By Sarah M. Chelangat

The rental tax regime in Uganda has undergone numerous changes through amendments in the Income Tax Act. These changes are intended to find an acceptable rental tax regime that will increase the revenue collections from the sector as well as eliminate the unfairness caused to individual taxpayers to benefit companies.

Prior to the 2020 and 2021 amendments, individuals earning rental income were allowed a threshold, 20% of expenses incurred in generation of rental income and thereafter apply 20% rate to the chargeable income while companies were allowed all their expenses and 30% to the remaining chargeable income. This led to increased tax planning and revenue leakages as individuals structured their rental tax affairs through companies.

In the 2021 amendments, companies were allowed all expenses incurred in generation of rental income, while individuals were allowed only 75% of the expenses upon verification by URA. This approach was burdensome to both the taxpayer and URA.