The Minister responsible for finance, on the 11th day of May 2022, through a notice, designated a total of 9,784 tax payers as income tax withholding agents. This notice has been gazetted and therefore effective.
We implore you to thoroughly check the notice and ascertain whether or not you have been designated as an income tax withholding agent.
What does it mean to be a designated income tax withholding agent?
A tax payer who is a designated income tax withholding agent that pays more than one million Uganda shillings for goods, materials or any services is required to withhold 6% of the payment and remit
the amount withheld to Uganda Revenue Authority on or before the 15th day of the following month.
If there are separate payments for goods, materials or services and each payment is one million Uganda shillings or less and it would reasonably be expected that the goods or materials, or services would ordinarily be supplied in a single supply for an aggregate amount exceeding one million shillings, the designated income tax withholding agent is still required to withhold 6% on each payment.
Please note that where a designated income tax withholding agent makes a payment to a non resident person for a service, the applicable rate of withholding tax may differ, depending on the nature and circumstances of the payment.
When not to withhold.
A designated income tax withholding agent is not required (and should not) withhold in any of the following circumstances;
- Where the supplier of the good, material or service is exempted from income tax. Proof of such an exemption is a valid income tax exemption certificate issued under the hand of the Commissioner General, Uganda Revenue Authority.
- A supplier who the Commissioner General, Uganda Revenue Authority is satisfied has regularly complied with their obligations under the Income Tax Act and therefore exempted from having their payments subjected to withholding tax. An updated list of all tax payers whose payments have been exempted from withholding tax is freely available on the Uganda Revenue Authority Website.
How to comply.
As a designated income tax withholding agent, your obligations are effective 1st July 2022. You are required to record the tax withheld from payments in every month, prepare and file a WHT return and pay the tax withheld to URA on or before the 15th of the subsequent month. For instance, for the month of July 2022, you are required to file your WHT return and pay the tax withheld to URA on or before the 15th of August 2022.
Failure to withhold and remit the tax to URA as explained above makes the designated income tax withholding agent liable for the tax that should have been withheld. Late payments attract interest at 2% per month. In that regard, we advise as follows;
- Ensure filling monthly WHT returns whether or not you have transactions subject to deduction of WHT from the payments made to suppliers.
- Critically audit the payments transacted by you and ascertain if they were subject to WHT deduction in accordance with the law.
- If you find any irregularities, please calculate the outstanding WHT liability, amend the WHT return and pay this liability at the earliest
Our Legal and Regulatory Compliance Team.
Stephen Tumwesigye
Managing Partner
M: +256 (0) 774 334 908
E: stumwesigye@taslafadvocates.com
Juliet Namirembe
Legal Associate
M: +256 701 810050
E: suzama@taslafadvocates.com
Rushongoza Begumya
Legal Associate
M: +256 (0) 751 848 903
E: rbegumya@taslafadvocates.com
Bruno Kalibbala
Legal Associate
M: +256 (0) 751 632 198
E: bkalibbala@taslafadvocates.com
