Income Tax Act

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Jurisdiction: Uganda
Citation: Chapter 340
Date: 31 December 2000
Language: English
Type: Legislation
Download: Download PDF (849.2 KB)

Income Tax Act

Chapter 340

Commenced on 1 July 1997
[This is the version of this document as it was at 31 December 2000 to 30 June 2001.]
[Note: The version of the Act as at 31 December 2000 was revised and consolidated by the Law Reform Commission of Uganda. All subsequent amendments have been researched and applied by Laws.Africa for ULII.]

[Amended by Income Tax (Amendment) Act, 2010 (Act 24 of 2010) on 1 July 1997]
[Amended by Income Tax (Amendment) Act, 2003 (Act 3 of 2003) on 1 July 1997]

An Act to consolidate and amend the law relating to income tax and for other connected purposes.

Part I – Preliminary

1. Application of the Act

This Act applies to years of income commencing on or after 1st July, 1997.

2. Interpretation

In this Act, unless the context otherwise requires—

(a)“amateur sporting association” means an association whose sole or main object is to foster or control any athletic sport or game and whose members consist only of amateur sports persons or affiliated associations, the members of which consist only of amateur sports persons;

(b)“approved” means approved by the Minister under regulations made under section 164;

(c)“assessed loss” has the meaning in section 38;

(d)“assessment” means—(i)the ascertainment of the chargeable income of, and the amount of tax payable on it by, a taxpayer for a year of income under this Act, including a deemed assessment under section 96;(ii)the ascertainment of the rental income of, and the amount of tax payable on it by, an individual for a year of income under this Act;(iii)the ascertainment of the amount of penal tax payable by a person under this Act; or(iv)any decision of the commissioner which, under this Act, is subject to objection and appeal;

(e)“associate” has the meaning in section 3;

(f)“building society” means a building society registered under the Building Societies Act;

(g)“business” includes any trade, profession, vocation or adventure in the nature of trade, but does not include employment;

(h)“business asset” means an asset which is used or held ready for use in a business, and includes any asset held for sale in a business and any asset of a partnership or company;

(i)“business debt” means—(i)in the case of a debtor—(A)a debt obligation, the proceeds of which are used to acquire a business asset or to incur an expense of a business;(B)a debt obligation arising, as a result of being given time to pay, on the acquisition of a business asset or the incurring of an expense of a business; or(C)any debt obligation of a partnership or company; or(ii)in the case of a creditor, any debt obligation owed to the creditor that was entered into or arose in the course of the creditor’s business;

(j)“business income” has the meaning in section 18;

(k)“chargeable income” has the meaning in section 15;

(l)“chargeable trust income” has the meaning in section 70;

(m)“commissioner” means the Commissioner General appointed under the Uganda Revenue Authority Act;

(n)“company” means a body of persons corporate or unincorporate, whether created or recognised under the law in force in Uganda or elsewhere, and a unit trust, but does not include any other trust or a partnership;

(o)“cost base”, in relation to an asset, has the meaning in section 52;

(p)“court” means a court of competent jurisdiction;

(q)“currency point” represents the amount in Uganda shillings prescribed in the Seventh Schedule;

(r)“debenture” includes any debenture stock, mortgage, mortgage stock, loan, loan stock or any similar instrument acknowledging indebtedness, whether secured or unsecured;

(s)“debt obligation” means an obligation to make a repayment of money to another person, including accounts payable and the obligations arising under promissory notes, bills of exchange and bonds;

(t)“dependent”, in relation to a member of a retirement fund, means a spouse of the member, any child, including an adopted child, of the member who is under the age of eighteen years or any other relative of the member who the commissioner is satisfied relies on the member for support;

(u)“depreciable asset” means any plant or machinery, or any implement, utensil or similar article, which is wholly or partly used, or held ready for use, by a person in the production of income included in gross income and which is likely to lose value because of wear and tear, or obsolescence;

(v)“disposal” has the meaning in section 51;

(w)“dividend” includes—(i)where a company issues debentures or redeemable preference shares to a shareholder—(A)in respect of which the shareholder gave no consideration, an amount equal to the greater of the nominal or redeemable value of the debentures or shares; or(B)in respect of which the shareholder gave consideration which is less than the greater of the nominal or redeemable value, an amount equal to the excess;(ii)any distribution upon redemption or cancellation of a share, or made in the course of liquidation, in excess of the nominal value of the share redeemed, cancelled or subject to liquidation;(iii)in the case of a partial return of capital, any payment made in excess of the amount by which the nominal value of the shares was reduced;(iv)in the case of a reconstruction of a company, any payment made in respect of the shares in the company in excess of the nominal value of the shares before the reconstruction; or(v)the amount of any loan, the amount of any payment for an asset or services, the value of any asset or services provided, or the amount of any debt obligation released, by a company to, or in favour of, a shareholder of the company or an associate of a shareholder to the extent to which the transaction is, in substance, a distribution of profits, but does not include a distribution made by a building society;

(x)“employee” means an individual engaged in employment;

(y)“employer” means a person who employs or remunerates an employee;

(z)“employment” means—(i)the position of an individual in the employment of another person;(ii)a directorship of a company;(iii)a position entitling the holder to a fixed or ascertainable remuneration; or(iv)the holding or acting in any public office;

(aa)“employment income” has the meaning in section 19;

(bb)“exempt organisation” means any company, institution or irrevocable trust—(i)which is—(A)an amateur sporting association;(B)a religious, charitable or educational institution of a public character; or(C)a trade union, an employees association, an association of employers registered under any law of Uganda or an association established for the purpose of promoting farming, mining, tourism, manufacturing or commerce and industry in Uganda; and(ii)which has been issued with a written ruling by the commissioner currently in force stating that it is an exempt organisation; and(iii)none of the income or assets of which confers, or may confer, a private benefit on any person;

(cc)“farming” means pastoral, agricultural, plantation, horticultural or other similar operations;

(dd)“financial institution” means any person carrying on the business of receiving funds from the public or from members through the acceptance of money deposits repayable upon demand, after a fixed period, or after notice, or any similar operation through the sale or placement of bonds, certificates, notes or other securities, and the use of such funds either in whole or part for loans, investments or any other operation authorised either by law or by customary banking practices, for the account and at the risk of the person doing such business;

(ee)“foreign-source income” means any income which is not derived from sources in Uganda;

(ff)“gross income” has the meaning in section 17;

(gg)“gross turnover”, in relation to a resident taxpayer, for a year of income, means—(i)the amount shown in the recognised accounts of the taxpayer as the gross proceeds derived in carrying on a business or businesses during the year of income, including the gross proceeds arising from the disposal of trading stock, without deduction for expenditures or losses incurred in deriving that amount; and(ii)the amount, if any, shown in the recognised accounts of the taxpayer as the amount by which the sum of the gains derived by the taxpayer during the year of income from the disposal of business assets, other than trading stock, exceeds the losses incurred by the taxpayer during the year in respect of the disposal of such assets;

(hh)“incapacitated person” means a resident individual adjudged under a law in Uganda to be in a state of unsoundness of mind;

(ii)“incapacitated person’s trust” means a trust established for the benefit of an incapacitated person;

(jj)“industrial building” means any building which is wholly or partly used, or held ready for use, by a person in—(i)manufacturing operations;(ii)research and development into improved or new methods of manufacture;(iii)mining operations;(iv)an approved hotel business; or(v)an approved hospital;

(kk)“interest” includes—(i)any payment, including a discount or premium, made under a debt obligation which is not a return of capital;(ii)any swap or other payments functionally equivalent to interest;(iii)any commitment, guarantee, or service fee paid in respect of a debt obligation or swap agreement; or(iv)a distribution by a building society;

(ll)“life insurance business” has the meaning in section 16(3);

(mm)“listed institution” means an institution listed in the First Schedule to this Act;

(nn)“local authority” means any public body established under a law of Uganda and having control over the expenditure of revenue derived from rates or taxes imposed by law upon the residents of the areas for which that body is established;

(oo)“local council” has the same meaning as in the Local Governments Act;

(pp)“manufacturing” means the substantial transformation of tangible movable property, including power generation and water supply;

(qq)“mineral” has the same meaning as in the Mining Act;

(rr)“mining operations” includes every method or process by which any mineral is won from the soil or from any substance or constituent of the soil;

(ss)“Minister” means the Minister responsible for finance;

(tt)“natural resource payment” means—(i)a payment, including a premium or like payment, made as consideration for the right to take minerals or a living or nonliving resource from the land; or(ii)a payment calculated in whole or in part by reference to the quantity or value of minerals or a living or nonliving resource taken from the land;

(uu)“nominal value”, in relation to a share or debenture, means the paid-up amount of the share or face value of the debenture, including any premium paid in respect of the share or debenture;

(vv)“nonresident person” has the meaning in section 14;

(ww)“partnership” means an association of persons carrying on business for joint profit;

(xx)“payment” includes any amount paid or payable in cash or kind, and any other means of conferring value or benefit on a person;

(yy)“person” includes an individual, a partnership, a trust, a company, a retirement fund, a government, a political subdivision of a government and a listed institution;

(zz)“property income” has the meaning in section 20;

(aaa)“provisional taxpayer” means a person liable for provisional tax under section 111;

(bbb)“relative”, in relation to an individual, means—(i)an ancestor, a descendant of any of the grandparents, or an adopted child, of the individual, or of a spouse of the individual; or(ii)a spouse of the individual or of any person specified in subparagraph (i) of this paragraph;

(ccc)“rent” means any payment, including a premium or like amount, made as consideration for the use or occupation of, or the right to use or occupy, land or buildings;

(ddd)“rental income”, in relation to an individual for a year of income, means the total amount of rent derived by the individual for the year of income from the lease of immovable property in Uganda by the individual with the deduction of any expenditures and losses incurred by the individual in respect of the property;

(eee)“resident company” has the meaning in section 10;

(fff)“resident individual” has the meaning in section 9;

(ggg)“resident partnership” has the meaning in section 12;

(hhh)“resident person” means a resident individual, resident company, resident partnership, resident trust, resident retirement fund, the Government of Uganda or a political subdivision of the Government of Uganda;

(iii)“resident retirement fund” has the meaning in section 13;

(jjj)“resident taxpayer” means a taxpayer who is a resident person;

(kkk)“resident trust” has the meaning in section 11;

(lll)“retirement fund” means a pension or provident fund established as a permanent fund maintained solely for either or both of the following purposes—(i)the provision of benefits for members of the fund in the event of retirement; or(ii)the provision of benefits for dependents of members in the event of the death of the member;

(mmm)“royalty” means—(i)any payment, including a premium or like amount, made as consideration for—(A)the use of, or right to use, any patent, design, trademark or copyright, or any model, pattern, plan, formula or process, or any property or right of a similar nature;(B)the use of, or right to use—(I)any motion picture film;(II)any video or audio material, whether stored on film, tape, disk or other medium, for use in connection with television or radio broadcasting; or(III)any sound recording or advertising matter connected with material referred to in subparagraph (i)(B)(I) or (II) of this paragraph;(C)the use of, or the right to use, or the receipt of, or right to receive, any video or audio material transmitted by satellite, cable, optic fibre or similar technology for use in connection with television or radio broadcasting;(D)the imparting of, or undertaking to impart, any scientific, technical, industrial or commercial knowledge or information;(E)the use of, or right to use, any tangible movable property;(F)the rendering of, or the undertaking to render, assistance ancillary to a matter referred to in subparagraph (i)(A) to (E) of this paragraph; or(G)a total or partial forbearance with respect to a matter referred to in subparagraphs (A) to (F); or(ii)any gain on the disposal of any right or property referred to in subparagraph (i) of this paragraph;

(nnn)“substituted year of income” has the meaning in section 39;

(ooo)“swap agreement” means an arrangement between a person who has incurred a debt obligation with a floating interest rate and a person who has incurred a debt obligation with a fixed interest rate under which the persons agree to exchange their interest obligations;

(ppp)“swap payment” means a payment made under a swap agreement;

(qqq)“tax” means any tax imposed under this Act;

(rrr)“tax-exempt employer” means an employer whose income is exempt from tax;

(sss)“taxpayer” means any person who derives an amount subject to tax under this Act and includes—(i)any person who incurs an assessed loss for a year of income; or(ii)for the purposes of any provision relating to a return, any person required by this Act to furnish such a return;

(ttt)“trading stock” includes anything produced, manufactured, purchased or otherwise acquired for manufacture, sale or exchange, as well as consumable stores;

(uuu)“transitional year of income” has the meaning in section 39;

(vvv)“trust” means any arrangement affecting property in relation to which there is a trustee;

(www)“trustee” includes—(i)any person appointed or constituted as such by act of the parties, by will, by order or declaration of any court or by operation of the law;(ii)an executor, administrator, tutor or curator;(iii)a liquidator or judicial manager;(iv)any person having the administration or control of property subject to a trust;(v)any person acting in a fiduciary capacity;(vi)any person having, either in a private or official capacity, the possession, direction, control or management of any property of a person under a legal disability;(vii)any person who manages assets under a private foundation or other similar arrangement;

(xxx)“underlying ownership”, in relation to a person other than an individual, means an interest held in, or over, the person directly or indirectly through interposed companies, partnerships or trusts by an individual or by a person not ultimately owned by individuals;

(yyy)“unit trust” means a unit trust registered or required to be registered as Parliament may by law prescribe; and

(zzz)“year of income” means the period of twelve months ending on the 30th June, and includes a substituted year of income and a transitional year of income.

3. Associate

(1)For the purposes of this Act, where any person, not being an employee, acts in accordance with the directions, requests, suggestions or wishes of another person whether or not they are in a business relationship and whether those directions, requests, suggestions or wishes are communicated to the first-mentioned person, both persons are treated as associates of each other.

(2)Without limiting the generality of subsection (1), the following are treated as an associate of a person—

(a)a relative of the person, unless the commissioner is satisfied that neither person acts in accordance with the directions, requests, suggestions or wishes of the other person;

(b)a partner of the person, unless the commissioner is satisfied that neither person acts in accordance with the directions, requests, suggestions or wishes of the other person;

(c)a partnership in which the person is a partner where the person, either alone or together with an associate or associates under another application of this section, controls 50 percent or more of the rights to income or capital of the partnership;

(d)the trustee of a trust under which the person, or an associate under another application of this section, benefits or may benefit;

(e)a company in which the person, either alone or together with an associate or associates under another application of this section, controls 50 percent or more of the voting power in the company either directly or through one or more interposed companies, partnerships or trusts;

(f)where the person is a partnership, a partner in the partnership who, either alone or together with an associate or associates under another application of this section, controls 50 percent or more of the rights to income or capital of the partnership;

(g)where the person is the trustee of a trust, any other person who benefits or may benefit under the trust; or

(h)where the person is a company—

(i)a person who, either alone or together with an associate or associates under another application of this section, controls 50 percent or more of the voting power in the company, either directly or through one or more interposed companies, partnerships or trusts; or

(ii)another company in which the person referred to in subparagraph (i) of this paragraph, either alone or together with an associate or associates under another application of this section, controls 50 percent or more of the voting power in that other company, either directly or through one or more interposed companies, partnerships or trusts.

