Tax Focus Newsletter - June 2022

• Published date: 08 August 2022
• Subject Matter: Tax, Income Tax, Sales Taxes: VAT, GST
• Law Firm: SNG Grant Thornton
• Author: Ms Anil Patel

Summary of Key amendments passed into Law

The Parliament approved the tax measures for the financial year 2022-23, which came into effect from 1st July 2022. Below is summary of the Key amendments as well as the potential impact of the same.

Income Tax

Amendment in definition of Beneficial Owner:

The beneficial owner definition has been changed in order to facilitate the automatic exchange of information. The new definition specifies the different qualifying criteria for a beneficial owner, such as the percentage of shareholding, influence on transactions as well as personal or financial superiority, power to make or influence a decision-making process.

Fixed percentage allowed as expenditure or losses in deriving the tax payable on rental income:

For rental income, a fixed 50% of gross rental income is to be allowed as expenditure and losses for non-individuals and any expenditure and losses in excess of 50% shall not be carried forward to be claimed in subsequent years. No deduction in form of wear and tear, interest etc will be allowed over and above the prescribed limit of 50%. With the applicable income tax rate of 30% the effective tax rate on gross rental income shall be 15% for non-individuals. For rental income earned by individuals and partners of partnership firms who are individuals the proposed tax rate is 12% of the gross rental income. The mortgage interest deduction which has been previously allowed to individuals has been scrapped.

Income from the carriage of passengers, or cargo or mail which is not embarked in Uganda, is not subject to tax as income derived from a Ugandan-Source Services contract:

The amendment to Section 86 of the ITA is aimed at clarifying the position that no WHT is chargeable on income derived from the carriage of passengers who do not embark or international transport of cargo or mail which is not embarked in Uganda.

VAT

VAT on imported services applicable, even if the same is used in provision of exempt supply:

The VAT Amendment Act 2021 kept importation of any service out of the ambit of VAT, which would be used in the provision of exempt supply (Financial, Medical, Education and insurance services, which are exempt as per Second Schedule of The VAT Act). With the new amendment, VAT on imported services becomes applicable (18%), even if the same is to be used in provision of the exempt supply. The VAT paid on imported services is non-creditable and is to be paid by importer of the service

Key Amendment to Second...