An over view of the 2021 Tax Amendments
"Tax Law "
The President of the Republic of Uganda has assented to the Income Tax (Amendment) Act 2021, the Value Added Tax (Amendment) Act 2021, the Excise Duty (Amendment) Act 2021, the Tax Appeals Tribunal (Amendment) Act 2021, the Tax Procedures Code (Amendment) Act 2021 and the Mining (Amendment) Act 2021. They all come into force on the 1st of July 2021.
In this overview we shall highlight some of the changes brought by these amendments.
A: The Income Tax (Amendment) Act 2021 (2021 ITA)
Narrowing definition of a beneficial owner for double tax agreement purposes:
A beneficial owner is defined to mean a natural person who has final ownership or control of another person or a natural person on whose behalf a transaction is conducted, and includes a natural person who exercises absolute control over a legal person.
Providing a definition of an exempt organization:
An exempt organization is defined to include any company, institution or irrecoverable trust which is a religious, charitable or educational institution whose object is not for profit.
Remove of Agro processing exemption:
The exemption previously enjoyed by a person earning income derived from agro-processing has been removed.
Increased deductions and rate of tax for purposes of rental income of individuals:
An individual conducting rental business is allowed a deduction up to 75% of the rental income as expenditure and losses incurred by a person in the production of such income. Previously an individual was allowed to deduct only 20%. The rental income of an individual will be taxed at rate of 30% of the chargeable income.
New classification of depreciable assets:
Depreciable assets are now classified into three classes instead of the previous four. Class one includes computers and data handling (at a depreciation rate of 40%); class two includes plant and machinery used in farming, manufacturing and mining (at a depreciation rate of 30%); and class three includes automobiles; buses, minibuses, goods vehicles, construction and earth moving equipment, specialized trucks, tractors, trailers and trailer mounted containers, rail cars, locomotives and equipment; vessels, barges, tugs and similar water transportation equipment; aircraft; specialized public utility plant, equipment and machinery; office furniture, fixtures and equipment; any depreciable asset not included in another class (at a depreciation rate of 20%).
A deduction for the depreciation of an asset that qualifies for initial allowance shall be deferred to the next year of income. The deferral also applies to an industrial building that qualifies for initial allowance.
Gains from sale of interest in venture capital funds not charged to Capital Gains Tax:
No gain or loss is taken into account in determining chargeable income in relation to capital gains arising from the sale of investment interest of a registered venture capital fund if at least fifty percent of the proceeds on sale is reinvested within the year. A registered venture capital fund shall be entitled to a non-recognition of a gain or loss equivalent to the percentage of reinvested proceeds.
Minister to make Regulations to facilitate automatic exchange of information:
The Minister is mandated to make regulations to enable the commissioner facilitate automatic exchange of information under the international tax agreement providing for automatic exchange of information.
B: The Value added Tax (Amendment) Act 2021 (2021 VATA)
Clarification of the exemption of import of service:
An import of a service is an exempt import if the service would be exempt had it been supplied in Uganda or would be used in the provision of an exempt supply.
Application for input tax to be made within 6 months of invoice:
A taxable person is mandated to apply for input tax credit within six months from the date of the invoice.
A nontaxable person who is issued an electronic receipt will be entitled to a refund of 5% of the tax paid:
A person other than a taxable person who purchases goods or services from a taxable person and is issued with an electronic receipt or invoice or several electronic receipts or invoices worth five million shillings within a period of thirty days, shall be entitled to a refund of five percent of the tax paid.
C: Tax Appeals Tribunal (Amendment) Act 2021 (2021 TATA)
Appeals allowed up to Supreme Court:
For appeals in tax matters and allows a taxpayer or Uganda Revenue Authority (URA) if aggrieved with the decision of the High Court in tax matters to appeal to the Court of Appeal. The Court of Appeal is required to conclude the appeal within sixty (60) days from the date of filing the appeal. The party aggrieved by the decision of the Court of Appeal may appeal to the Supreme Court. The Supreme Court is mandated to conclude the appeal within thirty (30) days from the date of filing the appeal.