Part II – Imposition of tax

4. Income tax imposed

(1)Subject to and in accordance with this Act, a tax to be known as income tax shall be charged for each year of income and is imposed on every person who has chargeable income for the year of income.

(2)Subject to subsections (4) and (5), the income tax payable by a taxpayer for a year of income is calculated by applying the relevant rates of tax determined under this Act to the chargeable income of the taxpayer for the year of income and from the resulting amount are subtracted any tax credits allowed to the taxpayer for the year of income.

(3)Where a taxpayer is allowed more than one tax credit for a year of income, the credits shall be applied in the following order—

(a)the foreign tax credit allowed under section 81; then

(b)the tax credit allowed under section 128; then

(c)the tax credit allowed under section 111(8).

(4)Where the gross income of a taxpayer for a year of income consists exclusively of employment income derived from a single employer from which tax has been withheld as required under section 116, the income tax payable by the taxpayer for the year of income is the amount equal to the sum of the amounts required to be withheld from such income under section 116.

(5)Subject to subsection (7), where the gross turnover of a resident taxpayer for a year of income derived from carrying on a business or businesses is less than fifty million shillings, the income tax payable by the taxpayer for the year of income shall be determined in accordance with the Second Schedule to this Act, unless the taxpayer elects by notice in writing to the commissioner for subsection (2) to apply; and—

(a)the tax shall be a final tax on the business income of the taxpayer;

(b)no deductions shall be allowed under this Act for expenditures or losses incurred in the production of the business income; and

(c)no tax credits allowed under this Act shall be used to reduce the tax payable on the business income of the taxpayer, except as provided in the Second Schedule to this Act.

(6)An election under subsection (5) must be lodged with the commissioner by the due date for the taxpayer’s return for the year of income to which it relates.

(7)Subsection (5) does not apply to a resident taxpayer who is in the business of providing medical, dental, architectural, engineering, accounting, legal or other professional services, public entertainment services, public utility services or construction services.

5. Rental tax imposed

(1)Subject to and in accordance with this Act, a tax shall be charged for each year of income and is imposed on every individual who has rental income for the year of income.

(2)The tax payable by an individual under this section for a year of income is calculated by applying the relevant rates of tax determined under section 6(2) to the rental income derived by the individual for the year.

(3)The tax imposed under this section on an individual is separate from the tax imposed under section 4 and—

(a)the rental income of the individual shall not be included in the gross income of the individual for any year of income;

(b)expenditures and losses incurred by the individual in the production of the rental income shall be allowed as a deduction under this Act for any year of income; and

(c)the tax payable by a resident individual under this section shall not be reduced by any tax credits allowed to the individual under this Act.

(4)In this section, “year of income” means the period of twelve months ending on 30th June.

Rates of tax

6. Rates of tax for individuals

(1)The chargeable income of an individual for a year of income is charged to income tax at the rates prescribed in Part I of the Third Schedule to this Act.

(2)The rental income of a resident individual for a year of income is charged to rental tax at the rate prescribed in Part VI of the Third Schedule.

7. Rate of income tax for companies

The chargeable income of a company for a year of income is charged to income tax at the rate prescribed in Part II of the Third Schedule to this Act.

8. Rate of income tax for trustees and retirement funds

(1)Subject to subsections (2) and (3), a trustee of a trust is charged to tax at the rate prescribed in Part III of the Third Schedule to this Act on the chargeable trust income of the trust for a year of income.

(2)A trustee of a trust being the estate of a deceased taxpayer who, at the date of death, was a resident individual is charged to tax on the chargeable trust income of the trust at the rates prescribed in Part I of the Third Schedule to this Act for—

(a)the year of income in which death occurred; and

(b)the following year of income.

(3)A trustee of an incapacitated person’s trust is charged to tax at the rates prescribed in Part I of the Third Schedule to this Act on the chargeable trust income of the trust for a year of income.

(4)The chargeable income of a retirement fund for a year of income is charged to tax at the rate prescribed in Part III of the Third Schedule to this Act.

Part III – Residents and nonresidents

9. Resident individual

(1)Subject to subsections (2) and (3), an individual is a resident individual for a year of income if that individual—

(a)has a permanent home in Uganda;

(b)is present in Uganda—

(i)for a period of, or periods amounting in aggregate to, 183 days or more in any twelve-month period that commences or ends during the year of income; or

(ii)during the year of income and in each of the two preceding years of income for periods averaging more than 122 days in each such year of income; or

(c)is an employee or official of the Government of Uganda posted abroad during the year of income.

(2)An individual who is a resident individual under subsection (1) for a year of income, in this section referred to as the “current year of income”, but who was not a resident individual for the preceding year of income is treated as a resident individual in the current year of income only for the period commencing on the day on which the individual was first present in Uganda.

(3)An individual who is a resident individual for the current year of income but who is not a resident individual for the following year of income is treated as a resident individual in the current year of income only for the period ending on the last day on which the individual was present in Uganda.

10. Resident company

A company is a resident company for a year of income if it—

(a)is incorporated or formed under the laws of Uganda;

(b)has its management and control exercised in Uganda at any time during the year of income; or

(c)undertakes the majority of its operations in Uganda during the year of income.

11. Resident trust

A trust is a resident trust for a year of income if—

(a)the trust was established in Uganda;

(b)at any time during the year of income, a trustee of the trust was a resident person; or

(c)the trust has its management and control exercised in Uganda at any time during the year of income.

12. Resident partnership

A partnership is a resident partnership for a year of income if, at any time during that year, a partner in the partnership was a resident person.

13. Resident retirement fund

A retirement fund is a resident retirement fund for a year of income if it—

(a)is organised under the laws of Uganda;

(b)is operated for the principal purpose of providing retirement benefits to resident individuals; or

(c)has its management and control exercised in Uganda at any time during the year of income.

14. Nonresident person

(1)Subject to subsection (2), a person is a nonresident person for a year of income if the person is not a resident person for that year.

(2)Where section 9(2) or (3) applies, an individual is a nonresident person for that part of the year of income in which the individual is not a resident individual.

Part IV – Chargeable income

15. Chargeable income

Subject to section 16, the chargeable income of a person for a year of income is the gross income of the person for the year less total deductions allowed under this Act for the year.

16. Chargeable income arising from insurance business

(1)The chargeable income of a person for a year of income arising from the carrying on of a short-term insurance business is determined in accordance with the Fourth Schedule to this Act.

(2)Where a person to whom subsection (1) applies derives income charged to tax other than income arising from the carrying on of a short-term insurance business for a year of income, the chargeable income determined under subsection (1) is added to that other income for the purposes of determining the person’s total chargeable income for the year of income.

(3)In this section—

(a)“insurance business” means the business of, or in relation to the issue of, or the undertaking of liability under, life policies, or to make good or indemnify the insured against any loss or damage, including liability to pay damages or compensation contingent upon the happening of a specified event;

(b)“life insurance business” means business of any of the following classes—

(i)effecting, carrying out and issuing policies on human life or contracts to pay annuities on human life;

(ii)effecting, carrying out and issuing contracts of insurance against the risk of the person insured sustaining injury or dying as the result of an accident or of an accident of a specific class, or becoming incapacitated in consequence of disease or of diseases of specified classes, being contracts that are expressed to be in effect for a period of not less than five years or without limit of time and either are not expressed to be terminable by the insurer before the expiry of five years from taking effect or are expressed to be so terminable before the expiry of such period only in special circumstances specified in the contract; or

(iii)effecting, carrying out and issuing of insurance whether effected by the issue of policies, bonds, endowment certificates or otherwise, whereby, in return for one or more premiums paid to the insurer, an amount or series of amounts is to become payable to the insurer in the future, not being such contracts as fall within subparagraph (i) or (ii) of this paragraph; and

(c)“short-term insurance business” means any insurance business which is not a life insurance business.

Gross income

17. Gross income

(1)Subject to this Act, the gross income of a person for a year of income is the total amount of—

(a)business income;

(b)employment income; and

(c)property income, derived during the year by the person, other than income exempt from tax.

(2)For the purposes of subsection (1)—

(a)the gross income of a resident person includes income derived from all geographical sources; and

(b)the gross income of a nonresident person includes only income derived from sources in Uganda.

(3)Unless this Act provides otherwise, Part V, which deals with tax accounting principles, applies in determining when an amount is derived for the purposes of this Act.

18. Business income

(1)Business income means any income derived by a person in carrying on a business and includes the following amounts, whether of a revenue or capital nature—

(a)the amount of any gain, as determined under Part VI which deals with gains and losses on disposal of assets, derived by a person on the disposal of a business asset, or on the satisfaction or cancellation of a business debt, whether or not the asset or debt was on revenue or capital account;

(b)any amount derived by a person as consideration for accepting a restriction on the person’s capacity to carry on business;

(c)the gross proceeds derived by a person from the disposal of trading stock;

(d)any amount included in the business income of the person under any other section of this Act;

(e)the value of any gifts derived by a person in the course of, or by virtue of, a past, present or prospective business relationship;

(f)the interest derived by a person in respect of trade receivables or by a person engaged in the business of banking or money lending; and

(g)rent derived by a person whose business is wholly or mainly the holding or letting of property.

(2)An amount included in business income under subsection (1)(f) or (g) retains its character as interest or rent for the purposes of any section of this Act referring to such income.

(3)Where, as a result of any concession granted by, or a compromise made with, a taxpayer’s creditors in the course of an insolvency, the taxpayer derives a gain on the cancellation of a business debt, section 38(3) applies in lieu of including the gain in the business income of the taxpayer under subsection (1).

(4)In this section, “business asset” does not include trading stock or a depreciable asset.

19. Employment income

(1)Subject to this section, employment income means any income derived by an employee from any employment and includes the following amounts, whether of a revenue or capital nature—

(a)any wages, salary, leave pay, payment in lieu of leave, overtime pay, fees, commission, gratuity, bonus or the amount of any travelling, entertainment, utilities, cost of living, housing, medical or other allowance;

(b)the value of any benefit granted;

(c)the amount of any discharge or reimbursement by an employer of expenditure incurred by an employee, other than expenditure incurred by an employee on behalf of the employer which serves the proper business purposes of the employer;

(d)any amount derived as compensation for the termination of any contract of employment, whether or not provision is made in the contract for the payment of such compensation, or any amount derived which is in commutation of amounts due under any contract of employment;

(e)any amount paid by a tax-exempt employer as a premium for insurance on the life of the employee and which insurance is for the benefit of the employee or any of his or her dependents;

(f)any amount derived as consideration for the employee’s agreement to any conditions of employment or to any changes in his or her conditions of employment;

(g)the amount by which the value of shares issued to an employee under an employee share acquisition scheme at the date of issue exceeds the consideration, if any, given by the employee for the shares, including any amount given as consideration for the grant of a right or option to acquire the shares;

(h)the amount of any gain derived by an employee on disposal of a right or option to acquire shares under an employee share acquisition scheme.

(2)Notwithstanding subsection (1), the employment income of an employee does not include—

(a)the cost incurred by the employer of any passage to or from Uganda in respect of the employee’s appointment or termination of employment where the employee—

(i)was recruited or engaged outside Uganda;

(ii)is in Uganda solely for the purpose of serving the employer; and

(iii)is not a citizen of Uganda; or

(b)any reimbursement or discharge of the employee’s medical expenses;

(c)except where subsection (1)(e) applies, any amount paid as a premium for insurance on the life of the employee and which insurance is for the benefit of the employee or any of his or her dependents;

(d)any allowance given for, and which does not exceed the cost actually or likely to be incurred, or a reimbursement or discharge of expenditure incurred by the employee on—

(i)accommodation and travel expenses; or

(ii)meals and refreshment while undertaking travel, in the course of performing duties of employment;

(e)the value of any meal or refreshment provided by the employer to the employee in premises operated by or on behalf of the employer solely for the benefit of employees and which is available to all full-time employees on equal terms;

(f)any benefit granted by the employer to the employee during a month, where the total value of the benefits provided by the employer to the employee for the month is less than ten thousand shillings; or

(g)any contribution or similar payment made to a retirement fund for the benefit of the employee or any of his or her dependents.

(3)For the purposes of this section, the value of any benefit is determined in accordance with the Fifth Schedule to this Act.

(4)Where the amount to which subsection (1)(d) applies is paid by an employer to an employee who has been in the employment of the employer for ten years or more, the amount included in employment income is calculated according to the following formula—A x 75%where A is the total amount derived by the employee to which subsection (1)(d) applies.

(5)For the purposes of subsection (2), a director of a company is only a full-time employee of the company if the director—

(a)is required to devote substantially the whole of his or her time to the service of the company in a managerial or technical capacity; and

(b)does not have an interest of more than 5 percent in the underlying ownership of the company.

(6)For the purposes of this section, an amount or benefit is derived in respect of employment if it—

(a)is provided by an employer or by a third party under an arrangement with the employer or an associate of the employer;

(b)is provided to an employee or to an associate of an employee; and

(c)is provided in respect of past, present or prospective employment.

(7)An amount excluded from the employment income of an employee under subsection (2) or (4) is exempt income of the employee.

(8)In this section—

(a)“employee share acquisition scheme” means an agreement or arrangement under which—

(i)a company is required to issue shares in the company to employees of the company or of an associated company; or

(ii)a company is required to issue shares to a trustee of a trust and under the trust deed the trustee is required to transfer the shares to employees of the company or of an associated company; and

(b)“medical expenses” includes a premium or other amount paid for medical insurance.

20. Property income

(1)Property income means—

(a)any dividends, interest, annuity, natural resource payments, rents, royalties and any other payment derived by a person from the provision, use or exploitation of property;

(b)the value of any gifts derived by a person in connection with the provision, use or exploitation of property;

(c)the total amount of any contributions made to a retirement fund during a year of income by a tax-exempt employer; and

(d)any other income derived by a person,

but does not include any amount which is business, employment or exempt income.

(2)An amount included in property income under subsection (1)(a) retains its character as dividends, interest, annuity, natural resource payment, rent or royalties for the purposes of any section of the Act referring to such income.

Exempt income

21. Exempt income

(1)The following amounts are exempt from tax—

(a)the income of a listed institution;

(b)the income of any organisation or person entitled to privileges under the Diplomatic Privileges Act to the extent provided in the regulations and orders made under that Act;

(c)the official employment income derived by a person in the public service of the government of a foreign country if—

(i)the person is either a nonresident person or is a resident individual solely by reason of performing such service;

(ii)the income is payable from the public funds of that country; and

(iii)the income is subject to tax in that country;

(d)any allowance payable outside Uganda to a person working in a Ugandan foreign mission;

(e)the income of any local authority;

(f)the income of an exempt organisation, other than—

(i)property income, except rent received by an exempt organisation in respect of immovable property which is used by the lessee exclusively for the activities of the organisation specified in paragraph (bb)(i) of the definition of “exempt organisation” in section 2; or

(ii)business income that is not related to the function constituting the basis for the organisation’s existence;

(g)any education grant which the commissioner is satisfied has been made bona fide to enable or assist the recipient to study at a recognised educational or research institution;

(h)any amount derived by way of alimony or allowance under any judicial order or written agreement of separation;

(i)interest payable on treasury bills or Bank of Uganda bills;

(j)the value of any property acquired by gift, bequest, devise or inheritance that is not included in business, employment or property income;

(k)any capital gain that is not included in business income;

(l)employment income derived by an individual to the extent provided for in a technical assistance agreement where—

(i)the individual is a nonresident or a resident solely for the purpose of performing duties under the agreement; and

(ii)the Minister has concurred in writing with the tax provisions in the agreement;

(m)foreign-source income derived by—

(i)a short-term resident of Uganda;

(ii)a person to whom paragraph (c) or (l) of this subsection applies; or

(iii)a member of the immediate family of a person referred to in subparagraph (i) or (ii) of this paragraph;

(n)a pension;

(o)a lump sum payment made by a resident retirement fund to a member of the fund or a dependent of a member of the fund;

(p)the proceeds of a life insurance policy paid by a person carrying on a life insurance business; or

(q)the official employment income of a person employed in the Uganda Peoples’ Defence Forces, the Uganda Police Force, or the Uganda Prisons Service, other than a person employed in a civil capacity.

