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Ugandan Budget Focuses On Revenue Generation

by Lorys Charalambous,, Cyprus

17 June 2015

The Budget for 2015/16 presented by Ugandan Minister of Finance Matia Kasaija contains a variety of tax proposals designed to enhance revenue, particularly by improving tax compliance and administration, while also attempting to sustain business investment.

For example, as the value added tax (VAT) threshold has been maintained at UGX50m (USD15,750) since the introduction of the tax in 1997, it has now been revised to UGX150m, both to enhance compliance and to reduce the cost of VAT administration. Similarly, the threshold for businesses to be able to use cash basis accounting has been increased from UGX200m to UGX500m.

To reduce the cost of compliance among small businesses and increase tax collections, the threshold for the presumptive tax regime has also been increased from a gross turnover of UGX50m to UGX150m.

Kasaija pointed out that Uganda's informal sector, in such sectors as agriculture, wholesale and retail trade, construction, and transport, is an estimated 49 percent of the country's gross domestic product and contributes minimally to revenue. In that regard, the Government is going to use the withholding tax system through public agencies to collect taxes from these businesses.

In addition, no deduction will be allowed for businesses purchasing goods and services exceeding UGX1m from a supplier who does not have a taxpayer identification number issued by the Uganda Revenue Authority.

Modest adjustments have been made to excise duty rates on some items, such as fuel, beer, cigarettes, and wine and ready-to-drink spirits. An excise duty of 10 percent has been placed on confectionery and furniture, and the environmental levy on used motor vehicles is to be increased from 20 percent to 35 percent for those vehicles that are between 5-10 years old, and to 55 percent for those above 10 years.

Other changes include amendments to provide for the zero-rating of VAT on cereals if they are grown, milled, or produced in Uganda; and to provide a mechanism for the petroleum and mining sectors to obtain relief against VAT payable on goods and services supplied to them during the exploration and development stages of their operations.

Finally, "to encourage firms to access financing from foreign sources so as to expand their business," the Budget amends thin capitalization rules to allow companies to deduct interest on loans from non-residents if they do not exceed their share capital by more than 150 percent, rather than 100 percent as previously.

TAGS: environment | compliance | tax | investment | small business | business | value added tax (VAT) | tax compliance | mining | accounting | oil and gas | excise duty | transfer pricing | withholding tax | Uganda | business investment

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