First of all, why pay taxes? ‘This is why you pay taxes, for the authorities are God’s servants, who give their full time to governing. Give to everyone what you owe them: If you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honor then honor’. Romans (13:6-7)

Uganda Revenue Authority and other tax collecting bodies are therefore established to fulfill the mandate of collecting as much tax as possible. Imagine a world where the citizen are all tax compliant and the government puts all the taxes to good use…..Utopia 🙂

The more you earn as an individual the more taxes you pay, hence PAYE (Pay As You Earn). The higher the annual gross turnover of a small business, the higher the annual tax payable. The more profits a medium enterprise makes, the more income tax you pay. In other words the only way to avoid tax at the moment is to ensure your monthly earning is less than Ugx235,000 and your annual business turnover is less than Ugx 10,000,000. Below these amounts the tax payable is 0%

So taxes we must pay but how much?

Depending on whether you see the glass as half-full or half-empty, the Uganda budget for 2015/2016 gave a section of small business owners a reason to celebrate. The increasing of the VAT registration threshold was a welcome to many SMEs. It brought with it amendments of The Value Added Tax (VAT) and The Income Tax Act (ITA). This was in line with Uganda Revenue Authority (URA) aim of reducing the administrative burden of small businesses.‪

The VAT amendment bill proposed to increase the annual turnover threshold for VAT registration from Ush 50 million to 150 million. This meant that a broader range of small businesses would be excluded from the requirement to register for VAT. A tax payer below the threshold would still be entitled to apply for (or retain) VAT registration. A registered taxpayer falling below the new threshold may apply for their registration to be cancelled.

The income tax amendment bill proposed to increase the threshold for presumptive tax from Ush 50 million to 150 million, while at the same time halving the base tax rate from 3% to 1.5%. This meant that SME taxpayers with annual turnover between Ush 50 and 150 million would be entitled to calculate their annual income tax liability based on a flat rate of 1.5% applied to their gross turnover. The tax amount may be a lesser lump sum according to where the turnover falls within the four prescribed brackets.

For tax payers with a gross turnover of less than Ush 50 million, specific lump sum tax amount would apply (ranging from Ush100,000 to 500,000) depending on the nature of the business and location. For instance those earning between Ush35 million to Ush50 million per annum, would pay Ush500,000 per year, while those with less than Ush10 million turnover would pay Ush250,000.

The bill made it mandatory for every local authority, government institution or regulatory body to require a TIN from any person applying for a license or any form of authorization necessary for conducting business in Uganda. The URA partnership with Kampala Capital City Authority (KCCA) and the Uganda Registration Services Bureau (URSB) has already registered many new taxpayers since its inception. This partnership is among many changes aimed at ensuring more people shoulder the tax burden instead of the current few.

Excerpts from PWC’s Tax watch, Tax Amendment Bills – 2015

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