(2)In this section—

(a)“short-term resident” means a resident individual, other than a citizen of Uganda, present in Uganda for a period or periods not exceeding two years; and

(b)“technical assistance agreement” means a grant agreement between the Government of Uganda and a foreign government or a listed institution for the provision of technical assistance to Uganda.

Deductions

22. Expenses of deriving income

(1)Subject to this Act, for the purposes of ascertaining the chargeable income of a person for a year of income, there shall be allowed as a deduction—

(a)all expenditures and losses incurred by the person during the year of income to the extent to which the expenditures or losses were incurred in the production of income included in gross income;

(b)the amount of any loss as determined under Part VI, which deals with gains and losses on the disposal of assets, incurred by the person on the disposal of a business asset during the year of income, whether or not the asset was on revenue or capital account; and

(c)in the case of rental income, 20 percent of the rental income as expenditures and losses incurred by the individual in the production of such income.

(2)Except as otherwise provided in this Act, no deduction is allowed for—

(a)any expenditure or loss incurred by a person to the extent to which it is of a domestic or private nature;

(b)subject to subsection (1), any expenditure or loss of a capital nature, or any amount included in the cost base of an asset;

(c)any expenditure or loss which is recoverable under any insurance, contract or indemnity;

(d)income tax payable in Uganda or a foreign country;

(e)any income carried to a reserve fund or capitalised in any way;

(f)the cost of a gift made directly or indirectly to an individual where the gift is not included in the individual’s gross income;

(g)any allowance given to, or a reimbursement or discharge of expenditure incurred by, an employee, in respect of the employee’s housing, and any expenditures incurred in respect of housing provided to an employee;

(h)any fine or similar penalty paid to any government or a political subdivision of a government for breach of any law or subsidiary legislation;

(i)a contribution or similar payment made to a retirement fund either for the benefit of the person making the payment or for the benefit of any other person;

(j)a premium or similar payment made to a person carrying on a life insurance business on the life of the person making the premium or on the life of some other person;

(k)the amount of a pension paid to any person; or

(l)any alimony or allowance paid under any judicial order or written agreement of seperation.

(3)In this section, expenditure of a domestic or private nature incurred by a person includes—

(a)the cost incurred in the maintenance of the person and the person’s family or residence;

(b)the cost of commuting between the person’s residence and work;

(c)the cost of clothing worn to work, except clothing which is not suitable for wearing outside of work; and

(d)the cost of education of the person not directly relevant to the person’s employment or business, and the cost of education leading to a degree, whether or not it is directly relevant to the person’s employment or business.

(4)Unless this Act provides otherwise, Part V, which deals with tax accounting principles, applies for the purposes of determining when an expenditure or loss is incurred for the purposes of this Act.

(5)In this section, “business asset” does not include trading stock or a depreciable asset.

23. Meal, refreshment and entertainment expenditure

A deduction is allowed for expenditure incurred by a person in providing meals, refreshment or entertainment in the production of income included in gross income, but only where—

(a)the value of the meals, refreshment or entertainment is included in the employment income of an employee under section 19(1)(b) or is excluded from employment income by section 19(2)(d) or (e); or

(b)the person’s business includes the provision of meals, refreshment or entertainment and the persons to whom the meals, refreshment or entertainment have been provided have paid an arm’s-length consideration for them.

24. Bad debts

(1)Subject to subsection (2), a person is allowed a deduction for the amount of a bad debt written off in the person’s accounts during the year of income.

(2)A deduction for a bad debt is only allowed—

(a)if the amount of the debt claim was included in the person’s income in any year of income; or

(b)if the amount of the debt claim was in respect of money lent in the ordinary course of a business carried on by a financial institution in the production of income included in gross income.

(3)In this section—

(a)“bad debt” means—

(i)a debt claim in respect of which the person has taken all reasonable steps to pursue payment and which the person reasonably believes will not be satisfied; and

(ii)in relation to a financial institution, a debt in respect of which a loss reserve held against presently identified losses or potential losses, and which is therefore not available to meet losses which subsequently materialise, has been made; and

(b)“debt claim” means a right to receive a repayment of money from another person, including deposits with financial institutions, accounts receivable, promissory notes, bills of exchange and bonds.

25. Interest

(1)Subject to this Act, a person is allowed a deduction for interest incurred during the year of income in respect of a debt obligation to the extent that the debt obligation has been incurred by the person in the production of income included in gross income.

(2)In this section, “debt obligation” includes an obligation to make a swap payment arising under a swap agreement and shares in a building society.

26. Repairs and minor capital equipment

(1)A person is allowed a deduction for expenditure incurred during the year of income for the repair of property occupied or used by the person in the production of income included in gross income.

(2)A person is allowed a deduction for expenditure incurred during the year of income in acquiring a depreciable asset with a cost base of less than five currency points.

(3)Subsection (2) only applies to a depreciable asset if the asset normally functions in its own right and is not an individual item which forms part of a set.

27. Depreciable assets

(1)A person is allowed a deduction for the depreciation of the person’s depreciable assets, other than an asset to which section 26(2) applies, during the year of income as calculated in accordance with this section.

(2)Depreciable assets are classified into four classes as set out in Part I of the Sixth Schedule to this Act with depreciation rates applicable for each class as specified in that Part.

(3)A person’s depreciable assets shall be placed into separate pools for each class of asset, and the depreciation deduction for each pool is calculated according to the following formula—A x B where—A is the written-down value of the pool at the end of the year of income; andB is the depreciation rate applicable to the pool.

(4)The written-down value of a pool at the end of a year of income is the total of—

(a)the written-down value of the pool at the end of the preceding year of income after allowing for the deduction under subsection (3) for that year; and

(b)the cost base of assets added to the pool during the year of income, reduced, but not below zero, by the consideration received from the disposal of assets in the pool during the year of income.

(5)Where the amount of consideration received by a person from the disposal during a year of income of any asset or assets in a pool exceeds the written-down value of the pool at the end of the year of income disregarding that amount, the excess is included in the business income of the person for that year.

(6)If the written-down value of a pool at the end of the year of income, after allowing for the deduction under subsection (3), is less than five currency points, a deduction shall be allowed for the amount of that written-down value.

(7)Where all the assets in a pool are disposed of before the end of a year of income, a deduction is allowed for the amount of the written-down value of the pool as at the end of that year.

(8)Where a person has incurred nondeductible expenditures in more than one year of income in respect of a depreciable asset, this section applies as if the expenditures incurred in different years of income were incurred for the acquisition of separate assets of the same class.

(9)The cost base of a depreciable asset is added to a pool in the year of income in which the asset is placed in service.

(10)Where a depreciable asset is only partly used during a year of income in the production of income included in gross income, the depreciation deduction allowed under this section in relation to the asset shall be proportionately reduced.

(11)For the purposes of subsection (4)(b), the cost base of a road vehicle, other than a commercial vehicle, is not to exceed the amount set out in Part II of the Sixth Schedule.

(12)Where the cost base of a road vehicle for the purposes of subsection (4)(b) is limited under subsection (11), the person is treated as having acquired two assets—

(a)a depreciable asset being a road vehicle with a cost base equal to the amount set out in Part II to the Sixth Schedule to this Act; and

(b)a business asset that is not a depreciable asset with a cost base equal to the difference between the cost base of the asset not taking into account subsection (11), in this section referred to as the “actual cost base”, and the amount set out in Part II of the Sixth Schedule.

(13)Where a road vehicle to which subsection (12) applies is disposed of, the person is treated as having disposed of each of the assets specified under that subsection, and the consideration received on disposal is apportioned between the two assets based on the ratio of the cost base of each asset as determined under that subsection to the actual cost base of the asset.

(14)In calculating the amount of any gain or loss arising on disposal of an asset specified in subsection (12)(b), the cost base of the asset as determined under that paragraph is reduced by the depreciation deductions which would have been allowed to the person if the asset—

(a)was a depreciable asset being a road vehicle; and

(b)the asset was the only asset in the pool.

(15)In this section, “commercial vehicle” means—

(a)a road vehicle designed to carry loads of more than half a tonne or more than thirteen passengers; or

(b)a vehicle used in a transportation or vehicle rental business.

28. Initial allowance

(1)A person who places an item of eligible property into service for the first time during the year of income is allowed a deduction for that year of an amount equal to—

(a)where the asset is placed in service outside an area prescribed in Part IV of the Sixth Schedule to this Act, 75 percent of the cost base of the property at the time it is placed in service; or

(b)in any other case, 50 percent of the cost base of the property at the time it is placed in service.

(2)The cost base of an asset to which subsection (1) applies is reduced by the amount of the deduction allowed under that subsection for the purposes of section 27(4)(b).

(3)In this section, “item of eligible property” means plant and machinery wholly used in the production of income included in gross income but does not include—

(a)goods and passenger transport vehicles;

(b)appliances of a kind ordinarily used for household purposes; or

(c)office or household furniture, fixtures and fittings.

29. Industrial buildings

(1)Subject to this section, where a person has incurred capital expenditure in any year of income on the construction of an industrial building and the building is used by the person during the year of income in the production of income included in gross income, the person is allowed a deduction for the depreciation of the building during the year of income as calculated according to the following formula—A x B x C/D where —A is the depreciation rate applicable to the building as determined under Part III of the Sixth Schedule;B is the capital expenditure incurred in the construction of the building;C is the number of days in the year of income during which the asset was used or was available for use in the production of income included in gross income; andD is the number of days in the year of income.

(2)Subject to subsection (3), where an industrial building is only partly used by a person during a year of income for prescribed uses, the amount of the depreciation deduction allowed under subsection (1) shall be proportionately reduced.

(3)Where an industrial building is only partly used by a person during a year of income for prescribed uses and the capital expenditure incurred in the construction of that part of the building used for other uses is not more than 10 percent of the total capital expenditure incurred on the construction of the building, the building is treated as wholly used for prescribed uses.

(4)Where a person has incurred expenditure in making a capital improvement to an industrial building in a year of income, this section applies as if the expenditure was capital expenditure incurred in that year in the construction of a separate industrial building.

(5)Where an industrial building is purchased by a person, the person is deemed to have incurred the capital expenditure incurred by the person who constructed the building.

(6)The amount of the deduction allowed under this section is not to exceed the amount which, apart from making the deduction, would be the residue of expenditure at the end of the year of income.

(7)Where an industrial building has been disposed of by a person during a year of income, the cost base of the building for the purposes of this Act is reduced by any deductions allowed to the person under this section in respect of the building.

(8)Where an industrial building is bought and sold together with land, the value of the land shall be the difference between the total consideration and the value of the industrial building as defined in subsection (7).

(9)Where subsection (4) applies, the consideration received on disposal of an industrial building shall be reasonably apportioned among the separate industrial buildings identified under that subsection.

(10)In this section—

(a)“capital expenditure” does not include—

(i)expenditure incurred in the acquisition of a depreciable asset installed in an industrial building; or

(ii)expenditure incurred in the acquisition of, or of any rights in or over, any land;

(b)“prescribed uses” means the uses specified in the definition of “industrial building” in section 2; and

(c)“residue of expenditure” means the capital expenditure incurred on the construction of an industrial building less any deductions allowed under this section to any person and any amounts which would have been allowed as deductions if the building was solely used for prescribed uses at all times since construction was completed.

30. Start-up costs

A person who has incurred expenditure in starting up a business to produce income included in gross income shall be allowed a deduction of an amount equal to 25 percent of the amount of the expenditure in the year of income in which the expenditure was incurred and in the following three years of income in which the business is carried on by the person.

31. Costs of intangible assets

(1)A person who has incurred expenditure in acquiring an intangible asset having an ascertainable useful life is allowed a deduction in each year of income during the useful life of the asset in which the person wholly uses the asset in the production of income included in gross income of an amount calculated according to the following formula—A/Bwhere—A is the amount of expenditure incurred; andB is the useful life of the asset in whole years.

(2)Where an intangible asset has been disposed of by a person during the year of income, the cost base of the asset is reduced by any deductions allowed under this section to the person in respect of the asset.

32. Scientific research expenditure

(1)A person is allowed a deduction for scientific research expenditure incurred during the year of income in the course of carrying on a business, the income from which is included in gross income.

(2)In this section—

(a)“scientific research” means any activities in the fields of natural or applied science for the development of human knowledge;

(b)“scientific research expenditure”, in relation to a person carrying on business, means the cost of scientific research undertaken for the purposes of developing the person’s business, including any contribution to a scientific research institution which is used by the institution in undertaking research for the purposes of developing the person’s business, but does not include—

(i)expenditure incurred for the acquisition of a depreciable or intangible asset;

(ii)expenditure incurred for the acquisition of land or buildings; or

(iii)expenditure incurred for the purpose of ascertaining the existence, location, extent or quality of a natural deposit; and

(c)“scientific research institution” means an association, institute, college or university which undertakes scientific research.

33. Training expenditure

(1)An employer is allowed a deduction for expenditure incurred during the year of income for the training or tertiary education, not exceeding in the aggregate five years, of a citizen or permanent resident of Uganda, other than an associate of the employer, who is employed by the employer in a business, the income from which is included in gross income.

(2)In this section, “permanent resident” means a resident individual who has been present in Uganda for a period or periods in total of five years or more.

34. Charitable donations

(1)A person is allowed a deduction for a gift made during a year of income to an organisation within section 2(bb)(i)(A) or (B) of the definition of “exempt organisation”.

(2)For the purposes of subsection (1), the value of a gift of property is the lesser of—

(a)the value of the property at the time of the making of the gift; or

(b)the consideration paid by the person for the property.

(3)The amount of a deduction allowed under subsection (1) for a year of income shall not exceed 5 percent of the person’s chargeable income, calculated before taking into account the deduction under this section.

35. Farming

(1)Expenditure incurred by a person in acquiring farm works is included in the person’s pool for class 4 assets under section 27 in the year of income in which the expenditure is incurred and is depreciated accordingly.

(2)Subject to subsection (3), a person carrying on a business of horticulture in Uganda who has incurred expenditure of a capital nature on—

(a)the acquisition or establishment of a horticultural plant; or

(b)the construction of a greenhouse, shall be allowed a deduction of an amount equal to 20 percent of the amount of the expenditure in the year of income in which the expenditure was incurred and in the following four years of income in which the plant or greenhouse is used in the business of horticulture carried on by the person.

