What you need to know:
In strengthening Uganda’s domestic revenue mobilisation strategy, stimulating the tax compliance and regulatory environment, there are a raft of amendments within the country’s tax laws. Ms Stella Nyapendi Chombo, the Acting Commissioner, legal services and board affairs at the Uganda Revenue Authority shares key insights of the new tax amendments for this financial year 2023/2024 with Prosper Magazine’s Racheal Nabisubi.
Which are some of the domestic tax laws that were amended and effective in the current financial year 2023/2024?
The President of the Republic of Uganda assented to various Tax Laws which had been the subject of the amendments’ process for the current financial year 2023/2024. This constitutional role by the Head of State was on the 5th day of August and it included the Income Tax (Amendment) Act 2023, the Value Added Tax (Amendment) Act 2023, the Excise Duty (Amendment) Act 2023, the Tax Procedures Code (Amendment) Act 2023, Lotteries and Gaming (Amendment) Act 2023, the Stamp Duty (Amendment) Act 2023, the Stamp Duty (Amendment) Act 2023.
Others were the introduction of the aspects of Islamic Banking in the Tax laws under, the Value Added Tax (Amendment) Act (No.2) 2023, the Income Tax (Amendment) Act (No.2) 2023 and the Excise Duty (Amendment) Act (No.2) 2023.
What steps are taken before the changes are made to the tax legislation? Give us an overview of the process.
This process is governed by the Legislative process, which recognises the legislative process. It begins with an internal call for proposal inviting URA’s staff to submit proposals to amend the various Tax Laws they have implemented over the course of the year. In our case, this stage is the formulation stage.
This call is held annually in August under the legal services and board affairs department docket and provides an overview of the national budget cycle managed by the Ministry of Finance, Planning and Economic Development.
Based on the call for proposal, the staff define the general tax policy and administration goals, which can range from revenue generation to economic growth, income distribution, sustainability, and social well-being.
For the deliberation phase, the proposals are presented to the department heads and discussed at an inter-department forum arranged by the Legal Services and Board Affairs and the department of Domestic Taxes. The proposals, which also cover customs, are collated and discussed with the management of both departments before the final matrix is submitted to URA management for review and subsequent approval.
This call is held annually in August under the legal services and board affairs department docket and provides an overview of the national budget cycle managed by the line Finance Ministry.
The Ministry which has oversight over URA will then lead the process to involve the First Parliamentary Counsel from Justice and Constitutional Affairs as well as the Finance Committee of Parliament of Uganda and all the way to the Plenary where it undergoes the parliamentary procedure until the Bills are enacted into law.
What significant changes are worth highlighting to taxpayers?
The main changes included in these statutes concern a wide range of matters of substance and administration. These include; Repeal of initial allowance, Cap on carry forward loss, Income tax (amendments), digital service tax, enhanced penalties, Tax procedure code (amends), the new Act to provide for cross border automatic exchange of information in Uganda and Law to facilitate the implementation of Islamic banking and finance in Uganda.
The Alternative Dispute Resolution mechanism was introduced to taxpayers earlier in the year. In March, 2023, the Tax Procedures Code (ADR procedure) regulations were issued. These regulations provide for ADR to be used by the tax authority through negotiations and mediation with the taxpayer rather than through the Court as was the case previously. ADR not only saves time and costs for the taxpayer but also releases revenue which would otherwise be help pending the internal dispute resolution process by URA.
Are there any new laws that have been put in place this financial year to make it easier to collect revenue and streamline administration?
Yes, this year, the Convention on Mutual Administrative Assistance in Tax Matters (Implementation) Act 2023, was introduced into the tax legal regime. The new Act is meant to give force of law in Uganda, to the Convention on Mutual Administrative Assistance in Tax Matters; and the Multilateral Competent Authority Agreement on Automotive Exchange of Financial Account Information among others. This law is already in place in countries like South Africa and Nigeria, and URA is counting on it to boost voluntary compliance, taxpayer registration, and fight against tax fraud and tax evasion among other benefits, ultimately increasing revenue collection.
How can taxpayers take advantage of the assented tax laws?
The Tax laws have been amended to provide tax payers with a variety of options. One of the highlights is the introduction of a “Penalty Waiver” under Section 40D of Tax Procedure Code (TPC) Act, which allows taxpayers to avoid interest and penalties. The changes will make it easier for taxpayers to resolve balances in their ledger account of various tax heads. Taxpayers need to reconcile tax ledgers across all tax head and work to clear all outstanding principal taxes (if applicable) by December 31, 2023 in order to take full advantage of the interest and penalty waiver. The newly enacted laws are designed to simplify the gray areas within the law. Taxpayers should take advantage of the opportunities presented by the newly enacted laws to improve their tax compliance and voluntary compliance going forward to enhance their cooperation with the URA.
What initiatives does the URA have in place to enhance appreciation of the amended domestic tax laws?
One of URA’s main objectives is to improve understanding of the amended laws through increased tax education via stakeholders. The scope of sensitisation includes internal stakeholders, especially URA employees, who need to have a good understanding of the changed laws to effectively implement them.
The business sector and other experts like accountants and lawyers, have also been involved on a regular basis because they are at the top of the line in providing guidance and support to taxpayers as they navigate their URA and tax compliance journey.
In addition, a practice note on the section 40D of the TPC regarding waiver of interest and penalties was published to make it easier for taxpayers to understand the optimal benefits of the law as managing tax arrears portfolio effectively is essential for revenue collection.