Used car dealers ask URA to revise tax collection system

A security guard stands by cars parked at Harris Motors U Ltd bond at Nakawa, Kampala, yesterday. PHOTO BY STEPHEN WANDERA

What you need to know:

Complaint. Traders complained of URA grabbing members’ cars for auction in case a car is lost on transit from Mombasa.

Kampala. Importers of used cars want Uganda Revenue Authority (URA) to streamline its tax collection which they describe as ‘oppressive.’
According to Mr Malik Azhar, senior member, Used Cars Dealers Association Uganda Ltd, members’ cars are being auctioned unfairly especially when a member fails to pay taxes within the nine-months tax grace period.

“When our members import cars, we are given nine months to clear taxes or else the import is auctioned to recover tax. One can have the period extended by paying 3 per cent of import value of the car. We have had instances where the 3 per cent is paid but surprisingly, the car is auctioned,” Mr Azhar said.
Speaking during a meeting of Used Cars Dealers Association Uganda members and URA officials at Hotel Africana last week, Mr Azhar also complained of URA grabbing members’ cars for auction in case a car is lost on transit from Mombasa, Kenya.
Mr Faisal Khan, a member of the association, said more than 10,000 cars of their members risk being auctioned in a few months by URA if the tax is not reviewed, a move that is killing car business.

Mr Mathew Abitan, supervisor URA, representing Commissioner Domestic Tax, said they have noted the importers’ concerns and promised feedback after a management meeting on April 5, to discuss importers issues.
Mr Azhar said the new development comes after the environmental tax introduced last year has slowed business.
“Our members import cars through clearing firms which have insurance bonds. But in case a car is stolen on the way, URA officials raid our bonds, pick cars for auction to recover taxes of the lost car,” he said.

“This cheating in broad daylight of importers is killing used car business in the country to the extent that some of their members have started relocating to neighbouring countries,” Mr Azhar said.
“On average, our members used to sell 15 to 20 cars per month (each member) before the environment tax. But nowadays, we sell two to three cars a month and to make matters worse, some of our clients take these cars on loan. We want government to suspend this tax for a while so that the stakeholders can meet and have a discussion,” Mr Azhar said.
Importers also requested for extension of nine months tax grace period to two years.

Uganda Revenue Authority tariffs

Uganda Revenue Authority uses its own Car Values as a basis for tax assessment. It is this price that forms the basis of import duty, not the price you paid for the car at auction or anywhere else. This price reflects URA’s view of the price when the vehicle arrives in Uganda.

Tax type Percentage of URA Valuation of Vehicle
Import Duty 25%
VAT 18%
Withholding tax 6%
Environmental tax if older than 8 years 50% or 35% if older than 5 years
Registration fees Shs1.2m (below 3,000c.c)
Registration fees Shs1.7m (3,000c.c and above).