(3)Expenditure of a capital nature incurred on the establishment of a horticultural plant shall include expenditure incurred in draining or clearing land.

(4)In this section—

(a)“farm works” means any labour quarters and other immovable buildings necessary for the proper operation of a farm, fences, dips, drains, water and electricity supply works, windbreaks and other works necessary for farming operations, but does not include—

(i)farm houses; or

(ii)depreciable assets; and

(b)“horticulture” includes—

(i)propagation or cultivation of seeds, bulbs, spores or similar things;

(ii)propagation or cultivation of fungi; or

(iii)propagation or cultivation in environments other than soil, whether natural or artificial.

36. Mineral exploration expenditures

A person carrying on mining operations is allowed a deduction for any expenditure of a capital nature incurred in searching for, discovering and testing, or winning access to deposits of minerals in Uganda.

37. Apportionment of deductions

(1)A deduction relating to the production of more than one class of income shall be reasonably apportioned among the classes of income to which it relates.

(2)Where a person derives more than one class of income, the deduction allowed under section 34 shall be allocated rateably to each class of income.

38. Carry forward losses

(1)Subject to this section, where, for any year of income, the total amount of income included in the gross income of a taxpayer is exceeded by the total amount of deductions allowed to the taxpayer, the amount of the excess, in this Act referred to as an “assessed loss”, shall be carried forward and allowed as a deduction in determining the taxpayer’s chargeable income in the following year of income.

(2)Where for any year of income the total farming income derived by a taxpayer who is an individual is exceeded by the total deductions allowed to the taxpayer relating to the production of that income, the amount of the excess, in this Act referred to as an “assessed farming loss”, may not be deducted against any other income of the taxpayer for the year of income, but shall be carried forward and allowed as a deduction in determining the chargeable farming income of the taxpayer in the following year of income.

(3)The amount of an assessed loss carried forward under this section for a taxpayer shall be reduced by the amount or value of any benefit to the taxpayer from a concession granted by, or a compromise made with, the taxpayer’s creditors whereby the taxpayer’s liabilities to those creditors have been extinguished or reduced, provided such liabilities were incurred in the production of income included in gross income.

(4)Where a taxpayer has more than one class of loss, the reduction in subsection (3) shall be applied rateably to each class of loss.

(5)Subsection (1) shall apply separately to income derived from sources in Uganda and to foreign-source income.

(6)In this section—

(a)“chargeable farming income” means the total farming income of a taxpayer for a year of income reduced by any deductions allowed under this Act for that year which relate to the production of such income; and

(b)“farming income” means the business income derived from the carrying on of farming operations.

Part V – Tax accounting principles

39. Substituted year of income

(1)A taxpayer may apply, in writing, to use as the taxpayer’s year of income a substituted year of income being a twelve-month period other than the normal year of income; and the commissioner may, subject to subsection (3), by notice in writing, approve the application.

(2)A taxpayer granted permission under subsection (1) to use a substituted year of income may apply, in writing, to change the taxpayer’s year of income to the normal year of income or to another substituted year of income; and the commissioner, subject to subsection (3), may, by notice in writing, approve the application.

(3)The commissioner may only approve an application under subsection (1) or (2) if the taxpayer has shown a compelling need to use a substituted year of income or to change the taxpayer’s year of income, and any approval is subject to such conditions as the commissioner may prescribe.

(4)The commissioner may, by notice in writing to a taxpayer, withdraw the permission to use a substituted year of income granted under subsection (1) or (2).

(5)A notice served by the commissioner under subsection (1) takes effect on the date specified in the notice, and a notice under subsection (2) or (4) takes effect at the end of the substituted year of income of the taxpayer in which the notice was served.

(6)Where the year of income of a taxpayer changes as a result of subsection (1), (2) or (4), the period between the last full year of income prior to the change and the date on which the changed year of income commences is treated as a separate year of income, to be known as the “transitional year of income”.

(7)In this Act, a reference to a particular normal year of income includes a substituted year of income or a transitional year of income commencing during the normal year of income.

(8)A taxpayer dissatisfied with a decision of the commissioner under subsection (1), (2) or (4) may only challenge the decision under the objection and appeal procedure in this Act.

(9)In this section, “normal year of income” means the period of twelve months ending on the 30th June.

40. Method of accounting

(1)A taxpayer’s method of accounting shall conform to generally accepted accounting principles.

(2)Subject to subsection (1) and unless the commissioner prescribes otherwise in a particular case, a taxpayer may account for tax purposes on a cash or accrual-basis.

(3)A taxpayer may apply, in writing, for a change in the taxpayer’s method of accounting; and the commissioner may, by notice in writing, approve such an application but only if satisfied that the change is necessary to clearly reflect the taxpayer’s income.

(4)A taxpayer dissatisfied with a decision under this section may only challenge the decision under the objection and appeal procedure in this Act.

(5)If the taxpayer’s method of accounting is changed, adjustments to items of income, deduction or credit or to other items shall be made in the year of income following the change, so that no item is omitted and no item is taken into account more than once.

41. Cash-basis taxpayer

A taxpayer who is accounting for tax purposes on a cash-basis derives income when it is received or made available and incurs expenditure when it is paid.

42. Accrual-basis taxpayer

(1)A taxpayer who is accounting for tax purposes on an accrual-basis—

(a)derives income when it is receivable by the taxpayer; and

(b)incurs expenditure when it is payable by the taxpayer.

(2)Subject to this Act, an amount is receivable by a taxpayer when the taxpayer becomes entitled to receive it, even if the time for discharge of the entitlement is postponed or the entitlement is payable by installments.

(3)Subject to this Act, an amount is treated as payable by the taxpayer when all the events that determine liability have occurred and the amount of the liability can be determined with reasonable accuracy, but not before economic performance with respect to the amount occurs.

(4)For the purposes of subsection (3), economic performance occurs—

(a)with respect to the acquisition of services or property, at the time the services or property are provided;

(b)with respect to the use of property, at the time the property is used; or

(c)in any other case, at the time the taxpayer makes payment in full satisfaction of the liability.

43. Prepayments

Where a deduction is allowed for expenditure incurred on a service or other benefit which extends beyond thirteen months, the deduction is allowed proportionately over the years of income to which the service or other benefit relates.

44. Claim of right

(1)A taxpayer who is accounting for tax purposes on a cash-basis shall include an amount in income when received or claim a deduction for an amount when paid, notwithstanding that the taxpayer is not legally entitled to receive the amount or liable to make the payment, if the taxpayer claims to be legally entitled to receive or legally obliged to pay the amount.

(2)Where subsection (1) applies, the calculation of the chargeable income of the taxpayer shall be adjusted for the year of income in which the taxpayer refunds the amount received or recovers the amount paid.

(3)A taxpayer who is accounting for tax purposes on an accrual-basis shall include an amount in income when receivable or claim a deduction for an amount when payable notwithstanding that the taxpayer is not legally entitled to receive the amount or liable to make the payment, if the taxpayer claims to be legally entitled to receive or legally obliged to pay the amount.

(4)Where subsection (3) applies, the calculation of the chargeable income of the taxpayer shall be adjusted for the year of income in which the taxpayer ceases to claim the right to receive the amount or ceases to claim an obligation to pay the amount.

45. Long-term contracts

(1)In the case of an accrual-basis taxpayer, income and deductions relating to a long-term contract are taken into account on the basis of the percentage of the contract completed during the year of income.

(2)The percentage of completion is determined by comparing the total costs allocated to the contract and incurred before the end of the year of income with the estimated total contract costs as determined at the time of commencement of the contract.

(3)Where, in the year of income in which a long-term contract is completed, it is determined that the contract has made a final year loss, the commissioner may allow the loss to be carried back to the preceding years of income and applied against the amount included in income over the period of the contract under subsection (1) for those years, starting with the year immediately preceding the year in which the contract was completed.

(4)In this section—

(a)“final year loss”, in relation to a long-term contract, occurs where both the following conditions are satisfied—

(i)the profit estimated to be made under the contract for the purposes of subsection (1) exceeds the actual profit, including a loss, made under the contract; and

(ii)the difference between the estimated profit and the actual profit exceeds the amount included in income under subsection (1) for the year of income in which the contract is completed, and the amount of the excess referred to in subparagraph (ii) of this paragraph is the amount of the final year loss; and

(b)“long-term contract” means a contract for manufacture, installation or construction or, in relation to each, the performance of related services, which is not completed within the year of income in which work under the contract commenced, other than a contract estimated to be completed within six months of the date on which work under the contract commenced.

46. Trading stock

(1)A taxpayer is allowed a deduction for the cost of trading stock disposed of during a year of income.

(2)The cost of trading stock disposed of during a year of income is determined by adding to the opening value of trading stock for the year, the cost of trading stock acquired during the year, and subtracting the closing value of trading stock for the year.

(3)The opening value of trading stock for a year of income is—

(a)the closing value of trading stock at the end of the previous year of income; or

(b)where the taxpayer commenced business during the year of income, the value of trading stock acquired prior to the commencement of the business.

(4)The closing value of trading stock is the lower of cost or the market value of trading stock on hand at the end of the year of income.

(5)A taxpayer who is accounting for tax purposes on a cash-basis may calculate the cost of trading stock on the prime-cost method or absorption-cost method; and a taxpayer who is accounting for tax purposes on an accrual-basis shall calculate the cost of trading stock on the absorption-cost method.

(6)Where particular items of trading stock are not readily identifiable, a taxpayer may account for that trading stock on the first-in-first-out method or the average-cost method but, once chosen, a stock valuation method may be changed only with the written permission of the commissioner.

(7)In this section—

(a)“absorption-cost method” means the generally accepted accounting principle under which the cost of trading stock is the sum of direct material costs, direct labour costs and factory overhead costs;

(b)“average-cost method” means the generally accepted accounting principle under which trading stock valuation is based on a weighted average cost of units on hand;

(c)“direct labour costs” means labour costs directly related to the production of trading stock;

(d)“direct material costs” means the cost of materials that become an integral part of the trading stock produced;

(e)“factory overhead costs” means the total costs of manufacturing except direct labour and direct material costs;

(f)“first-in-first-out method” means the generally accepted accounting principle under which trading stock valuation is based on the assumption that trading stock is sold in the order of its receipt;

(g)“prime-cost method” means the generally accepted accounting principle under which the cost of trading stock is the sum of direct material costs, direct labour costs and variable factory overhead costs; and

(h)“variable factory overhead costs” means those factory overhead costs which vary directly with changes in volume.

47. Debt obligations with discount or premium

(1)Subject to subsection (2), interest in the form of any discount, premium or deferred interest shall be taken into account as it accrues.

(2)Where the interest referred to in subsection (1) is subject to withholding tax, the interest shall be taken to be derived or incurred when paid.

48. Foreign currency debt gains and losses

(1)Foreign currency debt gains are included in gross income and foreign currency debt losses are deductible only under this section.

(2)A foreign currency debt gain derived by a taxpayer during the year of income is included in the business income of the taxpayer for that year.

(3)Subject to subsections (4) and (6), a foreign currency debt loss incurred by a taxpayer during a year of income is allowed as a deduction to the taxpayer in that year.

(4)A deduction is not allowed to a taxpayer for a foreign currency debt loss incurred by the taxpayer unless the taxpayer has notified the commissioner in writing of the existence of the debt which gave rise to the loss by the due date for furnishing of the taxpayer’s return of income for the year of income in which the debt arose or by such later date as the commissioner may allow.

(5)Subsection (4) does not apply to a financial institution.

(6)Where—

(a)a taxpayer has incurred a foreign currency debt loss under a transaction;

(b)the taxpayer or another person has derived a foreign currency debt gain under another transaction; and

(c)either—

(i)the transaction giving rise to the loss would not have been entered into, or might reasonably be expected not to have been entered into, if the transaction giving rise to the gain had not been entered into; or

(ii)the transaction giving rise to the gain would not have been entered into, or might reasonably be expected not to have been entered into, if the transaction giving rise to the loss had not been entered into, no deduction is allowed to the taxpayer to the extent that the amount of the loss exceeds that part of the gain included in gross income.

(7)Subject to subsection (9), a taxpayer derives a foreign currency debt gain if—

(a)where the taxpayer is a debtor, the amount in shillings of the foreign currency debt incurred by the taxpayer is greater than the amount in shillings required to settle the debt; or

(b)where the taxpayer is a creditor, the amount in shillings of the foreign currency debt owed to the taxpayer is less than the amount in shillings paid to the taxpayer in settlement of the debt.

(8)Subject to subsection (9), a taxpayer incurs a foreign currency debt loss if—

(a)where the taxpayer is a debtor, the amount in shillings of the foreign currency debt incurred by the taxpayer is less than the amount in shillings required to settle the debt; or

(b)where the taxpayer is a creditor, the amount in shillings of the foreign currency debt owed to the taxpayer is greater than the amount in shillings paid to the taxpayer in settlement of the debt.

(9)In determining whether a taxpayer has derived a foreign currency debt gain or incurred a foreign currency debt loss, account shall be taken of the taxpayer’s position under any hedging contract entered into by the taxpayer in respect of the debt.

(10)A foreign currency debt gain is derived or a foreign currency debt loss is incurred by a taxpayer in the year of income in which the debt is satisfied.

(11)In this section—

(a)“foreign currency debt” means a business debt denominated in foreign currency; and

(b)“hedging contract” means a contract entered into by the taxpayer for the purpose of eliminating or reducing the risk of adverse financial consequences which might result for the taxpayer under another contract from currency exchange rate fluctuation.

Part VI – Gains and losses on disposal of assets

49. Application of Part VI

This Part applies for the purposes of determining the amount of any gain or loss arising on the disposal of an asset where the gain is included in gross income or the loss is allowed as a deduction under this Act.

50. Gains and losses on disposal of assets

(1)The amount of any gain arising from the disposal of an asset is the excess of the consideration received for the disposal over the cost base of the asset at the time of the disposal.

(2)The amount of any loss arising from the disposal of an asset is the excess of the cost base of the asset at the time of the disposal over the consideration received for the disposal.

51. Disposals

(1)A taxpayer is treated as having disposed of an asset when the asset has been—

(a)sold, exchanged, redeemed or distributed by the taxpayer;

(b)transferred by the taxpayer by way of gift; or

(c)destroyed or lost.

(2)A disposal of an asset includes a disposal of a part of the asset.

(3)Where the commissioner is satisfied that a taxpayer—

(a)has converted an asset from a taxable use to nontaxable use; or

(b)has converted an asset from a nontaxable use to a taxable use, the taxpayer is deemed to have disposed of the asset at the time of the conversion for an amount equal to the market value of the asset at that time and to have immediately reacquired the asset for a cost base equal to that same value.

(4)A nonresident person who becomes a resident person is deemed to have acquired all assets, other than taxable assets, owned by the person at the time of becoming a resident for their market value at that time.

(5)A resident person who becomes a nonresident person is deemed to have disposed of all assets, other than taxable assets, owned by the person at the time of becoming a nonresident for their market value at that time.

