Govt proposes to scrap tax on adult diapers, animal feeds 

Government plans to exempt payment of taxes on adult diapers, according to proposals contained in the Value Added Tax (Amendment) Bill, 2023. 

The proposal, the Uganda Revenue Authority assistant commissioner public and corporate affairs, Mr Ibrahim Bbosa told Monitor are part of measures that seek to support ailing adults. 

“The products have been exempted to support ailing adults,” he said in response to Monitor’s inquiries. 

It was not immediately clear why government is seeking to exempt adult diapers, however, Mr Bbosa, said: “Once approved and assented to, the changes will take effect on July 1.”

Under the same Bill, government is also proposing tax exemptions for supply of animal feeds, premixes, concentrates and seed cake. The proposals are seeking to amend the Second Schedule of the principal Value Added Tax Act. 

Mr Bbosa also indicated that the proposed amendments in sections of the Value Added Tax (VAT) Act are aimed at clarifying ambiguity, reduce tax exemptions and widen the tax base.

Therefore, he said, the amendments had widened the definition of electronic services to include websites, streaming platforms and subscription-based services, cab hailing services, cloud storage, data warehousing and any other services, which all suppliers of the services mentioned above, will be required to collect and remit VAT to URA including non-resident service providers such as Amazon, Netflix, Facebook, and Twitter, among others.  

Other proposed amendments include a provision to include the dollar as a currency through which non-resident companies such as Amazon or Facebook can remit tax, amendment of interest on unpaid tax and payment and tax on imported service, which will require an importer to file and pay taxes for imports within 15 days after end of the tax period. 

The exemption of taxes on concentrates will be of particular interest to farmers, which Mr Bbosa noted is part of a plan to “support farmers who deal in the listed agricultural products”. 

In October last year, URA and a section of farmers faced off with the tax body, after it seized more than 500 trucks carrying concentrates, which URA argued were not part of the exempted items under animal feeds. 

The standoff, which had escalated, threatened a number of farmers in Kampala, Wakiso and Luwero districts, warning of a shortage of poultry and pork products due to lack of feeds.

However, URA later suspended the tax, noting that it would streamline the levy for both value added tax and import duty of 18 percent and 10 percent. 

Parliament had in 2017 scrapped VAT on animal feeds and premixes. But URA had argued that concentrates were not listed as part of the exempted items.

Misclassification 

URA last year, had indicated that importers of animal feeds had been misclassifying concentrates as premixes, which had been exempted from tax in 2017. 

The law had remained silent on concentrates, which prompted URA to enforce collection of the tax, before suspending the process. URA said it would review provisions in the law to identify gaps that traders could have taken advantage of to avoid remitting the tax. 

Therefore, the addition of concentrates, among exempted animal feeds comes as a relief. 

[email protected]