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www.pkf.com Global Expertise, Local Knowledge

GOU Budget 2015/2016

Albert Beine

Senior Tax Manager

PKF Uganda

12 June 2015

Implications of Tax amendments

“Maintaining Infrastructure Investment and Promoting Excellence in Public

Service Delivery”

2015/16 Budget Theme

- The Public Finance Management Act 2015 among other things requires that the budget is approved by parliament prior to beginning of financial year,

- These tax amendments have therefore already been approved by Parliament.

Preamble

VAT changes

Value Added Tax

• Annual VAT registration threshold has been increased from Ushs 50m to Ushs 150m

• Cash basis accounting for VAT purposes –Threshold increased from Ushs 200m to Ushs500m.

Value Added Tax…

• VAT changes in Petroleum & Miningsector

- Licensees to register for VAT duringexploration & development stage. This willenable them to obtain relief

- Computation of VAT payable for “contractor”and “licensee” – tax payable on a taxablesupply made by contractor to licensee formining or petroleum operations is deemed tohave been paid by the licensee to thecontractor….

Value Added Tax…

• Definition of exempt imports – Sect 20

- imports falling under Fifth Schedule of EACCMA are also considered exempt for VAT purposes. However, effective 1 July 2015, this will EXCLUDE fluorescent bulbs with a power connecting cap at the end.

Value Added Tax…

• Sect 28 – Credit for input tax – VAT onimported services made by a “licensee” isclaimable

• Supply of cereals, where cereals aregrown and milled in Uganda now ZEROrated (Retrospectively from Jan 2015)

Income Tax…

• Presumptive tax – threshold increased from Ushs50m to Ushs 150m

• Tax payable under presumptive:

Old Rates New Rates

Turnover Rate of tax Turnover Rate of tax

>5m but < 10m NIL > 50m but < 75m 937,500 or 1.5% of turnover

whichever is lower

>10m but < 20m 450,000 or 3% of turnover

whichever is lower

>75m but <100m 1,312,500 or 1.5% of turnover

whichever is lower

>20m but < 30m 750,000 or 3% of turnover

whichever is lower

>100 but < 125m 1,687,500 or 1.5% of turnover

whichever is lower

>30m but < 40m 1,050,000 or 3% of turnover

whichever is lower

>125 but < 150m 2,062,500 or 1.5% of turnover

whichever is lower

>40m but < 50m 1,350,000 or 3% of turnover

whichever is lower- -

Income Tax…

• Where turnover is less than 50m!(i) Kampala City and Divisions (amounts in Ushs)

Business Grade I Grade II Grade III Others

General trade 500,000 350,000 200,000 100,000

Workshops 500,000 350,000 200,000 100,000

Garages 500,000 350,000 200,000 100,000

Hair & beauty

salons

500,000 350,000 200,000 100,000

Tailors 500,000 350,000 200,000 100,000

Maternity

homes

500,000 350,000 200,000 100,000

Drug shops 500,000 350,000 200,000 100,000

• Where turnover is less than 50m!(ii) Municipalities & Towns (amounts in Ushs)

Business Grade I Grade II Grade III Others

General trade 500,000 350,000 200,000 100,000

Workshops 500,000 350,000 200,000 100,000

Garages 500,000 350,000 200,000 100,000

Hair & beauty

salons

500,000 350,000 200,000 100,000

Tailors 500,000 350,000 200,000 100,000

Maternity

homes

500,000 350,000 200,000 100,000

Drug shops 500,000 350,000 200,000 100,000

Income Tax…

Income Tax…

• No expenditure above one million will be allowed ongoods and services from a supplier who does not havea TIN – serious taxpayers will ONLY want to deal with tax

registered suppliers,

• Definition of “branch” expanded to include;

- a place where a person furnishes services, including

consultancy services through employees or other

personnel engaged by a person for such purpose if the

activities continue for a period or periods aggregating

more than 90 day in any 12 month period,

• Thin Capitalisation – debt to equity ratio changed from 1:1to 1.5:1. However, thin cap rules will not apply if the amount ofdebt is at arms length

• Sect 119 - WHT on goods and services: WHT will beapplicable on;

- supply or importation of petroleum or petroleum products,

- supply or importation of plant and machinery,

- supply or importation of human or animal drugs,

- supply or importation of scholastic materials,

- supply or importation of raw materials.

Income Tax…

• The following taxpayers will be required topay advance tax before renewal of theiroperational licences;

(i) Taxpayers providing passenger transport

services,

(ii) Taxpayers providing goods transport

services with vehicles of more than load

capacity of 2 tonnes,

- see rates of advance tax applicable on the above on next slide -

Income Tax…

Vehicle Type Advance tax ‘ UShs

Vans, pickups and lorries 500,000 per ton

Saloons, station wagons, mini

busses, buses and coaches

2,000 per passenger

per month

Drivers 100,000 per annum

Conductors 50,000 per annum

Income Tax…

• Tax Identification Number now a MUST!