(6)Where a person to whom subsection (5) would otherwise apply—

(a)intends, in the future, to reacquire status as a resident person; and

(b)provides the commissioner with sufficient security to satisfy any tax liability which would otherwise arise under subsection (5),

the commissioner may, by notice in writing, exempt the person from the application of subsection (5).

(7)In this section, “taxable asset” means an asset the disposal of which would give rise to a gain included in the gross income of, or a loss allowed as a deduction to, a resident or nonresident taxpayer.

52. Cost base

(1)Subject to this Act, this section establishes the cost base of an asset for the purposes of this Act.

(2)The cost base of an asset purchased, produced or constructed by the taxpayer is the amount paid or incurred by the taxpayer in respect of the asset, including incidental expenditures of a capital nature incurred in acquiring the asset, and includes the market value of any consideration in kind given for the asset.

(3)Subject to subsection (4), the cost base of an asset acquired in a non-arm’s-length transaction is the market value of the asset at the date of acquisition.

(4)The cost base of an asset acquired in a transaction described in section 53(2) is the amount of the consideration deemed by that subsection to have been received by the person disposing of the asset.

(5)Where a part of an asset is disposed of, the cost base of the asset shall be apportioned between the part of the asset retained and the part disposed of in accordance with their respective market values at the time of acquisition of the asset.

(6)Unless otherwise provided in this Act, expenditures incurred to alter or improve an asset which have not been allowed as a deduction are added to the cost base of the asset.

(7)Where the acquisition of an asset by a taxpayer represents the derivation of an amount included in gross income, the cost base of the asset is the amount included in gross income plus any amount paid by the taxpayer for the asset.

(8)Where the receipt of an asset represents the derivation of an amount which is exempt from tax, the cost base of the asset is the amount exempt from tax plus any amount paid by the taxpayer for the asset.

53. Special rules for consideration received

(1)The consideration received on disposal of an asset includes the market value of any consideration received in kind.

(2)Where an asset is disposed of to an associate or in a non-arm’s-length transaction other than by way of transmission of the asset to a trustee or beneficiary on the death of a taxpayer, the person disposing of the asset, in this section referred to as the “disposer”, is treated as having received consideration equal to the greater of—

(a)the cost base of the asset to the disposer at the time of disposal; or

(b)the fair market value of the asset at the date of disposal.

(3)Where two or more assets are disposed of in a single transaction and the consideration paid for each asset is not specified, the total consideration received is apportioned among the assets disposed of in proportion to their respective market values at the time of the transaction.

(4)Where a part of an asset is disposed of, the consideration received is apportioned between the part of the asset retained and the part of the asset disposed of in accordance with their respective market values at the time of acquisition of the asset.

54. Nonrecognition of gain or loss

(1)No gain or loss is taken into account in determining chargeable income in relation to—

(a)a transfer of an asset between spouses;

(b)a transfer of an asset between former spouses as part of a divorce settlement or bona fide separation agreement;

(c)an involuntary disposal of an asset to the extent to which the proceeds are reinvested in an asset of a like kind within one year of the disposal; or

(d)the transmission of an asset to a trustee or beneficiary on the death of a taxpayer.

(2)Where no gain or loss is taken into account as a result of subsection (1)(a), (b) or (d), the transferred or transmitted asset is deemed to have been acquired by the transferee, or trustee or beneficiary as an asset of the same character for a consideration equal to the cost base of the asset to the transferor or deceased taxpayer at the time of the disposal.

(3)The cost base of a replacement asset described in subsection (1)(c) is the cost base of the replaced asset plus the amount by which any consideration given by the taxpayer for the replaced asset exceeds the amount of proceeds received on the involuntary disposal.

Part VII – Miscellaneous rules for determining chargeable income

55. Income of joint owners

(1)Income or deductions relating to jointly owned property are apportioned among the joint owners in proportion to their respective interests in the property.

(2)Where the interest of the joint owners in jointly owned property cannot be ascertained, the interest of such joint owners in the property shall be deemed to be equal.

56. Valuation

(1)For the purposes of this Act and subject to section 19(1)(b), the value of a benefit in kind is the fair market value of the benefit on the date the benefit is taken into account for tax purposes.

(2)The fair market value of a benefit is determined without regard to any restriction on transfer or to the fact that it is not otherwise convertible to cash.

57. Currency conversion

(1)Chargeable income under this Act shall be calculated in Uganda shillings.

(2)Where the calculation of chargeable income involves an amount in a currency other than the Uganda shilling, the amount shall be converted to the Uganda shilling at the Bank of Uganda mid-exchange rate applying between the currency and the Uganda shilling on the date that the amount is derived, incurred or otherwise taken into account for tax purposes.

(3)With the prior written permission of the commissioner, a taxpayer may use the average rate of exchange during the year of income, or may keep books of account in a currency other than the Uganda shilling.

58. Indirect payments and benefits

The income of a person includes—

(a)a payment that directly benefits the person; and

(b)a payment dealt with as the person directs, which would have been income of the person if the payment had been made directly to the person.

59. Finance leases

(1)Where a lessor leases property to a lessee under a finance lease, for the purposes of this Act—

(a)the lessee is treated as the owner of the property; and

(b)the lessor is treated as having made a loan to the lessee, in respect of which payments of interest and principal are made to the lessor equal in amount to the rental payable by the lessee.

(2)The interest component of each payment under the loan is treated as interest expense incurred by the lessee and interest income derived by the lessor.

(3)A lease of property is a finance lease if—

(a)the lease term exceeds 75 percent of the effective life of the leased property;

(b)the lessee has an option to purchase the property for a fixed or determinable price at the expiration of the lease; or

(c)the estimated residual value of the property to the lessor at the expiration of the lease term is less than 20 percent of its fair market value at the commencement of the lease.

(4)For the purposes of subsection (3), the lease term includes any additional period of the lease under an option to renew.

60. Exclusion of doctrine of mutuality

(1)A company which carries on a members club, a trade association or a mutual insurance company is treated for the purposes of this Act as carrying on a business subject to tax.

(2)The business income of a company to which subsection (1) applies includes entrance fees and subscriptions paid by members.

(3)Where a company referred to in subsection (1) is operated primarily to furnish goods or services to members, deductions attributable to the furnishing of goods or services to members are allowed only to the extent of the total income derived from the members, with any excess carried forward and allowed as a deduction in the following year of income.

(4)In this section, “members club” means a club or similar institution all the assets of which are owned by or are held in trust for the members of the club or institution.

61. Compensation receipts

A compensation payment derived by a person takes the character of the item that is compensated.

62. Recouped expenditure

(1)Where a previously deducted expenditure, loss or bad debt is recovered by the taxpayer, the amount recovered is deemed to be income derived by the taxpayer in the year of income in which it is recovered and takes the character of the income to which the deduction related.

(2)For the purposes of subsection (1), a deduction is considered recovered upon the occurrence of an event which is inconsistent with the basis for the deduction.

Part VIII – Persons assessable

Taxation of individuals

63. Taxation of individuals

The chargeable income of each taxpayer who is an individual is determined separately.

64. Income splitting

(1)Where a taxpayer attempts to split income with another person, the commissioner may adjust the chargeable income of the taxpayer and the other person to prevent any reduction in tax payable as a result of the splitting of income.

(2)A taxpayer is treated as having attempted to split income where—

(a)the taxpayer transfers income, directly or indirectly, to an associate; or

(b)the taxpayer transfers property, including money, directly or indirectly, to an associate with the result that the associate receives or enjoys the income from that property,

and the reason or one of the reasons for the transfer is to lower the total tax payable upon the income of the transferor and the transferee.

(3)In determining whether the taxpayer is seeking to split income, the commissioner shall consider the value, if any, given by the associate for the transfer.

Taxation of partnerships and partners

65. Principles of taxation for partnerships

(1)The income and losses arising from activities conducted by a partnership is taxed in accordance with this Act.

(2)The presence or absence of a written partnership agreement is not decisive in determining whether a partnership relationship exists between persons.

(3)A partnership shall be liable to furnish a partnership return of income in accordance with section 92, but shall not be liable to pay tax on that income.

(4)Any election, notice or statement required to be filed in relation to a partnership’s activities shall be filed by the partnership.

66. Calculation of partnership income or loss

(1)The partnership income for a year of income is—

(a)the gross income of the partnership for that year calculated as if the partnership were a resident taxpayer; less

(b)the total amount of deductions allowed under this Act for expenditures or losses incurred by the partnership in deriving that income, other than the deduction allowed under section 38.

(2)A partnership loss occurs for a year of income where the amount in subsection (1)(b) exceeds the amount in subsection (1)(a) for that year, and the amount of the excess is the amount of the loss.

(3)Where the partnership is a nonresident partnership for a year of income, section 87 applies in calculating partnership income or partnership loss of the partnership for that year.

67. Taxation of partners

(1)The gross income of a resident partner for a year of income includes the partner’s share of partnership income for that year.

(2)The gross income of a nonresident partner for a year of income includes the partner’s share of partnership income attributable to sources in Uganda.

(3)A resident partner is allowed a deduction for a year of income for the partner’s share of a partnership loss for that year.

(4)A nonresident partner is allowed a deduction for a year of income for the partner’s share of a partnership loss, but only to the extent that the activity giving rise to the loss would have given rise to partnership income attributable to sources in Uganda if a loss had not been incurred.

(5)Income derived, or expenditure or losses incurred, by a partnership retain their character as to geographic source and type of income, expenditure or loss in the hands of the partners, and are deemed to have been passed through the partnership on a pro rata basis unless the commissioner permits otherwise.

(6)Subject to subsection (7), a partner’s share of partnership income or loss is equal to the partner’s percentage interest in the income of the partnership as set out in the partnership agreement.

(7)Where the allocation of income in the partnership agreement does not reflect the contribution of the partners to the partnership’s operations, a partner’s share of partnership income or loss shall be equal to the partner’s percentage interest in the capital of the partnership.

68. Formation, reconstitution or dissolution of a partnership

(1)A contribution to a partnership by a partner of an asset owned by the partner is treated as a disposal of the asset by the partner to the partnership for a consideration equal to—

(a)the cost base of the asset to the partner at the date on which the contribution was made where all the following conditions are satisfied—

(i)the asset was a business asset of the partner immediately before its contribution to the partnership;

(ii)the partner and partnership are residents at the time of the contribution;

(iii)the partner’s interest in the capital of the partnership after the contribution is 25 percent or more; and

(iv)an election for this paragraph to apply has been made by the partners jointly; or

(b)in any other case, the market value of the asset at the date the contribution was made.

(2)Where subsection (1)(a) applies, the asset retains the same character in the hands of the partnership as it did in the hands of the partner.

(3)Where there is a change in the constitution of a partnership or a partnership is dissolved, the former partnership is treated as having disposed of all the assets of the partnership to the reconstituted partnership or to the partners in the case of dissolution for a consideration equal to—

(a)the cost base of the asset to the former partnership at the date of the change in constitution where all the following conditions are satisfied—

(i)the former partnership and the reconstituted partnership are resident partnerships at the time of the change;

(ii)25 percent or more of the interests in the capital of the reconstituted partnership are held for twelve months after the change by persons who were partners in the former partnership immediately before the change; and

(iii)an election for this paragraph to apply has been made by the partners of the reconstituted partnership jointly; or

(b)in any other case, the market value of the asset at the date of the change in constitution or dissolution, as the case may be.

(4)Where subsection (3)(a) applies, the asset retains the same character in the hands of the reconstituted partnership as it did in the hands of the former partnership.

(5)An election under this section shall be made in the partnership return of income for the year of income in which the contribution was made or the constitution of the partnership changed.

69. Cost base of partner’s interest

(1)A partner’s interest in a partnership is treated as a business asset of the partner for all the purposes of this Act.

(2)Subject to subsections (3) and (4), the cost base of a partner’s interest in a partnership is the amount the partner has paid for the interest plus—

(a)the cost base of any asset contributed to the partnership by the partner where section 68(1)(a) applies; and

(b)the market value of any asset contributed to the partnership by the partnership where section 68(1)(b) applies.

(3)The cost base of a partner’s interest in a partnership determined under subsection (2) is increased by the sum of the partner’s share for the year of income and prior years of income of—

(a)partnership income; and

(b)income of the partnership exempt from tax under this Act.

(4)The cost base of a partner’s interest in a partnership determined under subsection (2) is reduced, but not below zero, by distributions by the partnership and by the sum of the partner’s share for the year of income and prior years of income of partnership losses and expenditures of the partnership not deductible in computing its chargeable income and not properly chargeable to capital account.

Taxation of trusts and beneficiaries

70. Interpretation of provisions relating to taxation of trusts and beneficiaries

In this section and sections 71, 72 and 73—

(a)“chargeable trust income”, in relation to a year of income, means—(i)the gross income of the trust (other than an amount to which section 72(1) or 73(1) applies) for that year calculated as if the trust is a resident taxpayer; less(ii)the total amount of deductions allowed under this Act for expenditures or losses incurred by the trust in deriving that income;

(b)“nonresident trust”, in relation to a year of income, means a trust that is not a resident trust for that year;

(c)“qualified beneficiary” means a person referred to in paragraph (i) or (ii) of the definition of “qualified beneficiary trust”;

(d)“qualified beneficiary trust” means—(i)a trust in relation to which a person, other than a settlor, has a power solely exercisable by that person to vest the corpus or income of the trust in that person; or(ii)a trust whose sole beneficiary is an individual or an individual’s estate or appointees, but does not include a trust whose beneficiary is an incapacitated person;

(e)“settlor” means a person who has transferred property to, or conferred a benefit on, a trust for no consideration or for a consideration which is less than the market value of the property transferred or benefit conferred; and

(f)“settlor trust” means a trust in relation to a whole or part of which the settlor has—(i)the power to revoke or alter the trust so as to acquire a beneficial entitlement in the corpus or income of the trust; or(ii)a reversionary interest in the corpus or income of the trust.

71. Principles of taxation for trusts

(1)Subject to subsection (5), the income of a trust is taxed either to the trustee or to the beneficiaries of the trust, as provided in this Act.

(2)Separate calculations of chargeable trust income shall be made for separate trusts regardless of whether they have the same trustee.

(3)Income derived or expenditure or losses incurred by a trust retain their character as to geographic source and type of income, expenditure or loss in the hands of the beneficiary.

(4)A trust is required to furnish a trust return of income in accordance with section 92.

(5)A settlor trust or a qualified beneficiary trust—

(a)is not treated as an entity separate from the settlor or qualified beneficiary, respectively; and

(b)the income of such a trust is taxed to the settlor or qualified beneficiary, and the property owned by the trust is deemed to be owned by the settlor or qualified beneficiary, as the case may be.

(6)The trustee of an incapacitated person’s trust is liable for tax on the chargeable trust income of the trust.

(7)Trustees are jointly and severally liable for a tax liability arising in respect of chargeable trust income that is not satisfied out of the assets of the trust.

(8)Where a trustee has paid tax on the chargeable trust income of the trust under section 72 or 73, that income shall not be taxed again in the hands of the beneficiary.

72. Taxation of trustees and beneficiaries

(1)Any amount derived by a trustee for the immediate or future benefit of any ascertained beneficiary, other than an incapacitated person, with a vested right to such amount is treated as having been derived by the beneficiary for the purposes of this Act.

