Tax education to simplify tax laws and procedures in Uganda
The constitutional court has not declared S. 15 of the Tax Appeals Tribunal Act unconstitutional.
Court has only section has only tried to restrict it's application.
This is the provision that provides for payment of 30% of tax assessed prior to proceeding before the Tax Appeals Tribunal;
The Supreme Court in *Uganda Projects implementation and management centre v URA SCCA. No.2/2009* ruled that, for anyone to proceed before TAT, they must pay 30% of the tax assessed regardless of the nature of their objection.
The learned Justices of the Constitutional Court sought to restrict this application in *FUELEX v URA
"S15 does not extend to instances where the tax payer contends that. 1. They’re exempted, 2.They have obtained a waiver, 3.They’re not a tax payer in Uganda, or 4.That the assessment in issue is founded upon wrong or non existent law.
In such instances, TAT is required to first make a determination on the question as to whether the objector is in fact a “Tax payer” for purposes of the assessment in question”
Also note that Supreme Court decision is still binding until the Supreme Court itself revises this decision.
Small businesses are always ignorant of how much tax to pay. Those that are not worry about how to calculate tax payable in a given period. Here is a quick guide to tax payable by small businesses in Uganda.
Note: it always pays to keep records. Keep every invoice, every receipt. Your business benefits from this too.
Are you a commercial motor vehicle owner? Do you struggle to understand how advance income tax is calculated? There you go..
HOW MUCH TAX DO YOU PAY?
Most people who are employed know that they pay taxes, however when signing that agreement, we only gloss over the net pay and not the gross pay. It would be surprising to know how much taxes you pay to the government, much more than your NSSF savings
Persons earning between 235,000 to 335,000 10% of your pay ends up in the national coffers
Between 335,000 to 410,000 - 10,000 plus 20% of your gross pay goes to the government
Above 410,000 - 25,000 plus 30% of your gross pay goes to the government
Above 10,000,000 - Almost 40% of your gross pay
Now we can all calculate how much the government takes from us
HOLDING ONTO AN OUT DATED LOG BOOK
To the left is the old Car log book, to the right is the new electronic log book.
In 2012, Uganda moved from a manual to an electronic motor vehicle system and all car owners were required to validate their old green log books and acquire an e-log book.
Before paying for that car, especially series below UAR, ensure that the seller has a new log book.
For those holding onto the old out dated log books, getting the new log book is simple, fast and easy. Do not wait until you have an urgent transaction as this can become frustrating.
CAR LOG BOOK TRANSFERS
Is that car log book in your name?
Selling your car, without transferring the log book to the names of the new owner means the car still belongs to you.
When or if that car is used in committing a crime, the police runs to URA first to find out the ownership of the car and you become the first suspect.
Buying a car without transferring the same into your names means the old owner technically still owns the car.
Did you know that in some microfinance institutions, all they need to give someone a loan is a car log book in his or her names?
So you could be driving a car that is security for another person's loan
Do not take the risk. Transferring ownership of a car is just a click button away...
"An efficient tax system ought to be certain. It needs to be clear as to the amount of tax that needs to be paid, the timing of the payment and the manner of payment. If these are not certain, then every person subject to that tax is put more or less in the power of the tax-gatherer, who can either aggravate the tax upon any obnoxious contributor, or extort, by the terror of such aggravation, some present or perquisites to himself."
Uncertainty leads to corruption and is a far worse evil than inequality in the burden of tax.
WHAT DOES FILING A TAX RETURN MEAN?
It means informing the tax man about the performance of your business on any particular tax head.
Simply put, i sold this much or I provided services to this many people, at this price and spent so much.
For example, if you are in whole sale business, you simply state your sales in the period, e.g. I sold 1,000 bags of rice at 100,000 each making sales of 100m and then state your expenses like rent, labour costs, storage costs..etc. This will enable you to come up with your profit and tax payable.
For tax heads like VAT, you simply state your sales and VAT charged on each sale (18%) and remit the 18% to URA.
There is certainly some accounting involved in income tax returns. This includes preparing Balance Sheets and profit and loss accounts.
In general terms, filing a return simply means declaring your business performance to the Tax Authority.
WHAT YOU NEED TO KNOW ABOUT FILING TAX RETURNS
1) Filing returns is mandatory for all Tax registered persons i.e Any individual or entity that has a TIN.
2) Filing returns is done online in your TIN account. Every TIN has a password that enables the user to log in and apply for various URA services as well as file a return.
3) There are 5 types of returns, Income tax returns, Value Added Tax (VAT) returns, Withholding Tax (WHT) returns, Local Excise Duty (LED) returns and Pay As You Earn (PAYE) returns
4) Some returns are filed monthly like VAT, PAYE, WHT and LED. These are due by the 15th of every month
5) Income tax returns are filed every 6 months usually 30th June and 31st December.
6) There is a penalty of UGX 200,000 per month for late filing of each return. i.e. filing after the due date. EXCEPT WHT and PAYE
7) It is not enough to file, one has to pay the resultant tax after filing. Payment due date follows the return due date
8) Late payment attracts interest on amount due.
9) Where your only source of Income is employment and your Employer files PAYE returns, the obligation to file your return is waived. However if you have other incomes for example a business or rentals, then you have to file a return.
