Tuesday January 19 2016

Rental income is charged to fill revenue gaps

By Henry Saka

The real estate sector is among the most profitable business ventures in Uganda contributing 13 per cent to the Gross Domestic Product though the sector’s revenue contribution, according to Uganda Revenue Authority (URA), is only 2 per cent.
In July 2014, URA created the rental expansion project under the domestic taxes department service management division headquarters in Kampala to expand the taxpayer register and to enhance revenue mobilisation in real estate through supporting the sectoral players to fulfill their tax obligations.

Taxpayer obligations include, among others: maintaining and declaring accurate and complete records of all their transactions to the URA; filing accurate and complete tax returns by the due date to avoid penalties; making timely payment of the right rental tax to avoid interest and penalties; and communicating to URA, in a timely manner, of any changes in the status of their businesses.

An individual, company, partnership, trustee, retirement fund, government, a political subdivision of a government and a listed institution that has rental income for each year of income is liable to rental tax.
Section 5 of the Income Tax Act states that any person who earns an income and is not exempt should contribute to national development by complying with Income Tax. Rental income forms part of a person’s income.

But what is rental income?
Rental income is the total amount of rent derived by a person for the year of income from the lease of immovable property (land rented for a washing bay, customs bond, selling sand or gravel and or buildings such as a house, flat, apartment, office) in Uganda with the deduction of any expenditures and losses incurred in respect of the property.

Rental income is isolated from business income and is taxed separately. It is charged for each year of income and is imposed on every person who has rental income.
The rental income of a resident individual for a year of income is charged to income tax at 20 per cent of the chargeable income excess of Shs2, 820,000 while the rental income of a company for a year of income is charged to income tax at 30 per cent.

URA’s role
URA is sensitising the public with customised tax education through workshops, tax literature, and talk shows on radio and TV. URA also carries out field/courtesy visits and onsite support.

The writer is the commissioner domestic taxes, URA. Email: c/o hssempogo@ura.go.ug