DESIGNATION OF INCOME TAX  WITHHOLDING AGENTS.

DESIGNATION OF INCOME TAX  WITHHOLDING AGENTS.

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;

  1. 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.  
  2. 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;

  1. Ensure filling monthly WHT returns  whether or not you have transactions  subject to deduction of WHT from the  payments made to suppliers. 
  2. Critically audit the payments transacted by  you and ascertain if they were subject to WHT  deduction in accordance with the law.  
  3. 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

Lynne Wells

Special Counsel

M: +256 (0) 774 643 240

E: lwells@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

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