Section 7: The Convention on Mutual Administrative Assistance

in Tax Matters (Implementa tion) Bill, 2023 Note: The Tax (Amendment) Bills, 2023 were tabled before parliament for discussion. The proposed changes set out in the various Bills are set to come into force on 1 July 2023 and will become law once assented to by the President. INCOME TAX (AMENDMENT) BILL, 2023 1 Exclusion from the definition of a Company - a unit Because all unit trusts trust are registered as companies. 2 Removal of Initial allowance deductions To enhance revenue The bill proposes to repeal initial allowances of 50% of the cost of items of eligible property placed into service for the first time outside a radius of 50 Kilometers from Kampala; as well as an initial allow- ance of 20% of the cost of a new industrial building for the first year the building is placed in service. 3 Exclusion of interest capping on debts owed by To level the ground for micro-finance deposit taking institution and tier 4 all deposit taking finan- micro- finance institutions. cial institutions. The bill proposes to extend the exclusion on interest capping applicable to financial institutions to micro- finance deposit taking institutions and tier 4 micro- finance institutions. 4 Excluding winnings derived from gaming from with- To address a compliance holding tax. challenge. The proposed change to exclude 'winnings from The industry has been gaming' implies that a 15% WHT will not apply on facing a challenge of payment of winnings from gaming. collecting WHT because the players continue gambling as they win. VAT (AMENDMENT) BILL, 2023 1 Sale by auction included as supply for goods To enhance revenue The Bill proposes to include the auction of goods as a supply of goods made by the auctioneer as the supplier in the course of auctioning goods. 2 Expansion of the scope of supplies considered to be To widen the tax base made in Uganda. The Bill proposes to expand the scope of supplies considered to be made in Uganda to include a person carrying on a business outside Uganda and does not have a place of business in Uganda, if the recipient of the supply is not a taxable person or a person who makes a supply with a total annual value in excess of UGX 150 million or a government entity that is not registered. 3 Broadening the definition of electronic services To widen the tax base The bill proposes to expand the meaning of an " electronic service" to mean a service supplied through an online or digital network by a supplier from a place of business outside Uganda to a recipient in Uganda, including the following additional services: a. Advertising platforms b. Streaming platforms and subscription-based services c. Cab-hailing services d. Cloud storage e. Data warehousing f. ny other service that the Minister of Finance has denoted by statutory instrument 4 Expanding the list of taxable supplies for which VAT To widen the tax base input credit cannot be utilized to include; • Payments made by a taxable person for enter- To enhance revenue tainment, for membership in a club, association or society of a sporting, social or recreational nature. In the past, this input VAT was being claimed by taxpayers on the basis that these payments were in respect to health benefits of the employees and not their entertainment. This amendment clarifies that payments to such establishments are not claimable. • Payments made by a taxable person outside Uganda making a supply of services to a non- taxable in Uganda such as non-resident suppliers of electronic services. 5 Limiting the input credit claimable by a taxable To increase revenue person to only supplies acquired for use in the related business, generating a taxable supply. 6 To remove the waiver on interest payable as at 30th This is in line with the June 2027 where the interest exceeds the aggregate amnesty proposal under of principal tax and penal tax. the TPCA. 7 Provision for non-resident suppliers to pay and To enhance compliance file tax returns in United States Dollars (USD) e.g. non-resident suppliers of digital services. To ease the payment of tax. 8 Add to the First Schedule of the VAT Act (public Organizations listed International organizations) ZEP-RE (PTA Reinsur- under the First Schedule ance Company) of the VAT Act are entitled to certain VAT reliefs.e.g. Claiming VAT refunds. 9 Proposed amendments to the Second Schedule (VAT House cleaning Exempt Supplies) A. Supplies added to the exemption list Levelling of the ground • Animal feeds, premixes, concentrates and seed- for all industry players cake • Billets for further value addition in Uganda Promoting agriculture. • Supply of liquefied gas and denatured fuel ethanol Revenue enhancement B. Supplies to be removed from exemption list and widening of the tax • Diapers base • Cotton seedcake • All production inputs into iron ore smelting into billets EXCISE DUTY (AMENDMENT) BILL, 2023 1 Introduce definition of fruit juice To widen the tax base The Bill proposes to introduce a definition for fruit juice to mean unfermented liquid extracted from the edible parts of a fresh fruit, whether the extracted liquid is diluted or not. 2 Introduce definition of un-denatured spirits To widen the tax base The Bill proposes to introduce a definition for un-denatured spirits to mean spirits that are not mixed with any substance to render the spirit unfit for human consumption. 