Capital gains are profits from the disposal of a business asset, the sale of shares, or commercial buildings. This excludes trading stocks and depreciable assets. Capital gains arise when there is a profit from the disposal of non-depreciable business assets such as land or buildings, as well as the sale of shares and commercial buildings.

A business asset is any asset that is used or held ready for use in a business, any asset held for sale in a business, or any asset of a partnership or company.

A taxpayer is treated as having disposed of an asset when the asset has been sold, exchanged, redeemed, distributed, transferred by way of gift, destroyed or lost

Capital gains or losses are taxed in the year of income in which the taxpayer realizes the gain or loss.

A capital loss arises where there is a loss on disposal of non-depreciable business assets such a land or building, as well as sale of shares and commercial buildings.

Capital losses are allowable as a deduction.

Capital gain or loss = Disposal proceeds (consideration received) less cost base of the asset at the time of disposal.

Cost base is defined as the amount paid or incurred by the taxpayer in respect of the asset including incidental expenditure of a capital nature incurred in acquiring the asset and includes any consideration in kind given for the asset.

Projections can be made at the beginning of the year of income. A taxpayer can base their income projections on the previous year(s) to project income for the current year, and for new businesses or those who made losses in the previous year, provisional income tax can be determined based on the current year’s income and expenses.

There is no separate capital gains tax legislation in Uganda. However, capital gains are included in and taxed together with business income in accordance with Section 18(1) (a) of the Income Tax Act.

The gains from the disposal of business assets by an individual are added to business income taxed as business income using the individual rates, while gains from shares or a commercial building sold by an individual are taxable as property income using the applicable rates.

The gains from the disposal of business assets, sale of shares or commercial buildings sold by a corporate entity are added to gross income and are taxed at the standard corporate tax rate of 30%.

Where a business asset is sold after 12 months or more from the date of purchase, the cost base of the asset is calculated with consideration for inflation using the formula below;

CB x CPID/CPIA, where;

CB is the price that was originally paid for the asset;

CPID is the Consumer Price Index number published for the calendar month of sale; and

CPIA is the Consumer Price Index number published for the month immediately before the date on which the relevant asset was acquired.

Illustration:

Assume ABC investments Limited purchased a piece of land in June 2022 for Shs.10, 000,000 and sold it in August 2023 for Shs.25, 000,000.

The Consumer Price Index (CPIA) for May 2022 was 153.25 and the Consumer Price Index (CPID) for August 2023 was 181.67

In this case, the cost of acquisition of the land with inflation considered would be;

CB x CPID/CPIA, where;

CB= 10,000,000

CPID= 181.67

CPIA=153.25

10,000,000 x 181.67/153.25 = 11,854,486

So, the taxable capital gain would be;

25,000,000 – 11,854,486

= 13,145,514 UGX

And tax at 30% would be;

13,145,514 X 30%

= 3, 943,654 UGX

Where a business asset is sold within 12 months from date of purchase, there is no consideration for inflation when computing the cost base of the asset.

Illustration:

Using the example of ABC Investments limited above; if the land was purchased and sold within 12 months from the date of the purchase, the capital gains would be computed with no consideration for inflation by deducting the original purchase price (CB) from the selling price.

So, the taxable capital gain would be;

 25,000,000 – 10,000,000

= 15,000,000

 And tax at 30% would be;

 15,000,000 X 30%

= 4, 500,000 UGX

Gains or losses from the following disposals are not recognized in determining chargeable income (i.e. gains are not taxed and losses are not allowed as a deduction):
a) A transfer of an asset between spouses
b) A transfer of an asset between former spouses as part of divorce settlement or bona fide separation agreement,
c) An involuntary disposal of an asset to the extent to which the proceeds are re-invested in an asset of the same kind within one year from disposal,
d) The transmission of an asset to a trustee or beneficiary on the death of a taxpayer

Provisional income tax is estimated income tax. It is income tax paid in advance by a taxpayer instead of making a lump sum payment at the end of the year of income.

No. Provisional income tax paid is allowed as a tax credit against the income tax payable at the end of the year of income. (Reduces income tax payable at the end of the year of income.)

Excess tax paid can be refunded or offset against other liabilities.

The difference (outstanding tax) is paid by the taxpayer.

