Uganda Budget Brief 2013: Tax highlights

In June 2013, the Uganda 2013-14 Budget was presented in Parliament. Uganda Budget Brief is a general guide summarising some of the main features of the proposed Budget, including Economic and Budget commentary, and Tax Highlights.

Value Added Tax

  • The cost of water for home consumption shall go up as a result of the re-introduction of VAT at 18%
  • VAT on Hotel Accommodation outside Kampala: The VAT exemption previously existing on hotel accommodation outside Kampala District has been removed. It shall now be subject to VAT at 18%
  • VAT on wheat and flour: VAT at 18% has been introduced on wheat and wheat flour, which were previously exempt. The upshot of this is increase in prices for wheat flour and related products
  • Rationalised VAT Exemptions: VAT exemptions will be rationalised in line with sector definitions and best practice so as to improve compliance and administration, and as a result a number of special exemptions may be scrapped.

Income Tax

  • Number of gazetted withholding tax Agents increased
  • The number of gazetted withholding tax agents is to be increased so as to enhance tax compliance.

Excise Duty

  • Duty on spirits
  • Duty on undenatured spirits, has been doubled from 70% to 140%
  • Excise duty on petrol and diesel: Excise duty on petrol and diesel has been increased by Ushs 50 per litre. Excise duty on petrol will therefore increase to Ushs 900 from Ushs 850 per litre, while that on diesel will increase to Ushs 580 from Ushs 530 per litre. Transport being a key driver for every economic activity, the increment is likely to increase the cost of living
  • Excise duty on kerosene: Excise duty on kerosene, which had previously been removed, has been re-introduced at a rate of Ushs 200 per litre. This implies the majority of the rural community that depend a lot on paraffin will have to dig deeper into their pockets
  • Increased duty on cigarettes: Excise duty on cigarettes has been increased from Ushs. 22,000, 25,000 and 55,000 for soft cup (with local content of more than 70%), other soft cup and hinge lid, to Ushs. 32,000 35,000 and 69,000 respectively
  • Excise duty on promotional activities: A 20% excise duty has been introduced on revenue from activities akin to gambling; we anticipate that this is meant to target revenues from promotions such as those held by telecoms
  • Excise duty on money transfers: Excise duty at the rate of 10% has been introduced on transfer of money by mobile network operators and other money transfer operators to widen the tax base as well as benefit from the growing sector.

Stamp Duty

  • Stamp duty on 3rd party insurance policies for motor vehicles has been increased by Ushs 30,000. Motor vehicle owners will thus not only pay more for fuel but also insurance.

Fees and Licences

  • Motorcycle registration fees has been increased by Ushs70,000, from Ushs 130,000 to Ushs200,000 while motor-vehicle registration fee has been increased by Ushs 200,000 from Ushs1,000,000 to Ushs 1,200,000
  • Government fees and levies: Government is going to introduce a levy on international incoming calls as a way of raising revenue. The Minister proposed to increase the non tax revenue rates on fees charged by Government Ministries, Departments and Agencies.

Customs Tax: EAC Pre-Budget Consultations and Decisions

  • Elimination of zero percent import duty on Uganda’s raw materials and industrial inputs under the EAC Customs Union Protocol. However, Uganda was able to secure reduced rates for most of the industrial inputs.

Administrative Tax Changes

  • New tax laws and procedures: Government has proposed new excise, stamps duty, lotteries, gaming and pool betting laws and a Tax Procedures Code to enhance compliance
  • Revision of Tax exemptions: Going forward, there will be a comprehensive review of exemptions in the VAT and Income Tax Act with the aim of eliminating the exemptions so as to increase revenue and improve tax administration
  • Review of tax legislation: VAT and Income Tax Laws to be reviewed to enhance their performance and to offer better services to taxpayers
  • Emphasis on use of PIN: Government to enforce use of the Tax Identification Number for all traders who receive trading and other licences and permits from Kampala Capital City Authority and Local Governments. This is meant to widen the tax base
  • Amendment of Financial Institution Act: Government proposes to amend the Financial Institutions Act to permit Uganda Revenue Authority to access taxpayers’ financial records from financial institutions to aid tax audit and investigation. The Financial Institutions Act will also be amended to provide for Agent Banking, Islamic Banking, Micro Insurance, and Mobile Money
  • Money transfers encouraged: To facilitate payment of non tax revenue, tax payers will be allowed to pay using their mobile phones and internet. This will also aid the increase of the mobile money transfer transactions and thus the 10% excise duty on transfer fees
  • VAT registration broom: Uganda Revenue Authority has been directed to clean up the VAT register to ensure that only those capable of filing monthly VAT returns and paying remain on the register
  • URA – Enhanced collection powers: Uganda Revenue Authority mandate is to be extended to collect all fees and other charges under the Uganda Registration Services Bureau, the Department of Citizenship and Immigration, as well as the Ministry of Energy and Mineral Development
  • Taxation of the Petroleum Value Chain: To ensure that the Government reaps maximum benefits from petroleum and mining sectors, there are proposals to review the value chain during the year 2013/2014.

If you would like specific advice on the tax implications of the proposed Budget, please get in touch with us.

Download the KPMG Uganda Budget Brief 2013 here: [download id=”8″]

David Okwara

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