Kasaija exempts locally made drugs, cuts taxes on soda

A farmer harvests coffee in Wakiso District. According to the draft tax proposals presented by Finance minister Matia Kasaija, agricultural products have been exempted from taxes. PHOTO BY RACHEL MABALA 

By Moses Kyeyune

Parliament- Finance minister Matia Kasaija presented a draft of tax proposals aimed at ensuring stable economic growth and employment.
The proposals contained in the new tax bills to Parliament provide key exemptions ranging from
“huge sum” investment to locally produced drugs and other raw materials used in the domestic market.

The beneficiaries of what some Members of Parliament called “a give-and-take” tax measures in the budget for the FY 2019/2020 include investors whose minimum investment capital is $10 million (about Shs37b) for foreigners and $2 million (Shs7.4b) for citizens.
The minister has proposed to reduce these rates from $15m (Shs55b)
and $5m (Shs18b)for foreigners and citizens respectively.

If adopted by Parliament, the proposed tax measures will also exempt locally produced drugs from paying Value Added Tax (VAT) and excise duty.

However, excise duty on non-alcoholic drinks [excluding] fruit and vegetable juice, will be cut from the current 12 per cent to 11 per cent.

This implies that items such as soda and mineral water will have a reduced tax of about Shs189 from Shs200.
For the purpose of administration of the excise duty, Mr Kasaija has proposed registration of manufacturers, importers and providers of excisable goods and services.

If Parliament approves the minister’s proposals, manufacturers, importers or providers of excisable goods and services other than retailers will be required to apply for registration of their premises.

The Commissioner of Registration “may within a period of one month after receiving the application register or refuse to register a manufacturer, importer or service provider,” the draft excise bill, 2019 reads in part.

Under the proposed revenue measures, all registered service providers shall be mandated to apply for renewal at least three months before the expiry of the running period, lest they lose their certificates of registration.

Operators will have to stick to the purposes, location and line of business for which they are registered, while operating without a certificate is criminal.

“A person who operates without a certificate of registration issued under this law will be liable to pay a fine of twenty currency points for each day of default from the date of on which the person commences the manufacture, provision or dealing in excisable goods or excisable services,” the bill adds.

One currency point is equivalent to Shs20,000. Defaulters face a penalty of Shs400,000 per a day.
Other items exempted from VAT include; aircraft insurance services, rice mills and agricultural sprayers.
The minister hopes these measures will in the long run spur growth and boost job creation in the country.

The main beneficiaries of this measure will be those “processing/ adding value to agricultural products; manufactures or assembles medical appliances, building materials, auto mobiles, house hold appliances, or manufactures furniture; carries on business in logistics and warehousing, information technology or commercial farming.

UN Women exempted
The new VAT Bill, 2019, further proposes that “the [Finance] minister shall make regulations for prescribing the equivalent tax treatment of supplies made in the course of Islamic financial transactions.”

This revenue measure also exempts United Nations Entity for Gender Equality and the Empowerment of Women (UN Women) from VAT burden.
The minister proposed that UN Women be added on the list of public international organisations, such as the United Nations High Commission for Refugees, whose purchases and supplies do not suffer the tax.

What the Tax Bills propose
Excise Duty (Amendment) Bill, 2019
- Shs 400,000 fine for operating without licence
l2% monthly interest rate payable on unpaid excise duty
- Shs189 (11% cut) on non-alcoholic drinks not including fruit and vegetable juice
- 10 year exemption for investors with minimum investment capital of Shs37band Shs7.4) for foreigners and citizens respectively
Stamp Duty (Ammendment)Bill, 2019
-Shs100,000 Uniform stamp duty payable on bank guarantees, insurance performance bids, indemnity bonds and similar debt instruments and to reduce capital thresholds for developers and operators.

mkyeyune@ug.nationmedia.com