The 2022 Tax Law Amendments: a Stakeholder’S Briefing.

Background:

On 2nd June 2022, the President of the Republic Of Uganda, H.E Yoweri Kaguta Museveni assented to the Income Tax (Amendment) Act, 2022, The Value Added Tax (Amendment) Act 2022, The Stamp Duty (Amendment) Act 2022, The Tax Procedures Code (Amendment) Act 2022 and The Tax Appeals Tribunal (Amendment) Act 2022.

The amendments have a significant impact on the lives of individuals and the business environment in Uganda. TASLAF is pleased to present a summary of the major changes brought about by the above amendments and what the changes mean for you and your business. .

Income Tax.

Income Tax (Amendment) Act, 2022 has introduced the following changes:

ITEM	PREVIOUS LAW	CURRENT LAW	COMMENTS
Exempt<br>Organisations	Research<br>institutions were not<br>exempt institutions<br>and could not apply<br>for income tax<br>exemptions.<br>Donations to<br>research institutions<br>were not income tax<br>deductible	The definition of an exempt<br>institution has been<br>expanded to include a<br>research institution whose<br>object is not for profit.	This paves way for research<br>institutions whose object is not<br>for profit to apply for income tax<br>exemptions. The amendment<br>also allows for a donation to<br>a research institution whose<br>object is not for profit to be tax<br>deductible on the part of the<br>donor.
Rental Income	Companies and<br>individuals earning<br>rental income were<br>entitled to deduct<br>bank loan interest<br>payments and 75%<br>of their gross rental<br>income as expenses,<br>compute and pay tax<br>on the surplus.	For individuals and<br>partnerships, tax on<br>rental income is 12% of<br>rental income exceeding<br>UGX 235,000 per month<br>or 2,820,000 per year.<br>Companies are allowed a<br>deduction of up to 50% of<br>their gross rental income as<br>expenses. Their income, net<br>of expenses (which expenses<br>should not exceed 50% of<br>gross rental income) is then<br>taxed at 30%	Rental income earners need to<br>take note of the changes in the<br>mode of computation of tax and<br>align accordingly.<br>The new rental tax computation<br>regime is still more beneficial to<br>company rental income earners<br>than individuals.<br>Property developers are urged<br>to take note that they will not<br>be entitled to deduct any capital<br>expenses that are ordinarily<br>allowable under the Income Tax<br>Act from their gross revenue.
Transportation<br>of passengers,<br>cargo or mail<br>into Uganda.	It was possible<br>for a non-resident<br>person to be taxed<br>on income made by<br>transporting people,<br>cargo or mail into or<br>through Uganda.	Income earned by a nonresident person from the<br>carriage of passengers, cargo<br>or mail embarking outside<br>Uganda into Uganda is not<br>regarded as income derived<br>from a Ugandan-source<br>service contract.	Persons who are resident in<br>Uganda for tax purposes are no<br>longer required to withhold tax on<br>payments made to non-resident<br>persons for carriage of passengers,<br>cargo or mail that do not embark<br>in Uganda. This is irrespective of<br>whether the passengers, cargo or<br>mail’s final destination is Uganda<br>or the passenger, cargo or mail is<br>simply passing through Uganda<br>to another destination country.
Oil and Gas<br>Compliance	The Income tax<br>Act and the Tax<br>Procedure Code Act<br>provided different<br>penalties for Oil and<br>Gas licensees who<br>failed to furnish<br>returns or file<br>documents.	The amendment has clarified<br>that the applicable penalties<br>for Oil and Gas licensees who<br>fail to furnish returns or file<br>documents are those provided<br>for under the Income Tax Act.<br>These are; a fine between<br>$50,000 and $500,000.	Oil and gas licensees need to take<br>care to ensure that they comply<br>with all filing requirements<br>within the time prescribed by the<br>law.

Value Added Tax.

The Value Added Tax (Amendment) Act, 2022 has introduced the following changes:

