How should consultancy income be taxed in Uganda? Is it subject to income tax at the corporate rate, or is withholding tax the final tax?
Dear Reader,
Income earned from consultancy services is categorized as business income and the rate of tax applicable depends on whether the person who has earned the income is an individual or non-individual. Where the income is earned by an individual, the income will be taxed at the applicable individual income tax rates. Where the income is earned by a company, the income will be taxed at the corporation rate of 30%. Where the income is earned by a partnership, the partnership will be required to file a partnership return of income but the obligation falls on the partners and the applicable rates shall depend on whether the partner is an individual or company.
In addition, payment for services to a resident consultant is subject to 6% withholding tax except where the resident consultant has a valid withholding tax exemption. The tax withheld is not a final tax and the consultant will be entitled to claim the tax withheld as a credit when filing their income tax return.
Where a client deducts withholding tax from consultancy payments, is the consultancy still required to account for PAYE on payments made to its employees or consultants?
Dear Reader,
Yes, the consultancy is required to withhold tax on payments to its employees and consultants. Where the consultancy has employees, it is required to remit PAYE on payment of employment income. In addition, where the consultancy subcontracts part of the work to other consultants, it is required to withhold tax on payments to its consultants.
What is the expected timeline for processing TIN amendment applications, such as changes to registered email addresses?
Dear Reader,
The expected timeline for processing a manual TIN amendment which is mainly change of the email address is 5 days upon submission of all the supporting documentation. With this, the taxpayer will be required to visit the nearest URA office with a copy of their National ID (if they are Ugandans) or a copy of their passport (if they are not Ugandans).
Where a taxpayer is amending any other details on their profile, an online amendment is sufficient. The expected time for processing this amendment is 2 working days if the taxpayer details are correct during the verification process.
What should a taxpayer do if a TIN amendment application remains unprocessed beyond the expected period, preventing access to URA communications and online services?
Dear Reader,
If your TIN amendment application takes longer than the expected processing period, please contact us through WhatsApp at 0772140000, toll-free lines 0800117000 or 0800217000, email services@ura.go.ug, or our online support portal touchpoint.ura.go.ug for help.
Would compensation payments awarded to an individual from a foreign country for example, medical compensation deposited into a Ugandan bank account be subject to tax in Uganda?
Dear Reader,
A resident person is taxed on their worldwide income. However, the tax treatment of a compensation payment depends on the nature of the payment since a compensation payment derived by a person takes the character of the item that is compensated. In the case of medical compensation, such payments do not fall within the definition of income under the Income Tax Act. Therefore, medical compensation received from a foreign country and deposited into a Ugandan bank account would not be subject to tax in Uganda.
What is the correct method for landlords to declare and pay rental income tax?
Dear Reader,
Any person who expects to derive rental income during a year of income is required to file and pay rental tax in accordance with the law. Rental tax is accounted for separately from the person’s other income.
Where the person is a non-individual, they are required to file their provisional rental income return on or before the last day of the sixth month of their year of income and may pay the provisional tax in 2 installments on or before the last day of the sixth and twelfth month of the year of income. The applicable rental tax rate for companies is 30% and they are allowed deductions of up to 50%of the rental income.
Where the person is an individual they are required to file their provisional rental income return on or before the last day of the third month of their year of income and may pay the provisional tax in 4 installments on or before the last day of the third, sixth, ninth and twelfth month of their year of income.
The applicable rental tax rate for individuals is 12% of the rental income exceeding UGX 2,820,000.
Where the income is earned by a partnership, the partnership will be required to file a partnership return of income but the obligation falls on the partners and the applicable rates shall depend on whether the partner is an individual or company.
A person is permitted to amend their provisional return before the end of the financial year.
Every landlord is required to file a final rental income return for each year of income not later than 6 months after the end of that year.
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.’’
Then use the CET- Common External Tariff.
How can URA ensure that the burden of withholding tax does not unfairly fall on suppliers who are already operating on thin margins?
Dear Reader,
Withholding tax is a tax collection mechanism intended to ensure tax compliance. The amount withheld from a supplier is an advance payment of tax treated as a credit and can be offset from the tax assessed to the supplier at the end of the financial year.
A supplier is entitled to claim a refund where the amounts withheld from them exceeds the actual tax due in the financial year.
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