3 Introduce definition of Vegetable juice To widen the tax base The Bill proposes to introduce a definition of vegetable juice to mean unfermented liquid extracted from the edible part of a vegetable, whether the extracted liquid is diluted or not. 4 Amendments to the Second schedule of the Excise Duty Act: Justification: • Where rates have increased; this is to enhance revenue or promote healthy living. • Where rates have decreased; this is to grow the local industries. • Where items have been added; this is to widen the tax base. No. Current item Proposed item Current duty Proposed description description rate duty rate 3 (a) Un-denatured Un-denatured 60% or UGX 60% or UGX spirits made spirits, of 1,500 per liter, 1,500 per from locally alcoholic whichever is liter, which- produced raw strength by higher ever is materials. volume of 80% higher or more made from locally produced raw materials 4 No. Current item de- Proposed item de- Current Proposed scription scription duty rate duty rate 3 (b) Un-denatured Un-denatured spirits, 100% 100% spirits made from of alcoholic strength or UGX or UGX imported raw by volume of 80% or 2,500/= 2,500/= materials more made from per liter, per liter, imported raw which- whichever materials ever is is higher higher 3 (c) Ready to drink any other Nil 80% or spirits un-denatured spirits UGX that are either - 1,700/= per (I) locally produced liter, which- and less than 80% ever is alcohol by volume higher (ii) imported and less Nil 100% than 80% alcohol by or UGX volume 2,500/= per liter, whichever is higher 3 (d) Un-denatured Un-denatured Nil Nil spirits made from spirits made from locally produced locally produced raw materials used raw materials used in the production in the production of disinfectants of disinfectants and and sanitizers for sanitizers for the the prevention prevention of the of the spread of spread of COVID-19, COVID-19, with an with an alcoholic alcoholic content content by volume by volume not less not less than 70% than 70% 5 (b) Fruit juice and Fruit juice and 12% or 12% or vegetable juice vegetable juice, UGX 250 UGX 250 (except juice (except juice made per liter, per liter, made from at from at least 30% which- whichever least 30% pulp pulp or at least 30% ever is is higher or at least 30% juice by weight or higher juice by weight or volume of the total volume of the total composition of the composition of the drink from fruits and drink from fruits vegetables locally and vegetables grown) locally grown) 4 No. Current item de- Proposed item de- Current Proposed scription scription duty rate duty rate 5 (d) Any other non- Any other non- 12% or 12% or alcoholic beverage alcoholic beverage UGX UGX locally produced locally produced 250/= 250/= other than the bev- other than a per liter, per liter, erage referred to in beverage referred which- whichever paragraph (a) made to in paragraph ever is is higher out of fermented (a) made out of higher sugary tea solution fermented sugary with a combina- tea solution with a tion of yeast and combination of yeast bacteria and bacteria 6 Mineral water, Mineral water, 10% 10% or bottled water and bottled water and UGX 75 other water other water per liter purposely for drink- purposely for whichever ing drinking is higher 13 (g) Incoming Incoming USD 0.09 USD 0.09 international calls, international calls, per min- per minute except calls from except calls from the ute the Republic of Republic of Kenya, Kenya, the the United Republic of Rwanda Republic of and the Republic of Tanzania, the South Sudan Republic of Rwanda and the Republic of South Sudan 25(b) Any other Any other fermented 30% or 30% or fermented beverages including UGX 550 UGX 550 beverages including cider, Perry, mead or per liter, per liter, cider, Perry, mead or near beer produced whichev- whichev- near beer from locally grown er is er is produced from or locally produced Higher higher locally grown or raw materials produced raw materials 26 Construction Construction Nil Nil materials of a materials of a manufacturer, other manufacturer, other than a manufacturer than a manufacturer referred to in item referred to in item 21, whose 21, whose investment investment capital capital is at least is, at least USD 35m USD 35m in the case in case of a of a foreigner or USD foreigner or USD 5m in the case of a 5m in the case of a citizen citizen. TAX PROCEDURE CODE (AMENDMENT) BILL, 2023 1 Requirement of a TIN to register an instrument To widen the tax required to pay stamp duty under the Stamp Duty base Act,2014. The bill proposes that a Local Authority, Government Institution or regulatory body shall not For information register an instrument required to pay stamp duty unless the person lodging the instrument for registration has a TIN. 2 Waiver of interest and penalty upon voluntary pay- To enhance ment of principal tax compliance The Bill proposes to empower the Commissioner to An Amnesty waive any interest and penalty payable by a taxpayer provision to relief tax if the taxpayer voluntarily pays either the whole or payers of the burden part of the principal tax outstanding as at 30 June of interest and pen- 2023 by 31 December 2023 alty. To deal with the arrears register. 3 Limitation on presentation of new information at To enhance objections stage or under the Alternative Dispute compliance and Resolution ("ADR") proceedings. adherence to the The Bill proposes to prohibit a taxpayer from requirement for providing additional information when objecting to a the taxpayer not to tax decision or during ADR proceedings where such withhold information a taxpayer failed to provide such information upon from URA. receiving the request of the URA. 4 Clarification on payment allocation where taxpayer To provide clarity on makes a payment that is less than the total amount payment allocation of tax, penal tax and interest due. under Section 38 The bill proposes that where a taxpayer is liable for penal tax and interest in relation to a tax liability and the taxpayer makes a payment that is less than the total amount of tax, penal tax and interest due, the amount paid shall be applied to principal tax first until it is fully paid up. 5 Parliament to approve remission of tax. To involve parliament The bill proposes to require the Minister to obtain in making decisions Parliament's approval before remission of tax. that impact the consolidated fund. 6 Introduction of new offences relating to Digital Tax Stamps and impose higher penalties and sentences upon conviction for offences committed under the TPCA as summarized below: Justification: This is to enhance compliance. OFFENCE FINE