Income Tax – General

When is final tax payable?

The due date for payment of tax shall be;
(a) in the case of a taxpayer subject to self Assessment, on the date for furnishing the return of income to which the assessment relates; or
(b) in any other case, within forty five days from the date of service of notice of assessment.

When should a final Income Tax return be filed?

Except where a return of income is not required, every taxpayer shall furnish a return of income for each year of income of the taxpayer not later than six months after the end of that year.

What are the instances where a return of income is not required?

Cases where Return of Income not required
Unless requested by the Commissioner by notice in writing, no return of income shall be furnished for a year of income –
(a) by a non-resident person;
- where the gross income of a taxpayer for a year of income consists exclusively of employment income derived from a single employer from which tax has been withheld, or

- where the liability of the non-resident person is satisfied if the tax payable has been withheld by a withholding agent as required on payments made to a non-resident entertainer or sportsperson and paid to the Commissioner, or
- both apply, to all the income derived from sources in Uganda by the person during the year of income; or

(b) by a resident individual –
(i) where the gross income of a taxpayer for a year of income consists exclusively of employment income derived from a single employer from which tax has been withheld, or where the gross turnover of a resident taxpayer for a year of income derived from carrying on a business or businesses is less than fifty million shillings; or
(ii) whose total chargeable income for the year of income is subject to the zero rate of tax under Part I of the Third Schedule to the Income Tax Act (i.e. whose total chargeable income for the year does not exceed shs. 1,560,000)

What is the due date for payment of provisional tax?

A provisional taxpayer, other than an individual, is liable to pay two installments of provisional tax, on or before the last day of the sixth and twelfth months of the year of income, in respect of the taxpayer’s liability for income tax for that year.
A provisional taxpayer who is an individual is liable to pay four installments of provisional tax, on or before the last day of the third, sixth, ninth, and twelfth months of the year of income, in respect of the taxpayer’s liability for income tax for that year.

What does ‘cash-basis accounting’ mean in taxation?

A cash basis accounting is where a taxpayer accounts and recognizes income as derived when it is received or made available and incurs expenditure when it is paid.

What does ‘accrual-basis accounting’ mean in taxation?

accrual basis is where a taxpayer accounts for and recognizes:
(a) Income as derived when it is receivable by the taxpayer; and
(b) Expenditure as incurred when it is payable by the taxpayer.

When can an amount be characterized as ‘receivable’ in regard to accrual-basis accounting?

An amount is treated as payable by the taxpayer when all the events that determine liability have occurred and the amount of the liability can be determined with reasonable accuracy, but not before economic performance with respect to the amount occurs. That is a payable comes into being when the taxpayer has an obligation to make payments to a third party for proper business purposes.

Can we submit final accounts in a foreign currency?

(1) Chargeable income shall be calculated in Uganda Shillings.
(2) Where an amount taken into account is in a currency other than the Uganda Shilling, the amount shall be converted to the Uganda Shilling at the Bank of Uganda mid-exchange rate applying between the currency and the Uganda Shilling on the date that the amount is derived, incurred, or otherwise taken into account for tax purposes.
With the prior written permission of the Commissioner, a taxpayer may use the average rate of exchange during the year of income, or may keep books of account in a currency other than the Uganda Shilling.

How is rent paid on my behalf by my employer treated?

“Rent paid by your employer is a taxable benefit. Its treatment is such that the amount of rent to be included as apart of one’s income is the lesser of;
- the market rent of the accommodation or housing reduced by any payment made by the employee for the benefit; or
15% of the employment income, including the amount of rent paid by the employer to the employee in the year of income in which the accommodation or housing was provided.”

Are Councilors’ allowances subject to tax?

Yes, Councilors’ allowances are subject to tax as income from employment.
You will recognize that employment income is held to include any wages, salary, leave pay, payment in lieu of leave, overtime pay, fees, commission, gratuity, bonus, or the amount of any traveling, entertainment, utilities, cost of living, housing, medical, or other allowance.


Is serving as a Councilor or a representative on a public body considered as being in ‘employment’?

Yes, acting as a Councilor is characterized as being in employment for employment means among others;
- a position entitling the holder to fixed of ascertainable remuneration,
- the holding or acting in any public office.

What is the tax on professional fees?

There are two rates of tax charged on professional fees as paid to either a non – resident or a resident professional.
(a) A tax is imposed on every non – resident person deriving income under a Ugandan-source services contract. The tax payable by a non-resident person is calculated by applying the rate prescribed in Part IV of the Third Schedule (i.e. 15%) to the Income Tax Act to the gross amount of any payment to a non-resident under a Ugandan- source services contract.

(b) A resident person who pays management or professional fees to a resident professional shall withhold tax on the gross amount of the payment at the rate prescribed in Part VIII of the Third Schedule (i.e. 6%).
Note that tax withheld is not final, one has to file a return of income so as to arrive at the proper tax payable.

What is a Ugandan – source services contract?

“Ugandan-source services contract” means a contract, other than an employment contract, under which –
(a) the principal purpose of the contract is the performance of services which gives rise to income sourced in Uganda; and
(b) any goods supplied are only incidental to that purpose.


How is rent paid on my behalf by my employer treated??

