Uganda’s Tax Amendment Bill 2022: Here’s what you need to know

Uganda’s Ministry of Finance, Planning and Economic Development recently unveiled the Tax Amendment Bill 2022, a move aimed at enhancing tax administration and bolstering revenue collection in the country. The Bill, which contains a host of new measures and revisions, has sparked discussions and raised questions among taxpayers and financial experts alike. Trevor Lukanga, Senior Manager at ArchPWC Uganda, shed light on the intricacies of the new amendments in a recent interview with CNBC Africa. From a tax perspective, Lukanga noted that changes in tax regulations occur annually and are typically influenced by tax policy and economic conditions. However, this year's amendments appear to be more closely tied to the current global economic climate, particularly amidst the ongoing geopolitical tensions between Russia and Ukraine. The amendments seem to reflect a shift in focus towards ensuring tax certainty for taxpayers rather than introducing significant changes. One of the key revisions highlighted by Lukanga is the adjustment in the taxation of rental income. Previously set at a flat rate of 75% for all taxpayers, the new amendments propose a differentiation between individuals and companies. Individuals would now be subject to a 12% tax rate, while companies would revert to a 30% rate with a 50% cap on allowable expenses. Beyond the realm of rental income, other segments of the economy are also poised to feel the impact of the new amendments. Lukanga mentioned the clarification of the 6% withholding tax on business assets, specifically on land. While not introducing new taxes, the amendments seek to streamline tax policies and ensure more transparent practices in tax collection. The effective implementation of these amendments, scheduled for July, is expected to have varying implications for Ugandan taxpayers. While the amendments do not entail significant tax hikes, Lukanga pointed out that penalties for non-compliance, especially in electronic filing, have been increased. Taxpayers are urged to adapt to electronic filing systems to avoid penalties and ensure seamless tax compliance. In terms of exemptions and incentives, the amendments touch upon foreign players in the market, with thresholds and VAT exemptions being revisited. The amendments aim to provide clarity and consistency in tax regulations, thereby facilitating tax collection and reducing potential loopholes for tax evasion. When questioned about the potential impact of the amendments on tax revenues, Lukanga emphasized the role of enhanced clarity in driving tax collection efforts. With measures such as the electronic filing system and increased penalties for non-compliance, the Uganda Revenue Authority aims to boost tax collection rates and minimize tax leakages. Speaking on the issue of tax leakages, Lukanga highlighted the challenges posed by Uganda's informal economy, which often leads to loopholes in tax collection. The introduction of the electronic filing system is seen as a critical step towards addressing these challenges and enhancing tax compliance. Overall, the Tax Amendment Bill 2022 signals a shift towards greater tax certainty, transparency, and compliance. While the amendments may not herald drastic changes in tax rates, their implications for tax administration and revenue collection are expected to shape the tax landscape in Uganda in the coming months.