10) NGO's and other exempt organisations are not exempt from filing returns for the tax types they are registered for. They also need to apply for income tax exemption if they do not make profit.
WHY YOU HAVE A RANDOM TAX ASSESSMENT FROM URA IN YOUR EMAIL (FILING TAX RETURNS)
A number of times, people call me quite irritated, probably bordering on anger, why?
"I found an email from URA issuing me with a tax assessment of UGX 2,000,000. where is this coming from?"
Most times, this is usually followed by statements like
"I have been out of the country for the past two years" OR
"I opened up a company and got a TIN as a bid requirement but that didn't work out and i abandoned the company" OR
"I am employed and have no business" OR
"I got a TIN to buy a car and that was it"
Unfortunately for all these scenarios, it is because we are not aware of the obligations that accrue once we register for taxes. Getting a TIN means one is a tax payer in Uganda until the TIN is deactivated.
The Tax Procedures Code S.16 requires every tax payer to file a return, failure to do so, the commissioner has the right to issue you with an assessment based on an industry average. This is done automatically by the URA system for as long as a return was not filed.
For salaried employees, the employer usually files a PAYE return. In principle, the employer files your return. However, make sure you are registered for a TIN as an employee, otherwise, if you registered as a business person, the assessments will keep coming. (Stay away from middle men, to have accurate details on your TIN)
This also applies to persons who were in business at the time of registering for a TIN but later changed to employment, you will have to amend the source of income details on your TIN, otherwise, the assessments will keep coming.
So FILE YOUR RETURNS TO AVOID ASSESSMENTS, whether you are in business or not. If business is not picking up or you have abandoned it for a while, it is okay to file a NIL return, but do not neglect the duty to file a tax return, for as long as the TIN is still active. And if you have not gone through a deactivation procedure, then the TIN is active.
The duty comes with a penalty if one does not file the return in time.(This is very important)
Remember, filing a return is done online, so being out of the country does not save you.
Next Post, we shall address the details of Filing a return including time periods and penalties.
Tax Education is Key
WHY YOU NEED A TIN
Most human beings naturally do not like to bother with getting things done, until they absolutely MUST.
Same goes for obtaining a Tax Identification Number, (TIN), people don't see the need to get one... right until they have bought a car and want to transfer it into their names, or they have received a parcel from a loved one outside the country that needs to pay tax or they have taken a business trip outside the country only to get to the airport and find out they cannot take the goods out before paying tax and they need a TIN to do this.
A couple of times when i ask friends in the business world to register for a TIN, the response i get is "why should i, i do not need it and besides, that will make the tax man come for me"...that is until they need to buy a plot of land above UGX 50M.
So,why do you need to get a TIN
1) To boost your business, most times companies that advertise bids will require one to have a tax clearance, it goes without saying that one cannot obtain a tax clearance if they are not registered for taxes in the first place.
2) If you plan on acquiring land above UGX 50m, the transfer cannot be completed without a TIN
3) To enable you transfer your vehicle or motor cycle into your own names. You need a TIN to do this
4) For salaried employees, URA is in the process of requiring all PAYE returns to include individual TINs of each employee. You do not want to miss out on your salary because you don't have one.
5) KCCA requires one to have a TIN in order to obtain a trade license.
So do not wait until you absolutely need one and get conned of your hard earned money by "tax brokers" promising to get you a TIN in one day at a price and filling in all the wrong details in your application that will eventually cause you unending stress.
As long as you have a source of income, get online and apply for a TIN or walk into any URA service center and ask for help or inbox us if you get any troubles in your application.
Remember, a TIN is FREE
In the next post, we shall look at the Rights and Obligations that accrue, once you register and get a TIN. Registering for one is not the end of the Road, if anything, it is the beginning.
Tax Education is Key
WHAT IS A TIN NUMBER
For sometime now.. URA has been on a drive..trying to get as many people registered for taxes in Uganda
To register for taxes.. One only needs to apply for a TIN (Tax Identification Number) online.
A TIN is just like any identifier... Like you may say a national ID identifies one as a Ugandan....A TIN identifies you as a tax payer..it is unique to the owner and cannot be shared.
Often times people register for TINs without understanding the importance of owning one or even the rights and obligations that come with owning a TIN
Getting a TIN is free and any Ugandan or any person earning an income in Uganda is entitled to a TIN. You only need a national ID and your source of income. A registered business or an employer. Foreigners need two IDs.. A passport and a work permit
Next post.. We shall share about the rights and obligations that come with owning a TIN and why you need to have one
Share with a friend..
Tax Education is Key
Over a series of conversations and quick questions from well educated friends about simple things like,
How do i get a TIN number?
I have failed to apply for a TIN online, how do i do it?
I want to import a car, what taxes are applicable on cars? Why is URA sending me a notice of assessment when i don't have business in Uganda?
What is a return?
When do i file a return?
Why do we pay tax twice, to both URA and KCCA?
Considering most of these questions come from people who have pursued business and law courses, and who know something about tax, i realized so many things about tax in Uganda are alien, not only to the down town day to day trader with a minimum education, but to just about everyone who doesn't interact with tax on a day to day basis... This page is meant to change that.... Welcome and feel free to ask any tax related question on the page or in box, we will try to respond as soon as possible and in as simple a language as we can
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