Rent paid by your employer is a taxable benefit. Its treatment is such that the amount of rent to be included as apart of one’s income is the lesser of;
- the market rent of the accommodation or housing reduced by any payment made by the employee for the benefit; or
15% of the employment income, including the amount of rent paid by the employer to the employee in the year of income in which the accommodation or housing was provided.”.

Are Councilors’ allowances subject to tax?

Yes, Councilors’ allowances are subject to tax as income from employment.
You will recognize that employment income is held to include any wages, salary, leave pay, payment in lieu of leave, overtime pay, fees, commission, gratuity, bonus, or the amount of any traveling, entertainment, utilities, cost of living, housing, medical, or other allowance.

When can an amount be characterized as ‘receivable’ in regard to accrual-basis accounting?

An amount is treated as payable by the taxpayer when all the events that determine liability have occurred and the amount of the liability can be determined with reasonable accuracy, but not before economic performance with respect to the amount occurs. That is a payable comes into being when the taxpayer has an obligation to make payments to a third party for proper business purposes.

Is serving as a Councilor or a representative on a public body considered as being in ‘employment’?

Yes, acting as a Councilor is characterized as being in employment for employment means among others;
- a position entitling the holder to fixed of ascertainable remuneration,
- the holding or acting in any public office.

What is the tax on professional fees?

There are two rates of tax charged on professional fees as paid to either a non – resident or a resident professional.

(a) A tax is imposed on every non – resident person deriving income under a Ugandan-source services contract. The tax payable by a non-resident person is calculated by applying the rate prescribed in Part IV of the Third Schedule (i.e. 15%) to the Income Tax Act to the gross amount of any payment to a non-resident under a Ugandan- source services contract.

(b) A resident person who pays management or professional fees to a resident professional shall withhold tax on the gross amount of the payment at the rate prescribed in Part VIII of the Third Schedule (i.e. 6%).
Note that tax withheld is not final, one has to file a return of income so as to arrive at the proper tax payable.
.

What is a Ugandan – source services contract?

“Ugandan-source services contract” means a contract, other than an employment contract, under which –

(a) the principal purpose of the contract is the performance of services which gives rise to income sourced in Uganda; and

(b) any goods supplied are only incidental to that purpose. .

What constitutes income of resident and non-resident individuals?

Income of both resident & non-resident person is constituted by;

(a) the gross income of a resident person includes income derived from all geographical sources; and

(b) the gross income of a non-resident person includes only income derived from sources in Uganda.
Both resident and non-resident individuals are subject to tax, Part I of the third schedule of the Income Tax Act spells the individual income tax rates applicable in both cases.

You may access the Income Tax Act by visiting the URA website at: www.ugrevenue.com and follow the links Regulations – domestic taxes
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Who is a resident individual for tax purposes?

The meaning of a resident person given as a person who;
(a) has a permanent home in Uganda;
(b) is present in Uganda –
(i) for a period of, or periods amounting in aggregate to, 183 days or more in any twelve-month period that commences or ends during the year of income;
(ii) during the year of income and in each of the two preceding years of income for periods averaging more than 122 days in each such year of income; or
(c) is an employee or official of the Government of Uganda posted abroad during the year of income.


Who is a non-resident individual for tax purposes?

A person is a non-resident person for a year of income if the person is not a resident person for that year.

Do I need to withhold tax on payment for services provided by a non-resident company?

Tax shall be withheld on payments to non-residents in respect of income earned under a Ugandan-source services contract. Tax shall be withheld at a rate of 15% and this tax is a final.

How does one qualify for income tax exemption?

For a person to qualify for tax exemption the person has to be a listed institution in the first schedule of the income tax act or they should be earning income that is exempt as given in S21 of the Income Tax Act.

If one receives rent for 99 years from a tenant at once how are the taxes paid on this rent?

“Income tax is charged on an annual basis, it is based on a year of income (a period of 12 months ending 30th June). The rent received in advance for several years shall be recognized as realized on an accruals basis for each year and the tax payable thereon shall be based on that income earned & assessed annually.
However, anyone wishing to use the cash basis of accounting ought to apply in writing to the Commissioner for permission to so”.

I would like to know whether tax is levied on an individual’s commission?

Yes commission is subject to tax. To the extent that the commission is earned as income for the individual it shall be subject to tax at individual income tax rates provided for in part 1 of the third schedule to the Income tax Act.
You can access the Income Tax Act by visiting the URA website: www.ugrevenue.com/regulations click on – Domestic Tax Laws


How much tax is payable by a small dry cleaning?

Every business has to be registered at the nearest URA Domestic Tax station. Small businesses can be assessed to tax under the presumptive tax system where the rates applicable based on gross turnover are as follows:

Small Business Taxpayers Tax Rates

The amount of tax payable for the purposes of section 4(5) by a taxpayer is-

What tax is payable by a sole proprietor whose turn over is about 5m?

Under the presumptive tax regime as provided for Second schedule of the Income Tax Act, businesses whose gross turnover is 5m or less no tax is payable. On the other hand where the gross turnover of the taxpayer exceeds Shs. 5 million but does not exceed shs. 20 million per annum, tax payable shall be 100,000 or 1% of the gross turn over whichever is less.