(2)Where a beneficiary has acquired a vested right to any amount referred to in subsection (1) as a result of the exercise by the trustee of a discretion vested in the trustee under a deed of trust, an arrangement or a will of a deceased person, such amount is deemed to have been derived by the trustee for the immediate benefit of the beneficiary.

(3)For subsection (2) to apply to a beneficiary for a year of income, the trustee must have exercised the discretion by the end of the second month after the end of the year of income.

(4)Where subsection (1) or (2) applies, the beneficiary is treated as having derived the amount at the time the amount was derived by the trustee.

(5)Where any amount to which subsection (1) applies is included in the gross income of the beneficiary for a year of income, the beneficiary shall be allowed a deduction in accordance with this Act for any expenditure or losses incurred in that year by the trustee in deriving that income.

(6)A trustee of a trust that is a resident trust for a year of income is liable for tax on the chargeable trust income of the trust for that year.

(7)A trustee of a trust that is a nonresident trust for a year of income is liable for tax on so much of the chargeable trust income of the trust for that year as is attributable to sources in Uganda.

(8)This section is subject to section 73.

73. Taxation of estates of deceased persons

(1)Any amount derived by a trustee as executor of the estate of a deceased person shall, to the extent that the commissioner is satisfied that such amount has been derived for the immediate or future benefit of any ascertained heir or legatee of the deceased, be treated as having been derived by such heir or legatee for the purposes of this Act.

(2)Where any amount to which subsection (1) applies is included in the gross income of the heir or legatee for a year of income, the heir or legatee shall be allowed a deduction in accordance with this Act for any expenditure or losses incurred in that year by the trustee in deriving that income.

(3)The trustee of an estate of a deceased person that is a resident trust for a year of income is liable for tax on the chargeable trust income of the estate for that year.

(4)The trustee of an estate of a deceased person that is a nonresident trust for a year of income is liable for tax on so much of the chargeable trust income of that year attributable to sources in Uganda.

(5)The trustee of an estate of a deceased person is responsible for the tax liability of the deceased taxpayer arising for any year of income prior to the year of income in which the taxpayer died.

Taxation of companies and shareholders

74. Principles of taxation for companies

(1)A company is liable to tax separately from its shareholders.

(2)Subject to subsection (3), a dividend paid to a resident company, other than an exempt organisation, by another resident company is exempt from tax where the company receiving the dividend controls, directly or indirectly, 25 percent or more of the voting power in the company paying the dividend.

(3)Subsection (2) does not apply to—

(a)a dividend paid to a financial institution by virtue of its ownership of redeemable shares in the company paying the dividend; or

(b)a dividend to which section 76 applies.

75. Change in control of companies

Where, during a year of income, there has been a change of 50 percent or more in the underlying ownership of a company, as compared with its ownership one year previously, the company is not permitted to deduct an assessed loss in the year of income or in subsequent years, unless the company, for a period of two years after the change or until the assessed loss has been exhausted if that occurs within two years after the change—

(a)continues to carry on the same business after the change as it carried on before the change; and

(b)does not engage in any new business or investment after the change where the primary purpose of the company or the beneficial owners of the company is to utilise the assessed loss so as to reduce the tax payable on the income arising from the new business or investment.

76. Dividend stripping

(1)Where a company takes part in a transaction in the nature of dividend stripping and receives a dividend from a resident company in the transaction, the company receiving the dividend shall include the dividend in its gross income to the extent to which the commissioner considers necessary to offset any decrease in the value of shares in respect of which the dividend is paid or in the value of any other property caused by the payment of the dividend.

(2)In any such transaction, the commissioner may also reduce the amount of any deduction arising to the extent to which it represents the decrease in value of the shares or other property.

(3)In this section, “dividend stripping” includes an arrangement under which—

(a)a company, referred to as the “target company”, has accumulated or current-year profits, or both, represented by cash or other readily realisable assets;

(b)another company, referred to as the “acquiring company”, acquires the shares in the target company for an amount that reflects the profits of the target company;

(c)the disposal of the shares in the target company gives rise to a tax-free capital gain to the shareholders in the target company;

(d)after the acquiring company has acquired the shares in the target company, the target company pays a dividend to the acquiring company, which in the absence of section 74(3)(b) would be exempt from tax in the hands of the target company; and

(e)after the dividend is declared, the acquiring company sells the shares for a loss.

77. Rollover relief

(1)Where a resident person, in this subsection referred to as the “transferor”, transfers a business asset, with or without any liability not in excess of the cost base of the asset, to a resident company other than an exempt organisation, in this subsection referred to as the “transferee”, in exchange for a share in the transferee and the transferor has a 50 percent or greater interest in the voting power of the transferee immediately after the transfer—

(a)the transfer is not treated as a disposal of the asset by the transferor but is treated as the acquisition by the transferee of a business asset;

(b)the transferee’s cost base for the asset is equal to the transferor’s cost base for the asset at the time of transfer; and

(c)the cost base of a share received by the transferor in exchange for the asset is equal to the cost base of the asset transferred, less any liability assumed by the transferor in respect of the asset.

(2)Where, as part of the liquidation of a resident company, in this subsection referred to as the “liquidated company”, a business asset is transferred to a shareholder being a resident company other than an exempt organisation, in this subsection referred to as the “transferee company”, and, immediately prior to the transfer, the transferee company held a 50 percent or greater interest in the voting power of the liquidated company—

(a)the transfer is not treated as a disposal of the asset by the liquidated company, but is treated as the acquisition of a business asset by the transferee company;

(b)the transferee’s cost base for the asset is equal to the liquidated company’s cost base for the asset at the time of transfer;

(c)the transfer of the asset is not a dividend; and

(d)no gain or loss is taken into account on the cancellation of the transferee’s shares in the liquidated company.

(3)Where a resident company or a group of resident companies is reorganised without any significant change in the underlying ownership or control of the company or group, the commissioner may—

(a)permit any resident company involved in the reorganisation to treat the reorganisation as not giving rise to the disposal of any business asset or the realisation of any business debt, as the case may be; and

(b)determine the cost base of any business asset held, or business debt undertaken, by the resident company after the reorganisation in order to reflect the fact that no disposal or realisation is treated as having occurred.

Part IX – International taxation

78. Interpretation

In this Part—

(a)“branch” means a place where a person carries on business, and includes—(i)a place where a person is carrying on business through an agent, other than a general agent of independent status acting in the ordinary course of business as such;(ii)a place where a person has, is using or is installing substantial equipment or substantial machinery; or(iii)a place where a person is engaged in a construction, assembly or installation project for ninety days or more, including a place where a person is conducting supervisory activities in relation to such a project; and

(b)“management charge” means any payment made to any person, other than a payment of employment income, as consideration for any managerial services, however calculated.

79. Source of income

Income is derived from sources in Uganda to the extent to which it is—

(a)derived from the sale of goods—

(i)in the case of goods manufactured, grown or mined by the seller, the goods were manufactured, grown or mined in Uganda; or

(ii)in the case of goods purchased by the seller, the agreement for sale was made in Uganda, wherever such goods are to be delivered;

(b)derived by a resident person in carrying on a business as owner or charterer of a vehicle, ship or aircraft, wherever such vehicle, ship or aircraft may be operated;

(c)derived from any employment exercised or services rendered in Uganda;

(d)derived in respect of any employment exercised or services rendered under a contract with the Government of Uganda, wherever the employment is exercised or services are rendered;

(e)derived by a resident individual from any employment exercised or services rendered as a driver of a vehicle, or an officer or member of a crew of any vehicle, ship or aircraft, wherever the vehicle, ship or aircraft may be operated;

(f)derived from the rental of immovable property located in Uganda;

(g)derived from the disposal of an interest in immovable property located in Uganda or from the disposal of a share in a company the property of which consists directly or indirectly principally of an interest or interests in such immovable property, where the interest or share is a business asset;

(h)derived from the disposal of movable property, other than goods, under an agreement made in Uganda for the sale of the property, wherever the property is to be delivered;

(i)an amount—

(i)included in the business income of a taxpayer under section 27(5) in respect of the disposal of a depreciable asset used in Uganda; or

(ii)treated as income under section 62, where the deduction was allowed for an expenditure, loss or bad debt incurred in the production of income sourced in Uganda;

(j)a royalty—

(i)arising from the use of, or right to use, in Uganda—

(A)any patent, design, trademark or copyright, or any model, pattern, plan, formula or process, or any property or right of a similar nature;

(B)any motion picture film;

(C)any video or audio material, whether stored on film, tape, disc or other medium, for use in connection with television or radio broadcasting;

(D)any sound recording or advertising matter connected with material referred to in subparagraph (i)(B) and (C) of this paragraph; or

(E)any tangible movable property;

(ii)arising from the importing of, or undertaking to import, any scientific, technical, industrial or commercial knowledge or information for use in Uganda;

(iii)arising from the use of, or the right to use, or the receipt of, or right to receive, in Uganda any video or audio material transmitted by satellite, cable, optic fibre or similar technology for use in connection with television or radio broadcasting;

(iv)arising from the rendering of, or the undertaking to render assistance ancillary to a matter referred to in subparagraph (i), (ii) or (iii) of this paragraph;

(v)arising from the total or partial forbearance in Uganda with respect to a matter referred to in subparagraph (i), (ii), (iii) or (iv) of this paragraph; or

(vi)arising from the disposal of industrial or intellectual property used in Uganda;

(k)interest where—

(i)the debt obligation giving rise to the interest is secured by immovable property located, or movable property used, in Uganda;

(ii)the payer is a resident person; or

(iii)the borrowing relates to a business carried on in Uganda;

(l)a dividend or director’s fee paid by a resident company;

(m)a pension or annuity where—

(i)the pension or annuity is paid by the Government of Uganda or by a resident person; or

(ii)the pension or annuity is paid in respect of an employment exercised or services rendered in Uganda;

(n)a natural resource payment in respect of a natural resource taken from Uganda;

(o)a foreign currency debt gain derived in relation to a business debt which has arisen in the course of carrying on a business in Uganda;

(p)a contribution to a retirement fund made by a tax-exempt employer in respect of an employee whose employment is exercised in Uganda;

(q)a management charge paid by a resident person;

(r)taxable in Uganda under an international agreement; or

(s)attributable to any other activity which occurs in Uganda, including an activity conducted through a branch in Uganda.

80. Foreign employment income

(1)Foreign-source employment income derived by a resident individual is exempt from tax if the individual has paid foreign income tax in respect of the income.

(2)A resident individual is treated as having paid foreign income tax on foreign-source employment income if tax has been withheld and paid to the revenue authority of the foreign country by the employer of the individual.

81. Foreign tax credit

(1)A resident taxpayer is entitled to a credit, in this section referred to as a “foreign tax credit”, for any foreign income tax paid by the taxpayer in respect of foreign-source income included in the gross income of the taxpayer.

(2)The amount of the foreign tax credit of a taxpayer for a year of income shall not exceed the Ugandan income tax payable on the taxpayer’s foreign-source income for that year, calculated by applying the average rate of Ugandan income tax of the taxpayer for that year to the taxpayer’s net foreign-source income for that year.

(3)The calculation of the foreign tax credit of a taxpayer for a year of income is made separately for foreign-source business income and other income derived from foreign sources by the taxpayer during the year.

(4)Foreign income tax paid by—

(a)a partnership is treated as paid by the partners;

(b)a trustee is treated as paid by the beneficiary where the income on which foreign income tax has been paid is included in the gross income of the beneficiary under this Act; or

(c)a beneficiary is treated as paid by the trustee where the income on which foreign income tax has been paid is taxed to the trustee under this Act.

(5)For the purposes of this section—

(a)“average rate of Ugandan income tax”, in relation to a taxpayer for a year of income, means the percentage that the Ugandan income tax, before the foreign tax credit, is of the chargeable income of the taxpayer for the year and, in the case of a taxpayer with both foreign-source business income and other income derived from foreign sources, the average rate of tax is to be calculated separately for both classes of income;

(b)“foreign income tax” includes a foreign withholding tax, but does not include a foreign tax designed to raise the level of the tax on the income so that the taxation by the country of residence is reduced; and

(c)“net foreign-source income” means the total foreign-source income included in the gross income of the taxpayer, less any deductions allowed to the taxpayer under this Act that—

(i)relate exclusively to the derivation of the foreign-source income; and

(ii)in the opinion of the commissioner, may appropriately be related to the foreign-source income.

82. Taxation of branch profits

(1)A tax shall be charged for each year of income and is imposed on every nonresident company carrying on business in Uganda through a branch which has repatriated income for the year of income.

(2)The tax payable by a nonresident company under this section is calculated by applying the rate prescribed in Part IV of the Third Schedule to this Act to the repatriated income of the branch of the nonresident company for the year of income.

(3)The repatriated income of a branch for a year of income is calculated according to the following formula—A + (B - C) - D where—A is the total cost base of assets, net of liabilities, of the branch at the commencement of the year of income;B is the net profit of the branch for the year of income calculated in accordance with generally accepted accounting principles;C is the Ugandan tax payable on the chargeable income of the branch for the year of income; andD is the total cost base of assets, net of liabilities, of the branch at the end of the year of income.

(4)In calculating the repatriated income of a branch, the total cost base of assets at the end of a year of income is the total cost base of assets at the commencement of the next year of income.

(5)The tax imposed under this section is in addition to any tax imposed by this Act on the chargeable income of the branch.

83. Tax on international payments

(1)Subject to this Act, a tax is imposed on every nonresident person who derives any dividend, interest, royalty, natural resource payment or management charge from sources in Uganda.

(2)The tax payable by a nonresident person under this section is calculated by applying the rate prescribed in Part IV of the Third Schedule to this Act to the gross amount of the dividend, interest, royalty, natural resource payment or management charge derived by a nonresident person.

(3)Notwithstanding section 79(l) a dividend derived by a nonresident person is only treated as income derived from sources in Uganda for the purposes of this section to the extent to which the dividend is paid out of profits sourced in Uganda.

(4)For the purposes of subsection (3), where a resident company has profits sourced both within and outside Uganda, the company is treated as having paid a dividend out of the profits sourced in Uganda first.

(5)Interest paid by a resident company in respect of debentures is exempt from tax under this Act where the following conditions are satisfied—

(a)the debentures were issued by the company outside Uganda for the purpose of raising a loan outside Uganda;

(b)the debentures were issued for the purpose of raising funds for use by the company in a business carried on in Uganda; and

(c)the interest is paid outside Uganda.

84. Tax on payments to nonresident public entertainers or sports persons

(1)Subject to this Act, a tax is imposed on every nonresident entertainer, sports person or theatrical, musical or other group of nonresident entertainers or sports persons who derive income from any performance in Uganda.

(2)The tax payable by a nonresident person under this section is calculated by applying the rate prescribed in Part IV of the Third Schedule to this Act to the gross amount of—

(a)remuneration derived by a nonresident public entertainer or sports person; or

(b)receipts derived by any theatrical, musical or other group of nonresident public entertainers or sports persons.

(3)Tax is imposed under this section on any group regardless of whether or not the performance is conducted for the joint account of all or some members of the group.

