TAXATION_OF_RENTAL_INCOME-1.pdf

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TAXATION OF INDIVIDUAL

RENTAL INCOME

URA

Vol. 2 Issue 1 F/Y: 2012/13



Taxation of Individual Rental Income2

DEFINITION

(A) Rental IncomeIncome earned by a person rom letting out property on commercialterms.

(B) Landlord or Landlady

This is the person who lets out property to another person (the Tenant)or a consideration. A landlord may take the orm o:

x An individual e.g Mathew Etimax

A corporate body e.g Properties (U) Ltd.x Government e.g Luwero District Administrationx An institution e.g Makerere University, UWESO, etc



Taxation of Individual Rental Income 3

(C) Tenant

This is the person who occupies another person’s property oncommercial terms and pays a consideration.

INDIVIDUAL RENTAL INCOME

Taxation o individual rental income is separately provided or underthe Income Tax Act, 1997. This is rent earned by individuals. Companyrental income is taxed under the ordinary income tax system togetherwith other corporate income.

The law provides that individual rental income is segregated and taxedseparately as though it were the only source o income or the taxpayer.




HOW IS RENTAL INCOME COMPUTED

Important steps

Step I: Determine the total annual gross rents rom all sources o theindividual; say R;

Step II: Deduct 20 percent allowance or costs i.e R – 20% R = 80%R

Step III: Deduct threshold (Shs.2, 820,000) i.e 80%R – 2,820,000

Step IV: Determine income tax at 20% i.e 20% (80%R – 2,820,000).

Illustrations: (3 scenarios)

Scenario 1: Gross rents not exceeding Shs. 2,820,000 per annum: Tax isNIL since gross rent does not exceed threshold.

Scenario 2: Gross rents say, Shs. 3,000,000 per annum;Allow 20% costs, thereore 3,000,000 – 600,000Net Rents = 2,400,000 since net rent DOES NOT exceed threshold, taxis NIL.




Scenario 3: Gross rents say, Shs.4, 000,000 per annum.

Step I:Allow 20% Costs4,000,000 – (20 x 4,000,000)

100= 4,000,000 – 800,000Net rents = 3,200,000.Step II:

Allow Threshold:

3,200,000 – 2,820,000Net chargeable rent = 380,000 (in excess o threshold)

Step III:

Calculate tax at 20%20 x 380,000100Rental Income Tax = 76,000




NB: An individual whose Gross or Net

rent per annum Does Not Exceed thethreshold pays NIL Rental Income Tax.

TAXPAYER’S OBLIGATION

x Complete a return o Rental Incomeor a year o income with supportingagreements where available or rentalreceipts issued to tenants(s) during

the year.

x Declare ALL your sources o rentalincome in FULL or a given year o income. The year o income is rom1st July to 30th June.

x File provisional returns o rental

income and pay in our installmentsie. September, December, March andJune ( Year o income or rental endson 30th June).

x Submit (urnish) fnal return toUganda Revenue Authority, withinsix months ater the end o therelevant year o income. i.e not laterthan 31st December.

x Pay the rental income tax by theappropriate due date.




ENTITLEMENT TO TAX CREDIT

The taxpayer is entitled to a tax credit in respect o any rental tax paidprovisionally or in advance during the year o Income. This howevercan only be oset against rental tax liability since the source is taxedseparately.



DISCLAIMER:

This Inormation is strictly or purposes o guidance to our clientele and is subject to change on amendmento tax legislations & any other regulations that govern tax administration.

URA

A Publicationo

Uganda Revenue Authority

P.O. Box 7279 Kampala, Uganda Telephone: (0417)442 054, 440 000, 443 150

Fax (0414)334 419 Email: [email protected]

http://ura.go.ug | Twitter@URAuganda | Facebook@URApage

URA TOLL FREE HELPLINE: 0800 117 000

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TAXATION_OF_RENTAL_INCOME-1.pdf