KAMPALA – The Uganda Revenue Authority (URA) on Thursday, 25 June 2020, explained the tax amendments that were passed in the National Budget for the Financial Year 2020/21.
Speaking at the Post Budget Breakfast E-Conference, Mr Patrick Mukiibi, the URA Commissioner for Domestic Taxes, revealed that that the new minimum capital investment requirement for duty exemption for developers of industrial parks and free zones, operators and other investors in specified business are $10M for a foreigner; $300,000 for a citizen investing elsewhere and $150,000 for a citizen investing upcountry.
“A 10 year income tax exemption for investments whose capital is USD. 300,000 for a citizen investing elsewhere and USD. 150,000 for a citizen investing upcountry. The threshold for EAC country citizens has been reduced from USD 1,000,000,” Mr Mukiibi said.
He added that investors must meet these conditions; use of 70% locally sourced raw materials; use of 70% local labour and citizens earning at least 70% of the total wage bill.
Mr Mukiibi added that income tax rates for small business (presumptive) taxpayers have been lowered.
“Rates will still be based on turnover however taxpayers with no record shall pay a fixed cost while those with records shall pay tax a percentage of annual turnover.”
He also explained that a 10% withholding tax will be deducted from commission paid to insurance and advertising agents. It is also now mandatory for Withholding agents to file a return not later than the 15th day of the following month, he said.
The Commissioner revealed that a fixed rate of Ugx. 10,000 per kilogram of the plastic bags has been introduced. “These include sacks and bags of polymers of ethylene and other plastics except vacuum packaging bags for food, juices, tea and coffee, sacks and bags for direct use in the manufacture of sanitary pads.”
He said the income of the Deposit Protection Fund (DPF) has been exempted from income tax. The DPF was created to provide insurance for the deposits of customers of regulated financial institutions in the event of collapse.
The Islamic Development Bank has been included on the list of agencies whose income does not pay tax (Listed Institutions) to encourage Investment since it is a development bank that extends interest free credit to business, he revealed.
“A purchaser of goods or services from a taxpayer designated to use the E-invoicing system must indicate E-Receipts from the E-invoicing system in order to qualify for an allowable expense. A provider of transport or freight service MUST obtain a Tax Clearance Certificate (TCC) before renewal of operational licenses,” Mr Mukiibi said.
“The new reduced tax rates for small taxpayers are still based on turnover. However, to inculcate a culture of book keeping taxpayers with no business records will pay a fixed cost while those with business records shall pay as a percentage of annual turnover.”