions

“In the current harsh economic environment, what practical solutions or support mechanisms does URA recommend to help businesses remain compliant while still operating sustainably?”

Dear Reader,

URA has various interventions that businesses can take advantage of, to remain compliant while still operating sustainably. These could include:

• Waiver of Interest and Penalty outstanding as at 30^th June 2024 where the principal tax is paid by 30^th June 2026.
• Exemption from Income tax for new businesses established by a citizen after 01^st July 2025 with an investment capital not exceeding UGX 500m.
• A taxpayer may request to pay taxes in installments.
• Where a taxpayer is not satisfied with the tax assessed, they may object to the assessment.
• A taxpayer may request for an extension of time to file a return.
• Educating taxpayers to enable them to understand their rights and obligations such as taxes applicable to their businesses.
• A taxpayer may take advantage of the incentives and deductions available under the law.

6. Tax Holidays.

Why do foreign investors seem to receive more tax holidays than local businesses?

What are the official procedures and criteria for obtaining a tax holiday in Uganda?”

Dear Reader,

The law provides incentives for both citizens and non-citizens. In the case of citizens, the minimum investment capital is USD 300,000 or USD 150,000 for investments located upcountry. While, a foreigner requires a minimum investment capital of USD 10,000,000 which is much higher.

This information is available to all investors who are engaged in qualifying investments such as agro-processing. Please note that, a number of citizens have benefited from the available incentives and we continue to encourage others to take advantage of the same.

It is therefore not true that foreign investors receive more tax holidays than citizens.

To benefit from the incentive, a taxpayer is required to apply in writing to the Commissioner Domestic Taxes and provide the supporting documents.

For one to benefit from the incentives, the taxpayer should be engaged in a qualifying investment such as;

• Processing agricultural goods.
• Commercial farming
• Manufacturing or assembling medical appliances, medical sundries or pharmaceuticals, building materials, automobile, house hold appliances.
• Manufacturing furniture
• Manufacturing tyres, footwear, mattress or toothpaste etc.
• Carrying on business in logistics and warehousing
• In the case of exporters, proof that they are exporting at least 80% of finished consumer and capital goods.
• Operating a vocational and technical institute.

7. Businesses Exempt from Tax

Which types of businesses or economic activities are legally exempt from paying taxes? We would like to know so we can explore such ventures and grow sustainably.

Dear Reader,

The income from the following business activities is legally exempt from paying income tax;

• The income of a collective investment scheme to the extent of which the income is distributed to participants.
• The income derived from or by a private equity or venture capital fund regulated under the Capital Markets Authority Act.
• The income of a person derived from the operation of aircraft in domestic and international traffic or the leasing of aircraft.
• The income of a SACCO up to 30^th June 2027

In addition, there are various business activities that may benefit from income tax exemption and other taxes provided they fulfil the criteria under the law. For example;

• New businesses established by a citizen after 01^st July 2025 with an investment capital not exceeding UGX 500m are exempted from income tax for a period of 3 years.
• Taxpayers who export at least 80% of finished consumer and capital goods may qualify for income tax exemption for a period of 10 years.
• VAT exemption on specified goods and services; excise duty exemption on specified goods; and stamp duty exemptions on specified instruments for hotel or tourism facility developers.
• 10-year income tax exemption, VAT exemption on specified goods and services, excise duty exemption on specified goods and stamp duty exemption on specified instruments for strategic investments such as:
  1. Processing agricultural goods;
  2. Commercial farming;
  3. Manufacturing or assembling medical appliances, medical sundries or pharmaceuticals, building materials, automobile, house hold appliances;
  4. Manufacturing furniture, pulp, paper and printing and publishing of instructional materials;
  5. Manufacturing tyres, footwear, mattress or toothpaste etc.
  6. Carrying on business in logistics and warehousing, information technology;
  7. Operating a vocational and technical institute;
  8. Manufacturing electric vehicles, electric batteries, or electric vehicle charging equipment or fabricating the frames and bodies of electric vehicles
  9. Operating a specialized hospital facility;
  10. Manufacturing chemicals for agricultural use or industrial use, textile, glassware, leather products, industrial machinery, electrical equipment, sanitary pads and diapers.

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