Every local authority, Government institution,

or regulatory body shall require a taxpayer

TIN from any person applying for a license

or any form of authorization necessary for

purposes of conducting any business in

Uganda

Income Tax…

WHT on payments of re insurancepremiums has been reduced from 15%(introduced in 2014) to 5%

Income Tax…

The provision for mineral explorationexpenditures which had earlier beencategorized under the general allowabledeductions has been repealed.

However, a comprehensive regime forpetroleum and mining sectors has beenprovided for in ITA.

Income Tax…

Excise duty

Excise duty

Item Old rate ‘ UShs New rate ‘Ushs

Soft cap 35,000 per 1,000 sticks 45,000 per 1,000 sticks

Hinge Lid 69,000 per 1,000 sticks 75,000 per 1,000 sticks

Beer whose local raw

material

content(excluding water)

is at least 75%

20% 30%

Undenatured spirits Ushs 4,000 per litre or

140% whichever is

higher

Ushs 1,000 per litre or

100% whichever is

higher

Other wines 70% 80%

Gas oil(automative, light,

amber for speed engine)

Ushs 630 per litre Ushs 680 per litre

Excise duty….

Item Old rate New rate

Incoming

international calls

included calls from

Ke, Rw & South

Sudan – USD$ 0.09

per minute

now Ke, Rw & South

Sudan excluded

Motor vehicle

lubricants

NIL 5%

Chewing gum,

sweets & chocolates

NIL 10%

Furniture NIL 10%

Environmental levy

Item Old rate New rate

Motor vehicles

(excluding goods

vehicles) which are

between 5-10 years old

20% of CIF value 35% of CIF value

(also threshold period

reduced from 8years to

5years)

Motor vehicles

(excluding goods

vehicles) which are 10

years or more

20% of CIF value 50 % of CIF value

Food for thought: Will the above reduce importation of OLD vehicles?!

Operator Licence fees(annual)

Item New rate (Annual)

Operator licence fees for

vehicles (Class O, Class C, Class R,

Class T or Class A)

Ushs. 200,000 – Ushs. 1,500,000

(Depending on no. of passengers)

Operator licence fees for

vehicles (Class G)

Ushs. 300,000 – Ushs. 700,000

(Depending on no. of tons)

Operator licence fees for motor

cycle (Boda boda)

Ushs. 30,000

Operator licence fees for cargo

vessels in land water propelled

by oars

Ushs. 60,000

Operator licence fees for cargo

vessels in land water vessels –

sailing

Ushs. 5,000 – Ushs. 700,000

(Depending on length and no. of tons)

Operator Licence fees(annual)

Item New rate (Annual)

Operator licence fees for

passenger vessels – propelled

by oars or sailing

Ushs. 60,000 – Ushs. 250,000

(Depending on no. of passengers)

Operator licence fees for

research and leisure vessels

Ushs. 3000 – Ushs. 500,000

(Depending on no. of tons)

EAC common external tariff

Item Old duty rate New duty rate

Road tractors for semi-trailors 10% 0%

Motor vehicles for transport of goods -

5 tonnes but not exceeding 20 tones

25% 10%

Motor vehicle for transport of goods –

exceeding 20 tonnes

25% 0%

Buses for transportation of more than 25

persons

25% 10%

The above benefits will be valid for a period of one year. Private sector is

encouraged to take advantage of these benefits

As agreed by Ministers of Finance during pre-budget consultative meetings

Significant decisions for Uganda include:

As part of strategy to enhance tax compliance, URA will

undertake the following;

- Implement Joint Compliance Campaign for fast growing

sectors, e.g real estate, manufacturing, wholesale, etc

- Tax payer sensitization and education on tax policy

changes,

- Strengthen international taxation function & exchange of

information between Revenue Authorities,

- Expand Tax Payer Registration & Expansion program

outside greater Kla, Mbra, Wakiso, etc

Tax Administration

Government has ratified the following agreements;

- East African Community Double Tax Agreement,

- Agreement for Establishing of the African Tax

Administration Forum (ATAF),

- The African Tax Administration Forum Agreement on

Mutual Assistance in tax Matters,

- The OECD convention on Mutual Administrative

Assistance.

International agreements

- The Minister has promised to holistically address current

tax incentives regime for investment,

- The Minister has promised to be meeting with investors

regularly to discuss options to improve the tax incentive

regime and appropriate changes to be implemented.

Tax Incentive Regime for investment

Tax amendments all geared towards thefollowing;

1. Increasing tax to GDP ratio,

2. Capturing the informal sector which forms 49%

of GDP,

3. Improve collaboration among Government

ministries and Agencies, and

4. Enhance tax compliance and revenue

collection,

Conclusion

Presenters contact details

Albert BeineSenior Tax ManagerPKF Uganda

Plot 1B, Kira RoadP.O Box 24544, KampalaTel: +256 31 2305800email: abeine@ug.pkfea.com