This was a necessary amendment following the decision of the Court of Appeal in Housing Finance Bank Limited v Uganda Revenue Authority Court of Appeal Civil Appeal No. 22 of 2012 where the court held that there was no right of appeal from the decision of the High Court exercising its appellant jurisdiction in tax matters from the rulings of the Tax Appeals Tribunal.
Stay of enforcement of orders issued by the Tax Appeals Tribunal and Courts:
The court or the Tax Appeals Tribunal to which an appeal has been made has the power to stay the enforcement of the orders of the lower court or decision maker (as the case maybe).
URA to pay interest on tax refunds:
Where the Tribunal or Court decides that URA is supposed to refund a tax paid by the taxpayer, the same must be paid with interest.
D: The Tax Procedures Code (Amendment) Act 2021 (The 2021 TPCA)
New definition of “tax decision”:
A new definition of a “tax decision” is adopted. A tax decision is defined as a tax assessment; or a decision on any matter left to the discretion, judgment, direction, opinion, approval, satisfaction or determination of the commissioner other than-
- A decision made in relation to a tax assessment;
- A decision to refuse, issue or revoke a practice note or an omission to issue or revoke a practice note;
- A decision or omission that affects a tax officer or employee or agent of URA;
- The compoundment of an offence under any tax law.
Tax Identification Numbers (TINs) are mandatory for all businesses/companies to be licensed in Uganda:
A local authority, government institution or regulatory body is barred from issuing a licence or any form of authorization necessary to carry on a business in Uganda unless the applicant has a TIN. The 2021 TPCA recognizes TINs issued by foreign countries with whom Uganda has a double tax treaty or agreement for the exchange of information.
Registration of tax agents:
No person is allowed to act as a tax agent unless he or she is registered as such. This restriction does not apply to an advocate of the taxpayer. Operating as a tax agent without registration is an offence punishable with a fine not exceeding twenty-four currency points or to imprisonment not exceeding one year or both.
Offences in relation to tax stamps:
It is an offence to attempt to acquire or sell a tax stamp (issued under the Excise Duty Act 2014) without goods. On conviction the offender is liable to a fine not exceeding five hundred currency points or imprisonment for a term not exceeding five years or both.
Where a person acquires a tax stamp and fixes the same on goods other than the goods approved by the commissioner, such a person commits an offence and is, on conviction, liable to double the tax due on the goods or five hundred currency points whichever is higher.
Extension of time for amendment of a return:
The time within which to apply to amend a tax return has been extended from twelve months to three years. Thus, where a taxpayer discovers an error in a return, he or she has filed he or she may apply for leave to file an additional assessment within three years.
Alternative Dispute Resolution procedure in tax matters:
Hitherto, a tax payer who was dissatisfied with a tax decision of URA had one option: to appeal to the Tax Appeals Tribunal. Under the 2021 TPCA, a taxpayer may apply to the commissioner to resolve the dispute using alternative dispute resolution procedure. The 2021 TPCA envisages that the Minister will make regulations to provide for alternative dispute resolution procedures for the purpose of tax.
Offences by tax agent:
It is an offence for the tax agent to aid, abet, counsel or induce the taxpayer to commit an offence under a tax law. The tax agent is liable to a fine equal to double the tax evaded or not exceeding two hundred and fifty currency points whichever is higher, or to imprisonment for a term not exceeding five years, or both.
E: The Mining (Amendment) Act 2021
Introduction of a 5% levy on export of gold:
A levy is imposed on processed gold at the rate of 5% of the value of a kilogram which is exported out of Uganda.
Introduction of a 10% levy on export of unprocessed mineral:
A levy is imposed on unprocessed minerals at the rate of 10% of the value of the unprocessed minerals which are exported out of Uganda.
The levy imposed on processed gold and unprocessed minerals under the 2021 Mining Act is paid to URA.