Petroleum. Fuel tankers off-load fuel at Vivo Energy Depot in Namuwongo in Kampala recently. Photo by Rachel Mabala
Government
last week announced new tax measures, which it said will help in
raising more funds to run the country in the next financial year. Among
the levies revised includes taxes on rentals, fuel and beers.
Increment in taxes came at a time when all businesses are struggling after the lockdown following Covid-19 pandemic.
However, a number of countries are already offering incentives for businesses to stay afloat. US last week announced $2 trillion stimulus plan, UK announced zero taxes on a number of businesses, including loan repayment plans and mortgages. In East Africa, Kenya also announced reduction on taxes to boost production.
Increment in taxes came at a time when all businesses are struggling after the lockdown following Covid-19 pandemic.
However, a number of countries are already offering incentives for businesses to stay afloat. US last week announced $2 trillion stimulus plan, UK announced zero taxes on a number of businesses, including loan repayment plans and mortgages. In East Africa, Kenya also announced reduction on taxes to boost production.
According to the Bill, under
the new measures, the new Valued Added Tax (VAT) will require an owner
of a commercial building to account for the tax of each building
separately and the same applies under income tax.
Government also seeks to revise the tax rate applicable to individuals and companies for purposes of rental income from 20 per cent to 30 per cent. The new ceiling of allowable deductible expenses on rental income has been revised to 50 per cent, up from 20 per cent contained in the current law.
Clause 3 of the Bill reads: “A person who earns rental income from more than one building shall account for the income and expenses of the buildings and shall pay tax for each of the buildings separately.”
Government also seeks to revise the tax rate applicable to individuals and companies for purposes of rental income from 20 per cent to 30 per cent. The new ceiling of allowable deductible expenses on rental income has been revised to 50 per cent, up from 20 per cent contained in the current law.
Clause 3 of the Bill reads: “A person who earns rental income from more than one building shall account for the income and expenses of the buildings and shall pay tax for each of the buildings separately.”
Landlords
shall, however, be allowed to deduct “50 per cent of the rental income
as expenditures and losses incurred by a person in the production of
such income.”
However, industry players in the real estates sector, economists and other groups say the proposed Bill will further add strain on to the existing burden and will affect not only the landlords, but also the tenants. They ask government to be sensitive.
Ms Shirley Kongai, the president of Association of Real Estates Agents says already landlords are struggling to collect rent from the tenants.
However, industry players in the real estates sector, economists and other groups say the proposed Bill will further add strain on to the existing burden and will affect not only the landlords, but also the tenants. They ask government to be sensitive.
Ms Shirley Kongai, the president of Association of Real Estates Agents says already landlords are struggling to collect rent from the tenants.
She
said they have been engaging in discussions on whether to collect rent
from those that have closed business or wait until the situation
stabilises.
Ms Kongai said while residential buildings are still being occupied, commercial structures are limping because businesses have closed.
She also said already a number of real estate owners are struggling with loan repayments because they are not collecting rent to repay the loans.
According to Ms Kongai, the current discussion should be if the rental rates are coming down, will the banks also lower the interest rates and whether government will lower taxes.
Ms Kongai said while residential buildings are still being occupied, commercial structures are limping because businesses have closed.
She also said already a number of real estate owners are struggling with loan repayments because they are not collecting rent to repay the loans.
According to Ms Kongai, the current discussion should be if the rental rates are coming down, will the banks also lower the interest rates and whether government will lower taxes.
Meera
Investment limited, a real estates company, has also written to Mr
Matia Kasaija, the Finance minister, about the proposed taxes, saying
they are unfair and unrealistic to the sector.
In an April 2 letter, the company says in a situation where a company has many buildings, it will be difficult to account for the buildings and prepare documents.
“With the current global situation regarding coronavirus, we do believe that this is not the right time to introduce the proposed amendments. Together with our lawyers, we propose some tax incentives we believe shall boost the reckoning and heal businesses and the local people from the devastating effects of the virus,” the letter reads in part.
In an April 2 letter, the company says in a situation where a company has many buildings, it will be difficult to account for the buildings and prepare documents.
“With the current global situation regarding coronavirus, we do believe that this is not the right time to introduce the proposed amendments. Together with our lawyers, we propose some tax incentives we believe shall boost the reckoning and heal businesses and the local people from the devastating effects of the virus,” the letter reads in part.
“During
the current lockdown, we were made aware of the tabling of the 2020 Tax
Amendment Bills. We have had consultations with our tax lawyers,
Kampala Associated Advocates, and we write to inform you that some of
the Bills will have an adverse effect on many of our businesses and we
seek your indulgence to prevent an adversity,” it adds.
Uganda Manufactures Association (UMA) has also poured cold water on the proposed amendments, saying it will negatively affect them.
Uganda Manufactures Association (UMA) has also poured cold water on the proposed amendments, saying it will negatively affect them.
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