(4)Every member of a group shall be jointly and severally liable for payment of the tax imposed under this section and, subject to section 87(1)(c), shall remit the tax due before leaving Uganda.

85. Tax on payments to nonresident contractors or professionals

(1)Subject to this Act, a tax is imposed on every nonresident person deriving income under a Ugandan-source services contract.

(2)The tax payable by a nonresident person under this section is calculated by applying the rate prescribed in Part IV of the Third Schedule to this Act to the gross amount of any payment to a nonresident under a Ugandan-source services contract.

(3)Subsection (1) does not apply to a royalty or management charge charged to tax under section 83.

(4)In this section, “Ugandan-source services contract” means a contract, other than an employment contract, under which—

(a)the principal purpose of the contract is the performance of services which gives rise to income sourced in Uganda; and

(b)any goods supplied are only incidental to that purpose.

86. Taxation of nonresidents providing shipping, air transport or telecommunications services in Uganda

(1)Subject to this Act, a tax is imposed on every nonresident person carrying on the business of ship operator, charterer or air transport operator who derives income from the carriage of passengers who embark, or cargo or mail which is embarked in Uganda.

(2)The tax payable by a nonresident person under subsection (1) is calculated by applying the rate of tax prescribed in Part VII of the Third Schedule to this Act to the gross amount derived by the person from the carriage.

(3)Subsection (1) does not apply to any income derived from the carriage of passengers who embark, or cargo or mail which is embarked, solely as a result of transshipment.

(4)Where a nonresident person carries on the business of transmitting messages by cable, radio, optical fibre or satellite communication, the chargeable income of the person derived from the transmission of messages by apparatus established in Uganda, whether or not such messages originated in Uganda, shall be 5 percent of the gross amount derived by the person in respect of the transmission.

87. General provisions relating to taxes imposed under sections 83, 84, 85 and 86

(1)The tax imposed on a nonresident person under sections 83, 84, 85 and 86(1) is a final tax on the income on which the tax has been imposed and—

(a)such income is not included in the gross income of the nonresident person who has derived the income;

(b)no deduction is allowed for any expenditure or losses incurred by the nonresident person in deriving the income; and

(c)the liability of the nonresident person is satisfied if the tax payable has been withheld by a withholding agent under section 120 and paid to the commissioner under section 123.

(2)In this section, “withholding agent” has the meaning in sections 115.

88. International agreements

(1)An international agreement entered into between the Government of Uganda and the government of a foreign country or foreign countries shall have effect as if the agreement was contained in this Act.

(2)To the extent that the terms of an international agreement to which Uganda is a party are inconsistent with the provisions of this Act, apart from subsection (5) of this section and Part X which deals with tax avoidance, the terms of the international agreement prevail over the provisions of this Act.

(3)Where an international agreement provides for reciprocal assistance in the collection of taxes and the commissioner has received a request from the competent authority of another country pursuant to that agreement for the collection from any person in Uganda of an amount due by that person under the income tax laws of that other country, the commissioner may, by notice in writing, require the person to pay the amount to the commissioner by the date specified in the notice for transmission to the competent authority of that other country.

(4)If a person fails to comply with a notice under subsection (3), the amount in question may be recovered for transmission to the competent authority of that other country as if it were tax payable by the person under this Act.

(5)Where an international agreement provides that income derived from sources in Uganda is exempt from Ugandan tax or is subject to a reduction in the rate of Ugandan tax, the benefit of that exemption or reduction is not available to any person who, for the purposes of the agreement, is a resident of the other contracting State where 50 percent or more of the underlying ownership of that person is held by an individual or individuals who are not residents of that other contracting State for the purposes of the agreement.

(6)In this section, “international agreement” means—

(a)an agreement with a foreign government providing for the relief of international double taxation and the prevention of fiscal evasion; or

(b)an agreement with a foreign government providing for reciprocal administrative assistance in the enforcement of tax liabilities.

89. Thin capitalisation

(1)Where a foreign-controlled resident company which is not a financial institution has a foreign debt to foreign equity ratio in excess of 2 to 1 at any time during a year of income, a deduction is disallowed for the interest paid by the company during that year on that part of the debt which exceeds the 2 to 1 ratio.

(2)In this section—

(a)“foreign-controlled resident company” means a resident company in which 50 percent or more of the underlying ownership or control of the company is held by a nonresident person, in this section referred to as the “foreign controller”, either alone or together with an associate or associates;

(b)“foreign debt”, in relation to a foreign-controlled resident company, means the greatest amount, at any time during a year of income, of the sum of—

(i)the balance outstanding at that time on any debt obligation owed by the foreign-controlled resident company to a foreign controller or nonresident associate of the foreign controller on which interest is payable which interest is deductible to the foreign-controlled resident company and is not included in the gross income of the foreign controller or associate; and

(ii)the balance outstanding at that time on any debt obligation owed by the foreign-controlled resident company to a person other than the foreign controller or an associate of the foreign controller where that person has a balance outstanding of a similar amount on a debt obligation owed by the person to the foreign controller or a nonresident associate of the foreign controller; and

(c)“foreign equity”, in relation to a foreign-controlled resident company and for a year of income, means the sum of the following amounts—

(i)the paid-up value of all shares in the company owned by the foreign controller or a nonresident associate of the foreign controller at the beginning of the year of income;

(ii)so much of the amount standing to the credit of the share premium account of the company at the beginning of the year of income as the foreign controller or a nonresident associate would be entitled if the company were wound up at that time; and

(iii)so much of the accumulated profits and asset revaluation reserves of the company at the beginning of the year of income as the foreign controller or a nonresident associate of the foreign controller would be entitled if the company were wound up at that time;

reduced by the sum of—

(iv)the balance outstanding at the beginning of the year of income on any debt obligation owed to the foreign-controlled resident company by the foreign controller or a nonresident associate of the foreign controller; and

(v)where the foreign-controlled resident company has accumulated losses at the beginning of the year of income, the amount by which the return of capital to the foreign controller or nonresident associate of the foreign controller would be reduced by virtue of the losses if the company were wound up at that time.

Part X – Antiavoidance

90. Transactions between associates

(1)In any transaction between taxpayers who are associates or who are in an employment relationship, the commissioner may distribute, apportion or allocate income, deductions or credits between the taxpayers as is necessary to reflect the chargeable income the taxpayers would have realised in an arm’s-length transaction.

(2)The commissioner may adjust the income arising in respect of any transfer or licence of intangible property between associates so that it is commensurate with the income attributable to the property.

(3)In making any adjustment under subsection (1) or (2), the commissioner may determine the source of income and the nature of any payment or loss as revenue, capital or otherwise.

91. Recharacterisation of income and deductions

(1)For the purposes of determining liability to tax under this Act, the commissioner may—

(a)recharacterise a transaction or an element of a transaction that was entered into as part of a tax avoidance scheme;

(b)disregard a transaction that does not have substantial economic effect; or

(c)recharacterise a transaction the form of which does not reflect the substance.

(2)A “tax avoidance scheme” in subsection (1) includes any transaction one of the main purposes of which is the avoidance or reduction of liability to tax.

Part XI – Procedure relating to income tax

Returns

92. Furnishing of return of income

(1)Subject to section 93, every taxpayer shall furnish a return of income for each year of income of the taxpayer not later than four months after the end of that year.

(2)A return of income shall be in the form prescribed by the commissioner, shall state the information required and shall be furnished in the manner prescribed by the commissioner.

(3)Subject to subsection (4), a return of income shall be signed by the taxpayer and include a declaration that the return is complete and accurate.

(4)Where a taxpayer is legally incapacitated, the taxpayer’s return of income shall be signed, and contain a declaration as to completeness and accuracy, by the taxpayer’s legal representative.

(5)A taxpayer carrying on business shall furnish with the taxpayer’s return of income a statement of income and expenditure and a statement of assets and liabilities.

(6)A person, other than an employee of the taxpayer, who, for remuneration, prepares or assists in the preparation of a return of income, or a balance sheet, statement of income and expenditure or any other document submitted in support of a return, shall sign the return certifying that the person has examined the books of account and other relevant documentation of the taxpayer and that, to the best of the person’s knowledge, the return or document correctly reflects the data and transactions to which it relates.

(7)Where a person refuses to sign a certificate referred to in subsection (6), the person shall furnish the taxpayer with a statement in writing of the reasons for such refusal, and the taxpayer shall include that statement with the return of income to which the refusal relates.

(8)Where, during a year of income—

(a)a taxpayer has died;

(b)a taxpayer has become bankrupt, wound-up or gone into liquidation;

(c)a taxpayer is about to leave Uganda indefinitely;

(d)a taxpayer is otherwise about to cease activity in Uganda; or

(e)the commissioner otherwise considers it appropriate,

the commissioner may, by notice in writing, require the taxpayer or the taxpayer’s trustee, as the case may be, to furnish, by the date specified in the notice, a return of income for the taxpayer for a period of less than 12 months.

(9)Where any person fails to furnish a return of income as required by this section, the commissioner may, by notice in writing, appoint a person to prepare and furnish the return, and the return so furnished is deemed, for all the purposes of this Act, to be the return of the person originally required to furnish the return.

(10)Where the commissioner is not satisfied with a return of income, the commissioner may, by notice in writing, require the person who has furnished the return to provide a fuller or further return of income.

93. Cases where returns of income not required

Unless requested by the commissioner by notice in writing, no return of income shall be furnished under this Act for a year of income—

(a)by a nonresident person where section 87 applies to all the income derived from sources in Uganda by the person during the year of income; or

(b)by a resident individual—

(i)to whom section 4(4) or (5) applies; or

(ii)whose total chargeable income for the year of income is subject to the zero rate of tax under Part I of the Third Schedule to this Act.

94. Extension of time to furnish a return of income

(1)A taxpayer required to furnish a return of income under section 92 may apply in writing to the commissioner for an extension of time to furnish the return.

(2)An application under subsection (1) shall be made by the due date for furnishing of the return to which it relates.

(3)Where an application has been made under subsection (1) and the commissioner is satisfied that the taxpayer is unable to furnish the return by the due date because of absence from Uganda, sickness or other reasonable cause, the commissioner may, by notice in writing, grant the taxpayer an extension of time for furnishing the return of a period not exceeding 90 days.

(4)A person dissatisfied with a decision under subsection (3) may only challenge the decision under the objection and appeal procedure in this Act.

(5)The granting of an extension of time under this section does not alter the due date for payment of tax under section 103.

Assessments

95. Assessments

(1)Subject to section 96, the commissioner shall, based on the taxpayer’s return of income and on any other information available, make an assessment of the chargeable income of a taxpayer and the tax payable thereon for a year of income within seven years from the date the return was furnished.

(2)Where—

(a)a taxpayer defaults in furnishing a return of income for a year of income; or

(b)the commissioner is not satisfied with a return of income for a year of income furnished by a taxpayer,

the commissioner may, according to the commissioner’s best judgment, make an assessment of the chargeable income of the taxpayer and the tax payable thereon for that year.

(3)Where the commissioner has made an assessment under subsection (2)(b), the commissioner shall include with the assessment a statement of reasons as to why the commissioner was not satisfied with the return.

(4)In the circumstances specified in section 92(8), in lieu of requiring a return of income, the commissioner may, according to the commissioner’s best judgment, make an assessment of the chargeable income of the taxpayer and the tax payable thereon for the year of income.

(5)The commissioner shall not assess any person for a year of income who, as a result of the operation of section 93, is not required to furnish a return of income for that year.

(6)Where an assessment has been made under this section, the commissioner shall serve a notice of the assessment on the taxpayer stating—

(a)the amount of chargeable income of the taxpayer;

(b)the amount of tax payable;

(c)the amount of tax paid, if any; and

(d)the time, place and manner of objecting to the assessment.

96. Self-assessment

(1)Where a taxpayer has furnished a return of income for a year of income, the commissioner is deemed to have made an assessment of the chargeable income of the taxpayer and the tax payable on that chargeable income for that year, being those respective amounts shown in the return.

(2)Where subsection (1) applies, the taxpayer’s return of income is treated as a notice of an assessment served on the taxpayer by the commissioner on the due date for furnishing of the return or on the actual date the return was furnished, whichever is the later.

(3)Notwithstanding subsection (1), the commissioner may make an assessment under section 95 on a taxpayer in any case in which the commissioner considers necessary.

(4)Where the commissioner raises an assessment in accordance with subsection (3), the commissioner shall include with the assessment a statement of reasons as to why the commissioner considered it necessary to make such an assessment.

(5)This section only applies to those taxpayers specified in a notice published by the commissioner in the Gazette as taxpayers to which this section is to apply for a year of income.

97. Additional assessments

(1)Subject to subsections (2) and (3), the commissioner may, within three years after service of a notice of assessment, make an additional assessment amending an assessment previously made.

(2)Where the need to make an additional assessment arises by reason of fraud or any gross or wilful neglect by, or on behalf of, the taxpayer or the discovery of new information in relation to the tax payable for any year of income, the commissioner may make an additional assessment for that year at any time.

(3)The commissioner shall not make an additional assessment amending an assessment in respect of an amount if any previous assessment for the year of income in question has, in respect of that amount, been amended or reduced pursuant to an order of the High Court or the Court of Appeal unless such order was obtained by fraud or any gross or wilful neglect.

(4)An additional assessment shall be treated in all respects as an assessment under this Act.

98. General provisions in relation to assessments

(1)As soon as is reasonably practicable after the expiry of the time allowed under the Act for the furnishing of returns of income for a year of income, the commissioner shall cause to be prepared a list of taxpayers assessed to tax in respect of that year, in this section referred to as an “assessment list”, and the list shall contain in relation to each taxpayer assessed—

(a)the taxpayer’s name and address;

(b)the amount of chargeable income upon which the assessment has been made; and

(c)the amount of tax payable.

(2)In any proceedings, whether civil or criminal, under this Act, a document purporting to be an extract from an assessment list and certified by the commissioner to be a true copy of the relevant entry in the list shall be prima facie evidence of the matters stated therein.

(3)No notice of assessment, warrant or other document purporting to be made, issued or executed under this Act—

(a)shall be quashed or deemed to be void or voidable for want of form; or

(b)shall be affected by reason of mistake, defect or omission therein,

if it is, in substance and effect, in conformity with this Act and the person assessed or intended to be assessed or affected by the document is designated in it according to common intent and understanding.

(4)Where the commissioner is satisfied that an order made or document issued by the commissioner contains a mistake which is apparent from the records and that such mistake does not involve a dispute as to the interpretation of the law or facts of the case, the commissioner may, for the purposes of rectifying the mistake, amend the order or document any time before the expiry of two years from the date of making or issuing the order or document.

Objections and appeals

99. Objection to assessment

(1)A taxpayer who is dissatisfied with an assessment may lodge an objection to the assessment with the commissioner within forty-five days after service of the notice of assessment.

(2)An objection to an assessment shall be in writing and state precisely the grounds upon which it is made.

(3)The commissioner may, upon application in writing by the taxpayer, extend the time for lodging an objection where the commissioner is satisfied that the delay in lodging the objection was due to the taxpayer’s absence from Uganda, sickness or other reasonable cause.