ITEM	PREVIOUS LAW	CURRENT LAW	COMMENTS
Importation of<br>service	A supply of imported<br>services used in<br>the provision of an<br>exempt supply was<br>exempt from VAT	Importation of a service<br>(such as paying for foreign<br>consultancy services) will<br>only be exempt from VAT if<br>the provision of the same<br>service domestically would<br>itself be VAT exempt	Producers who supply VATexempt goods or services have to<br>identify local service providers<br>since importing services used in<br>the provision of an exempt supply<br>no longer qualifies for exemption<br>from VAT.
Cash Basis<br>Accounting	Only tax payers<br>whose annual<br>turnover did<br>not exceed UGX<br>500,000,000 could<br>use cash basis<br>accounting in<br>accounting for VAT.	Taxpayers who supply<br>goods and services to the<br>government can also opt to<br>use cash basis accounting to<br>account for VAT	This enables government<br>suppliers to pay VAT only on<br>invoices that have actually been<br>paid by the government.
Oxygen<br>Cylinders	The supply of<br>oxygen or oxygen<br>cylinders for any<br>purpose was exempt<br>from VAT.	Only the supply of oxygen<br>cylinders or oxygen for<br>medical use is exempt from<br>VAT	Persons in the business of<br>supplying oxygen or oxygen<br>cylinders should take note of<br>this change and always include<br>VAT on any supply of oxygen<br>or oxygen cylinders except for<br>medical purposes.
Specialist<br>Medical<br>Hospitals	Only supplies<br>made to a person<br>developing a<br>specialist medical<br>care hospital at the<br>level of a national<br>referral hospital<br>were VAT exempt	The supply of services to<br>conduct feasibility studies,<br>design, construction, the<br>supply of locally produced<br>materials for construction of<br>premises or infrastructure,<br>machinery and furnishings<br>to any developer of a hospital<br>providing specialist care will<br>now be exempt from VAT	This is to encourage the<br>private sector to invest in the<br>establishment of specialist<br>hospitals and reduce the cost of<br>construction inputs.
Menstrual Cups	Menstrual Cups<br>were VAT Exempt.	The supply of menstrual cups<br>has been transferred from<br>being VAT exempt to being<br>Zero rated.	This allows producers of the<br>product to claim in put VAT<br>incurred in the purchase of inputs<br>for the production of menstrual<br>cups.
Assistive Devices<br>for Persons With<br>Disabilities and<br>Airport User<br>Services	N/A	The supply of assistive devices<br>for persons with disability<br>and of airport user services<br>charged by Civil Aviation<br>Authority are now exempt<br>from VAT.
Education<br>Materials	N/A	The supply of all education<br>materials made in Uganda or<br>abroad, including those made<br>in the EAC region are exempt<br>from VAT.	Aims at reducing the cost of<br>education materials and allow<br>enhancement of regional trade.

Stamp Duty

The Stamp Duty (Amendment) Act, 2022 has introduced the following changes:

ITEM	PREVIOUS LAW	CURRENT LAW	COMMENTS
Credit<br>Instruments	Instruments relating<br>to mortgages<br>and any other<br>charges caused by<br>depositing of title<br>to goods) attracted<br>Stamp Duty at 1% of<br>the transaction.	Instruments relating to<br>mortgages and any other<br>charges caused by depositing<br>of title to goods) now attract<br>Nil Stamp Duty.	The amendment is expected to<br>make credit cheaper.
Instruments<br>relating to trusts<br>and estates<br>of deceased<br>persons.	Instruments relating<br>to a trust as well as<br>transfer of property<br>from the name of<br>a deceased to the<br>administrator or<br>holder of probate<br>were exempt from<br>Stamp Duty.	Instruments relating to a trust<br>as well as transfer of property<br>from the name of a deceased<br>to the administrator or holder<br>of probate and a transfer<br>from the administrator or a<br>holder of letters of probate to<br>a beneficiary is subject to a<br>stamp duty tax of UGX 15,000.	A nominal levy has been<br>introduced, likely to increase<br>government revenues.

Tax Procedures Code Act

The Tax Procedures Code (Amendment) Act, 2022 has introduced the following changes:

ITEM	PREVIOUS LAW	CURRENT LAW	COMMENTS
Informer<br>Rewards	Any person<br>providing<br>information leading<br>to the recovery of<br>tax was entitled to a<br>reward of 5% of the<br>tax discovered.	The amendment has capped<br>rewards for persons that assist<br>URA to identify unassessed tax<br>or provide information leading to<br>its recovery. Under the new law,<br>persons who provide URA with<br>information leading to identification<br>of unassessed tax shall be entitled<br>to a payment of 1% of the tax or UGX<br>15,000,000 whichever is less.<br>On the other hand, a person who<br>provides URA with information<br>leading to the recovery of<br>unassessed tax is entitled to a fee of<br>5% of tax recovered or a payment of<br>UGX 100,000,000 whichever is less.	The reward system is now<br>two fold; persons who<br>provide information leading<br>to the identification of<br>unassessed tax are entitled<br>to a reward immediately.<br>Persons who provide<br>information leading to the<br>collection of tax are entitled<br>to a reward only when tax is<br>collected.
Tax Stamps	Failure to affix<br>stamps was an<br>offence but affixing<br>stamps and failing<br>to activate them was<br>not.	It is now an offence to fail to<br>activate tax stamps. Previously,<br>only failing to affix tax stamps on<br>goods was punishable.	The new sanction is meant<br>to encourage everyone<br>to not only affix but<br>also activate tax stamps<br>otherwise they risk<br>incurring a fine of double<br>the tax due on the goods or<br>UGX 50,000,000 whichever<br>is higher.
Temporary<br>Closure of<br>business	URA was entitled to<br>temporarily close<br>business premises<br>for failure to pay tax.<br>URA was required<br>to issue a notice of<br>seven days before<br>closing the premises.	• The length of notice required to be<br>given by URA before temporarily<br>closing of business premises has<br>been expanded from seven days<br>to fifteen days<br>• Apart from failure to pay tax,<br>failure to comply with the<br>requirements of electronic<br>receipting and invoicing rules<br>is now a ground for URA to<br>temporarily close the premises of<br>a non-compliant business	Tax payers are urged<br>to comply with the<br>requirements of electronic<br>receipting and invoicing<br>rules
Extractives And<br>Construction<br>Industry	Entities in the<br>extractives or<br>construction<br>industries were<br>under no obligation<br>to disclose to URA<br>the names of their<br>contractors	Entities in the extractives or<br>construction industries are now<br>under an obligation to disclose<br>to URA the names of all persons<br>contracted with within seven<br>(7) days of signing any contract.<br>Failure to comply with this<br>obligation attracts a penalty of UGX<br>20,000,000.	Entities in the extractives<br>or construction industries<br>should take note of this<br>requirement and rigorously<br>comply.

New tax offences have been introduced as below:

OFFENCE	PENALTY
Failure to affix or activate tax stamps	Fine not exceeding UGX 10,000,000<br>Or<br>Imprisonment not exceeding ten years<br>Or<br>Both
Printing over or defacing tax stamps	Fine not exceeding UGX 30,000,000<br>Or<br>Imprisonment not exceeding ten years<br>Or<br>Both
Forgery of tax stamps	Fine not exceeding UGX 30,000,000<br>Or<br>Imprisonment not exceeding ten years<br>Or<br>Both
Failure to use electronic receipting or invoicing	Fine not exceeding UGX 30,000,000<br>Or<br>Imprisonment not exceeding ten years<br>Or<br>Both
Forgery of electronic receipt or invoice	Fine not exceeding UGX 30,000,000<br>Or<br>Imprisonment not exceeding ten years<br>Or<br>Both
Interference with electronic fiscal device or<br>electronic dispensing control device	Fine not exceeding UGX 30,000,000<br>Or<br>Imprisonment not exceeding ten years<br>Or<br>Both
Failure to file information return for purposes of<br>automatic exchange of information	Fine not exceeding UGX 50,000,000<br>Or<br>Imprisonment not exceeding ten years<br>Or<br>Both
Failure to maintain records for purposes of<br>automatic exchange if information	Fine not exceeding UGX 50,000,000<br>Or<br>Imprisonment not exceeding ten years<br>Or<br>Both
Making a false or misleading statement in an<br>information return	Fine not exceeding UGX 50,000,000<br>Or<br>Imprisonment not exceeding ten years<br>Or<br>Both
Omitting from a statement made in the information<br>return	Fine not exceeding UGX 50,000,000<br>Or<br>Imprisonment not exceeding ten years<br>Or<br>Both

Tax Appeals Tribunal Act

The Tax Appeals Tribunal (Amendment) Act, 2022 has introduced the following changes:

ITEM	PREVIOUS LAW	CURRENT LAW	COMMENTS
Tax Appeals<br>Tribunal	Tribunal was<br>comprised of 5, with<br>one chairperson and<br>four members.	The composition of the<br>tribunal has been expanded<br>to nine, inclusive of a<br>chairperson and eight<br>members. At least forty<br>percent of the members of the<br>tribunal are required to be<br>women.	The amendment expands the size<br>of the tribunal and is expected<br>to enhance its capacity to<br>expeditiously hear and determine<br>tax matters.

Conclusion:

The amendments above introduce new tax rules, compliance requirements and sanctions. Stakeholders are encouraged to take note of these changes and accordingly align their operations to avoid penalties or excessive tax liabilities where this can be avoid.

TASLAF is in position to assist all entities to make sense of the amendments and what they mean in the specific context of an entity. If you would like to make a consultation, please make use of the contact details at the end of this article.

Disclaimer

No information contained in this alert should be construed as legal advice from TASLAF Advocates or the individual authors, nor is it intended to be a substitute for legal counsel on any subject matter.