1. Provisional income tax payment allow taxpayers to distribute their tax liability across the year of income, eliminating the burden of a lump-sum payment at the end.
2. By fulfilling their tax obligations in instalments throughout the year, taxpayers can avoid penalties and interest charges on delayed or insufficient tax payments.
3. Taxpayers can plan their expenditures and investments more effectively, knowing that a portion of their tax liability has already been settled Provisional income tax payment contribute to better cash flow management.
4. Provisional income tax payment break down the tax liability into manageable chunks. This allows individuals and businesses to focus on their financial goals without the constant worry of a significant tax liability.
5. It helps in reducing stress that a taxpayer may undergo while facing a substantial tax liability at the end of year of income.
6. Provisional income tax is a legal obligation. Taxpayers who pay this tax therefore meet compliance requirements and, as a result, can easily acquire a Tax Clearance Certificate from URA and also access investment opportunities.

It is paid by persons subject to income tax, except taxpayers under the presumptive tax regime. The taxpayer pays the amount in installments as per the due dates provided by the Uganda Revenue Authority.

It is paid by persons subject to income tax, except taxpayers under the presumptive tax regime. The taxpayer pays the amount in installments as per the due dates provided by the Uganda Revenue Authority.

Projections can be made at the beginning of the year of income. A taxpayer can base their income projections on the previous year(s) to project income for the current year, and for new businesses or those who made losses in the previous year, provisional income tax can be determined based on the current year’s income and expenses.

Provisional income tax return and payment due dates:

A final income tax return is a declaration of the actual income earned in a year of income less the allowable deductions. Final income tax payable or claimable is the difference between final income tax due less tax credits related to the gross income declared (Withholding tax paid and provisional tax paid)

Final income tax return and payment due dates:

• Visit the portal, ura.go.ug, on the home page
• Click on e-services Go to stamp duty and select Declaration of stamp duty
• Fill in your name details and select instrument
• You will get an acknowledgement receipt and Payment slip to print and pay in the bank. Then take the forms and a copy of the payment slip to URA office for bar coding.
• Please note that, fixed instruments have fixed values. Once the declaration is initiated a payment slip will be generated immediately. For example, An Instrument for Agreement and a Caveat is fixed at Ush 5,000.
• However, for Advolerem instruments, the amount due is based on a rate applied on the value of the respective instrument declared. Therefore, the payment slip is obtained after verification of declaration is completed in any URA Service office next to you. For example, a Transfer of a given value, Mortgage deed 1% and 0.5% respectively.
• For Transfer of total value – land after completing the declaration and the government valuer assigning the government value of the land in question, you then submit the declared form together with the instruments for transfer of land to any URA Service office next to you to get the payment slip, take to the bank you selected at declaration and then visit any URA
  Service office next to you to obtain the stamp duty certificate.

• Note that this is available on the portal. After paying in the bank and getting the bar codes from URA office visit the web portal http://ura.go.ug and on the home page click on eservices, stamp duty then select Stamp Certificate issuance.
• Type in the Acknowledgement number and the barcode number obtained from URA office.
• Click on show details, the system will display the certificate for you to print.

• Note: The certificate is only printed once, If by any reason you close without printing you
  will need to apply for Duplicate at a cost.

Note that the service is available on the web portal. If you were not able to print the stamp certificate first time, you will apply to get a Duplicate certificate.

• Visit the portal http://ura.go.ug and on the home page click on e-services, stamp duty then select Duplicate Certificate issuance.
• Type in the certificate number and the barcode number obtained from URA office.
• Click on search to get the details, The system will generate A payment slip for you to print and pay the levy. After paying in the Bank you will visit the Portal again and on the home page click on e-services, stamp duty then select Stamp Certificate issuance.
• Type in the Acknowledgement number and the barcode number obtained from URA office.
• Click on show details, the system will display the certificate for you to print.

•  A person (individual or corporate) who employs/remunerates an individual Employee:
•  An individual engaged in an employment.
• Position of an individual in the employment of another
• Directorship of a company
• A position entitling the holder to a fixed or ascertainable remuneration. This may be contractual, permanent or part time
• Holding or acting in any a public office
• Employment income comprises of the following amounts according to the law:-
• Amount of private/personal expenditure discharged or reimbursed by the employer
• The value of any benefits in kind provided by/on behalf of the employer
• Any amount in compensation of termination of employment or contract
• Insurance premiums paid by a tax-exempt employer for life insurance of an employee and or his dependents
• Payments in respect of change of employment/contract terms or payment for agreement to any restrictive conditions of employment
• Wages, salary, leave pay, payment in lieu of leave, overtime pay, fees, commission, gratuity, bonus, and the amount of any traveling by virtue of one’s employment, entertainment, utilities, cost of living, housing, medical or other allowance.
• Value shares received by an employee under employee share acquisition scheme less consideration if any Consideration for the grants or option to acquire shares
• Amount of any gain on disposal of a right or option to acquire shares under an employee share scheme.

