URA restricts warehousing of old vehicles to avert revenue loss

KAMPALA – Effective July 1st, 2022, motor vehicles nine years old or more from the date of manufacture, will not be warehoused. Uganda Revenue Authority (URA) has advised importers of these vehicles, that they will have to undergo Customs clearance and pay taxes due, at the port of entry into the East African Community before the vehicles are allowed into Uganda.

The new URA administrative measure will phase out the previous norm, which allowed for the warehousing of motor vehicles for a period of up to nine months. It is aimed at saving government revenue held by delayed warehousing of such motor vehicles.

Abel Kagumire, URA’s Commissioner of Customs revealed that the 83 licensed bonded warehouses hold between UGX 4.5 to 5.5 billion in taxes monthly. For example, between January and December 2021, at least 40,407 motor vehicles were held in car bonds accounting for UGX. 735 billion.

Restricting the importation of these vehicles will also avert the recurring risk of such vehicles “expiring” in-car bonds before taxes have been cleared. The Traffic and Road Safety Act indicates that motor vehicles that date 15 years from the date of manufacture are prohibited from importation because of their threat to the environment.

For instance, motor vehicles imported at 14 years from the date of manufacture hit 15 years during the nine months allowable warehousing period and cannot be allowed on the roads since they have not been cleared and taxes have not been retrieved. In March and December 2021, 365 vehicles with a value of UGX. 4,529,183,401 in taxes expired during the warehousing period.

Kagumire also revealed that it had become a common practice among some unscrupulous car importers to have cars intended for warehousing smuggled into neighbouring countries when they had not been cleared in Uganda. These cars would then obtain foreign number plates and brought back into the country.

“If the bonding issue is addressed then, the practice of smuggling motor vehicles and later round-tripping them into Uganda will be solved,” Kagumire added.

Kagumire also added that many Ugandans, according to research, prefer to import motor vehicles on their own, excluding middlemen and bond operators. These, in most cases, have the capacity to pay at the ports.

“Warehoused motor vehicles have reduced by 19.33% while those that paid taxes directly at the ports of entry increased by 45.8% between 2017 and 2021,” Kagumire explained.