NOTE: Each or any of the above in combination comprise employment income

• Pension: Pension is tax exempt
• Medical Expenses: Discharge or reimbursement of an employee’s medical expenses Life insurance: Premiums paid by a taxable employer for insurance of the life of an employee or his/her dependent
• Official Employment expenditure: Allowances for or discharge or reimbursement of expenses met by an employee while performing duties of employment
• Meals/refreshments: The value of meals/refreshments provided to all employees at equal terms in premises operated by or on behalf of the employer
• Retirement fund: Employer’s contribution to a retirement fund for the benefit of the employee (employee’s contribution is taxable)
• Shares: The value of a right or option to acquire shares granted to an employee under an employee share acquisition scheme
• Local Service Tax: This is deductible before computing tax.
• Other benefits: Any benefit whose total value is less than Shs. 10,000 during the month.
• Threshold: The first Shs. 235, 000 per month is tax free for all resident employees.
• Terminal benefits: 25% of terminal benefits (for employees who have served the employer for at least 10 years)
• Transport Costs: Cost of passage incurred by employer in respect of employee’s appointment if recruited out of Uganda for employer’s sole purpose (only applies to Non –Ugandans)
• Passage costs
• Allowances/Reimbursement: of the actual cost of accommodation and travel; meals and refreshments in the course of performing employment duties

It is facilitation directly/indirectly by an employer of an employee in relation to past, present or future employment (not necessarily contractual). A benefit in kind is one provided by an employer, third party of an employer or associate of an employer.

Taxable Non cash Employment benefits under the law include but are not limited to:-
Private use of official motor vehicle

• Provision of domestic servants , utilities, house keeper, chauffer
• Meals, refreshment, entertainment
• Relief of debt obligations/interest
• Waiver of obligations of the employee by the employer
• Any other benefit provided by the employer
• Provision of property by an employer to an employee (at non-arm’s length terms)
• Provision of residential accommodation
• Difference between interest at statutory rate and rate at which loans are granted

• A benefit need not be provided by the employer or provided to the employee. It can be provided by the associate of the employer or can be provided to an associate of the employee.
• A benefit is said to have been obtained in respect of employment:
• When it is provided by an employer or by a third party under arrangement with the employer or an associate of the employer
• When it is provided to an employee or an associate of an employee
• When it is provided in respect of past, present or prospective employment
• The valuation of benefits for the purposes of subsection (3) of section 19 of the Act is determined as follows.

1. 1. Where a benefit provided by an employer to an employee consists of the use or availability for use, of a motor vehicle wholly or partly for the private purposes of the employee, the value of the benefit is calculated according to the following formula –(20%x A x B/C) – D where,
      A. Is the market value of the motor vehicle at the time when it was first provided for the private use of the employee;
      B. Is the number of days in the year of income on which the motor vehicle was used or available for use for private purposes by the employee for all or a part of the day;
      C. Is the number of days in the year of income;
      D. Is any payment made by the employee for the benefit.
   2. Where a benefit provided by an employer to an employee consists of the provision of a housekeeper, chauffeur, gardener, or other domestic assistant, the value of the benefit is the total employment income paid to the domestic assistant in respect of services rendered to the employee, reduced by any payment made by the employee for the benefit. However provision of a security private guard is not classified as a taxable benefitFor example if the company pays a gardener sh. 150,000 per month, but the employee contributes sh. 20,000 per month, the benefit derived by the employee is sh. 130,000 (i.e.150,000 – 20,000). If the employee does not contribute anything, the benefit is sh. 150,000.
   3. Where a benefit provided by an employer to an employee consists of the provision of any meal, refreshment, or entertainment, the value of the benefit is the cost to the employer of providing the meal, refreshment, or entertainment, reduced by any consideration paid by the employee for the meal, refreshment, or entertainment. For example if the meals are provided for 26 days in a month, each meal costing3,000 and the employee not contributing anything, then the benefit is sh.78,000 per month (3,000 x 26).
   4. Where a benefit provided by an employer to an employee consists of the Provision of utilities in respect of the employee’s place of residence, the value of the benefit is the cost to the employer of providing the utilities reduced by any consideration paid by the
      employee for the utilities.In this case, the actual payment receipts from the utility company can be used to ascertain the
      value (less actual contribution by the employee if any).
   5. Where a benefit provided by an employer to an employee consists of a loan, or loans in total, exceeding one million shillings at a rate of interest below the statutory rate, the value of the benefit is the difference between the interest paid during the year of income, if any, and the interest which would have been paid if the loan had been made at the statutory rate for the year of income. Statutory rate here refers to the Bank of Uganda discount rate at the commencement of the year of income. Example: if an employer gives an employee a school fees loan of sh.400,000;a furniture loan of sh. 500,000 and an appliances loan of sh. 300,000 at 10% interest per month when the statutory rate is 15%, the benefit would be sh. 60,000 ( i.e. 1,200,000 x 15%) – (1,200,000 x10%) = 180,000 – 120,000.
   6. Where a benefit provided by an employer to an employee consists of the waiver by an employer of an obligation of the employee to pay or repay an amount owing to the employer or to any other person, the value of the benefit is the amount waived. Example: In the month of January 2015, an employee owed a bank sh. 300,000 . The employer decided to pay the full amount for the employee on 31st January 2015 and opted not to recover that amount from the employee. The employee has obtained a benefit equal to sh. 300,000 for the month of January, which should be part of her employment income.
   7. Where a benefit provided by an employer to an employee consists of the transfer or use of property or the provision of services, the value of the benefit is the market value of the property or services at the time the benefit is provided, reduced by any payment made by the employee for the benefit. Example: The Company transferred a car valued at sh. 5,000,000 to an employee in February 2014. The employee was asked to contribute sh. 1 ,000,000 for that car. The employee derived a benefit equal to sh. 4 million in February, which should be included in his employment income.
   8. Where a benefit provided by an employer to an employee consists of the provision of accommodation or housing in kind, the value of the benefit is the lesser of:
      1. the market rent of the accommodation or housing reduced by any payment made by the employee for the benefit; or
      2. Fifteen per cent of the employment income, including the amount referred to in paragraph (a), paid by the employer to the employee for the year of income in which the accommodation or housing was provided.
      a. the market rent of the accommodation or housing reduced by any payment made by the employee for the benefit; or
      b. Fifteen per cent of the employment income, including the amount referred to in paragraph (a), paid by the employer to the employee for the year of income in which the accommodation or housing was provided Example: A company pays an employee basic salary sh. 3,000,000 per month; transport allowance sh. 300,000 per month and medical allowance sh. 200,000per month. They provided him with a company house whose market rent is sh. 600,000 per month for which he contributes 50,000 per month. The benefit derived by this employee is the lesser of:
      a) (600,000 – 50,000) = 550,000 and
      b) 15% (3,000,000 + 300,000 + 200,000 + 550,000) = 607,500 In this case the housing benefit is sh. 550,000

NB. Non-resident employees are not entitled to the threshold (Shs 235,000); so at every
amount under rates of tax, add shs.23,500 or (10% of 235,000)

• Employees who are engaged on part-time basis are deemed in principle to be earning income from more than one source.
• Part-time allowances/earnings are taxed at a flat rate of 30% of the gross
• An employee aggrieved by this treatment may submit a return of emoluments from all sources and make a claim of tax overpaid.

• What are the obligations of an Employer
•  Withholding: To deduct the correct tax at the time of effecting payment to a liable employee.
• Remitting: To remit the total tax by the 15th day of the immediately following month.
• Accountability: Account the tax deducted from every employee on a monthly basis.
• Maintenance of Employees’ Records: To maintain records and keep them for inspection by URA on demand for at least five (5) years

An Employee:

• Is not required to furnish return if taxpayers source of income is only one employment and tax is fully deducted and paid source
• Is entitled to claim refund of over-paid tax where applicable
•  Is entitled to accountability for all taxes deducted and paid at source by the employer.

Therefore it is in the interest of the taxpayer to file a return of income where he/she has multiple source of income. No one can enjoy a refund of overpaid tax without making a declaration.

If you are deriving income from more than one source, complete an end of year return and declare:

• Total income from all sources including business income.
• Total tax paid at source such as PAYE, Withholding tax or provisional tax. (This excludes presumptive tax and rental tax paid by such employee).
• Tax payable.

An employer who fails to withhold tax as required by law is personally liable to pay the tax together with any penal tax and interest thereon.