(4)Where the commissioner refuses to grant an extension of time under subsection (3), the taxpayer may apply to the tribunal for a review of the decision within forty-five days after service of notice of the decision.

(5)After consideration of the objection, the commissioner may allow the objection in whole or in part and amend the assessment accordingly, or disallow the objection; and the commissioner’s decision is referred to as an “objection decision”.

(6)As soon as is practicable after making an objection decision, the commissioner shall serve the taxpayer with notice of the decision.

(7)Where an objection decision has not been made by the commissioner within ninety days after the taxpayer lodged the objection with the commissioner, the taxpayer may, by notice in writing to the commissioner, elect to treat the commissioner as having made a decision to allow the objection.

(8)Where a taxpayer makes an election under subsection (7), the taxpayer is treated as having been served with a notice of the objection decision on the date the taxpayer’s election was lodged with the commissioner.

100. Appeal to the High Court or a tax tribunal

(1)A taxpayer dissatisfied with an objection decision may, at the election of the taxpayer—

(a)appeal the decision to the High Court; or

(b)apply for review of the decision to a tax tribunal established by Parliament by law for the purpose of settling tax disputes in accordance with article 152(3) of the Constitution.

(2)An appeal under subsection (1) to the High Court shall be made by lodging a notice of appeal with the registrar of the High Court within forty-five days after service of notice of the objection decision.

(3)A person who has lodged a notice of appeal with the registrar of the High Court shall, within five working days of doing so, serve a copy of the notice of appeal on the commissioner.

(4)An appeal to the High Court under subsection (1) may be made on questions of law only, and the notice of appeal shall state the question or questions of law that will be raised on the appeal.

101. Appeal to the Court of Appeal

A party to a proceeding before the High Court who is dissatisfied with the decision of the High Court may, with leave of the Court of Appeal, appeal the decision to the Court of Appeal.

102. Burden of proof

In any objection to an assessment, any appeal of an objection decision to the High Court, any review of an objection decision by a tax tribunal or any appeal from the decision of the High Court or a tax tribunal in relation to an objection decision, the onus is on the taxpayer to prove, on the balance of probabilities, the extent to which the assessment made by the commissioner is excessive or erroneous.

Collection and recovery of tax

103. Due date for payment of tax

(1)Subject to this Act, tax charged in any assessment shall be payable—

(a)in the case of a taxpayer subject to section 96, on the due date for furnishing of the return of income to which the assessment relates; or

(b)in any other case, within forty-five days from the date of service of the notice of assessment.

(2)Subject to subsection (3), where a taxpayer has lodged a notice of objection to an assessment, the amount of tax payable by the taxpayer pending final resolution of the objection is 30 percent of the tax assessed or that part of the tax not in dispute, whichever is the greater.

(3)The commissioner may waive the amount or accept a lesser amount than is required to be paid under subsection (2) in a case where an objection has reasonably been made to an assessment.

(4)Upon written application by the taxpayer, the commissioner may, where good cause is shown, allow for the payment of tax in installments of equal or varying amounts as the commissioner may determine having regard to the circumstances of the case.

(5)Where tax is permitted to be paid by installments and there is default in payment of any installment, the whole balance of the tax outstanding shall become immediately payable.

(6)Permission under subsection (5) to pay tax due by installments does not preclude a liability for interest arising under section 136 on the unpaid balance of the tax due.

104. Tax as a debt due to the Government of Uganda

(1)Tax, when it becomes due and payable, is a debt due to the Government of Uganda and is payable to the commissioner in the manner and at the place prescribed.

(2)Tax that has not been paid when it is due and payable may be sued for and recovered in any court of competent jurisdiction by the commissioner acting in the commissioner’s official name, subject to the general directions of the Attorney General.

(3)In any suit under this section, the production of a certificate signed by the commissioner stating the name and address of the person liable and the amount of tax due and payable by the person shall be sufficient evidence of the amount of tax due and payable by such person.

105. Collection of tax from persons leaving Uganda permanently

(1)Where the commissioner has reasonable grounds to believe that a person may leave Uganda permanently without paying all tax due under this Act, the commissioner may issue a certificate containing particulars of the tax due to the commissioner of immigration and request the commissioner of immigration to prevent that person from leaving Uganda until that person—

(a)makes payment of tax in full; or

(b)provides a financial bond guaranteeing payment of the tax due.

(2)A copy of a certificate issued under subsection (1) shall be served on the person named in the certificate if it is practicable to do so.

(3)Payment of the tax specified in the certificate to a customs or immigration officer or the production of a certificate signed by the commissioner stating that the tax has been paid or secured shall be sufficient authority for allowing the person to leave Uganda.

106. Recovery of tax from person owing money to the taxpayer

(1)Where a taxpayer fails to pay income tax on the date on which it becomes due and payable, and the tax payable is not the subject of a dispute, the commissioner may, by notice in writing, require any person—

(a)owing or who may owe money to the taxpayer;

(b)holding or who may subsequently hold money for, or on account of, the taxpayer;

(c)holding or who may subsequently hold money on account of some other person for payment to the taxpayer; or

(d)having authority from some other person to pay money to the taxpayer,

to pay the money to the commissioner on the date set out in the notice, up to the amount of tax due.

(2)The date specified in the notice under subsection (1) must not be a date before the money becomes due to the taxpayer or is held on behalf of the taxpayer.

(3)At the same time that notice is served under subsection (1), the commissioner shall also serve a copy of the notice on the taxpayer.

(4)Where a person served with a notice under subsection (1) is unable to comply with the notice by reason of lack of monies owing to or held for the taxpayer, the person shall, as soon as is practicable and in any event before the payment date specified in the notice, notify the commissioner accordingly in writing setting out the reasons for the inability to comply.

(5)Where a notice is served on the commissioner under subsection (4), the commissioner may, by notice in writing—

(a)accept the notification and cancel or amend the notice issued under subsection (1); or

(b)reject the notification.

(6)A person dissatisfied with a decision under subsection (5) may only challenge the decision under the objection and appeal procedure in this Part.

(7)A person making a payment pursuant to a notice under subsection (1) is deemed to have been acting under the authority of the taxpayer and of all other persons concerned and is indemnified in respect of the payment against all proceedings, civil or criminal, and all processes, judicial or extrajudicial, notwithstanding any provisions to the contrary in any written law, contract or agreement.

(8)The provisions of this Act relating to the collection and recovery of tax shall apply to any amount due under this section as if it were tax due.

107. Collection of tax by distraint

(1)The commissioner may recover any unpaid tax by distress proceedings against the movable property of a person liable to pay tax, in this section referred to as the “person liable”, by issuing an order in writing specifying the person against whose property the proceedings are authorised, the location of the property and the tax liability to which the proceedings relate, and may require a police officer to be present while distress is being executed.

(2)For the purposes of executing distress under subsection (1), the commissioner may, at any time, enter any house or premises described in the order authorising the distress proceedings.

(3)The property upon which distress is levied under this section, other than perishable goods, shall be kept for ten days either at the premises where the distress was levied or at any other place that the commissioner may consider appropriate, at the cost of the person liable.

(4)Where the person liable does not pay the tax due, together with the costs of the distress—

(a)in the case of perishable goods, within a period that the commissioner considers reasonable having regard to the condition of the goods; or

(b)in any other case, within ten days after the distress is levied,

the property distrained may be sold by public auction or in such other manner as the commissioner may direct.

(5)The proceeds of a disposal under subsection (4) shall be applied by the auctioneer or seller towards the cost of taking, keeping and selling the property distrained upon, then towards the tax due and payable; and the remainder of the proceeds, if any, shall be given to the person liable.

(6)Nothing in this section shall preclude the commissioner from proceeding under section 104 with respect to the balance owed if the proceeds of the distress are not sufficient to meet the costs of the distress and the tax due.

(7)All costs incurred by the commissioner in respect of any distress may be recovered by the commissioner from the person liable, and the provisions of this Act relating to the collection and recovery of tax shall apply as if the costs were tax due under this Act.

(8)The Minister may, with the approval of Parliament by statutory instrument, within three months after the coming into force of this Act, make rules regarding the disposal of properties distrained under this section.

108. Recovery from agent of nonresident

(1)The commissioner may, by notice in writing, require any person who is in possession of an asset, including money, belonging to a nonresident taxpayer to pay tax on behalf of the nonresident, up to the market value of the asset but not exceeding the amount of tax due.

(2)The captain of any aircraft or ship owned or chartered by a nonresident person is deemed to be in possession of the aircraft or ship for the purposes of this section.

(3)The tax payable in respect of an amount included in the gross income of a nonresident partner under section 67 is assessable in the name of the partnership or of any resident partner of the partnership and may be recovered out of the assets of the partnership or from the resident partner personally.

(4)The tax payable in respect of an amount included in the gross income of a nonresident beneficiary as a result of the operation of section 72 or 73 is assessable in the name of the trustee and may be recovered out of the assets of the trust or from the trustee personally.

(5)A person making a payment pursuant to a notice under subsection (1) is deemed to have been acting under the authority of the taxpayer and of all other persons concerned and is indemnified in respect of the payment against all proceedings, civil or criminal, and all processes, judicial or extrajudicial, notwithstanding any provisions to the contrary in any written law, contract or agreement.

(6)The provisions of this Act relating to the collection and recovery of tax shall apply to any amount due under this section as if it were tax due.

109. Duties of receivers

(1)A receiver shall, in writing, notify the commissioner within fourteen days of being appointed to the position of receiver or of taking possession of an asset in Uganda, whichever occurs first.

(2)The commissioner may, in writing, notify a receiver of the amount which appears to the commissioner to be sufficient to provide for any tax which is or will become payable by the person whose assets are in the possession of the receiver.

(3)A receiver shall not part with any asset in Uganda which is held by the receiver in the capacity as receiver without the prior written permission of the commissioner.

(4)A receiver—

(a)shall set aside, out of the proceeds of sale of an asset, the amount notified by the commissioner under subsection (2), or such lesser amount as is subsequently agreed on by the commissioner;

(b)is liable to the extent of the amount set aside for the tax of the person who owned the asset; and

(c)may pay any debt that has priority over the tax referred to in this section notwithstanding any provision of this section.

(5)A receiver is personally liable to the extent of any amount required to be set aside under subsection (4) for the tax referred to in subsection (2) if, and to the extent that, the receiver fails to comply with the requirements of this section.

(6)In this section, “receiver” includes any person who, in respect to an asset in Uganda, is—

(a)a liquidator of a company;

(b)a receiver appointed out of court or by any court;

(c)a trustee for a bankrupt;

(d)a mortgagee in possession;

(e)an executor of a deceased’s estate; or

(f)any other person conducting the business of a person legally incapacitated.

110. Security on property for unpaid tax

(1)Where any person who is the owner of land or buildings situated in Uganda fails to pay tax when due, the commissioner may, by notice in writing, notify the person of the intention to apply to the chief registrar of titles, in this section referred to as the “chief registrar”, for such land or buildings to be the subject of security for tax as specified in the notice.

(2)If any person on whom a notice has been served under this section fails to make payment of the whole of the amount of the tax specified in the notice within 30 days of the date of service of the notice under subsection (1), the commissioner may, by notice in writing, in this section referred to as a “notice of direction”, direct the chief registrar that the land or buildings of the person, to the extent of the interest of such person therein, be the subject of security for unpaid tax in the amount specified in the notice.

(3)Where a notice of direction is served on the chief registrar under subsection (2), the chief registrar shall, without fee, register the direction as if it were an instrument or mortgage over, or charge on, as the case may be, such land or buildings; and thereupon such registration shall, subject to any prior mortgage or charge, operate in all respects as a legal mortgage over or charge on such land or building to secure the amount of the unpaid tax.

(4)Upon receipt of the whole of the amount of tax secured under subsection (3), the commissioner shall serve notice on the chief registrar cancelling the direction made under subsection (2); and the chief registrar shall, without fee, record the cancellation at which time the direction shall cease to exist.

Provisional tax

111. Payment of provisional tax

(1)A person who derives or expects to derive any income during a year of income which is not or will not be subject to withholding of tax at the source under section 116, 117 or 118 or subject to tax under section 5 is liable to pay provisional tax under this section.

(2)A provisional taxpayer, other than an individual, is liable to pay two installments of provisional tax, on or before the last day of the sixth and twelfth months of the year of income, in respect of the taxpayer’s liability for income tax for that year.

(3)For the purposes of subsection (2), the amount of each installment of provisional tax for a year of income is calculated according to the following formula—50% x (A - B) where—A is the estimated tax payable by the provisional taxpayer for the year of income; andB is the amount of any tax withheld under this Act, prior to the due date for payment of the installment, from any amounts derived by the taxpayer during the year of income which will be included in the gross income of the taxpayer for that year.

(4)A provisional taxpayer who is an individual is liable to pay four installments of provisional tax, on or before the last day of the third, sixth, ninth and twelfth months on the year of income, in respect of the taxpayer’s liability for income tax for that year.

(5)For the purposes of subsection (4), the amount of each installment of provisional tax for a year of income is calculated according to the following formula—25% x (A - B) where—A is the estimated tax payable by the provisional taxpayer for the year of income; andB is the amount of any tax withheld under this Act, prior to the due date for payment of the installment, from any amounts derived by the taxpayer during the year of income which will be included in the gross income of the taxpayer for that year.

(6)Upon written application by the taxpayer, the commissioner may, where good cause is shown, extend the due date for payment of an installment of provisional tax or allow for payment of such an installment in equal or varying amounts.

(7)An installment of provisional tax, when it becomes due and payable, is a debt due to the Government, and the provisions of this Act shall apply for the purposes of the collection and recovery of provisional tax by the commissioner.

(8)Each installment of provisional tax shall be credited against the income tax assessed to the provisional taxpayer for the year of income to which the installment relates.

(9)Where the total of the installments credited under subsection (8) exceeds the taxpayer’s income tax assessed for that year, the excess shall be dealt with by the commissioner in accordance with section 113(3).

(10)No installment of provisional tax paid by a provisional taxpayer shall be refunded to the taxpayer other than in accordance with subsection (9).

(11)In this section, “estimated tax payable” has the meaning in section 112.

112. Estimated tax payable

(1)A provisional taxpayer’s estimated tax payable for a year of income is—

(a)in the case of a taxpayer to whom section 4(5) applies, the amount determined under the Second Schedule to this Act for that year as the tax payable on the gross turnover of the taxpayer estimated for that year under subsection (2); or

(b)in any other case, the amount calculated by applying the rates of tax in force for that year against the amount estimated under subsection (3) by the taxpayer as the chargeable income of the taxpayer for the year.

(2)Every provisional taxpayer to whom section 4(5) applies shall furnish an estimate of the gross turnover of the taxpayer for each year of income and shall include with the estimate for a year of income, a statement of the actual gross turnover of the taxpayer for the previous year of income.

(3)Every provisional taxpayer, other than a taxpayer to whom section 4(5) applies, shall furnish an estimate of the chargeable income to be derived by the taxpayer for a year of income in respect of which provisional tax is or may be payable by the taxpayer.

(4)A provisional taxpayer’s estimate under subsection (2) or (3) shall be in the form prescribed by the commissioner and shall be furnished to the commissioner by the due date for payment of the first installment of provisional tax for the year of income.

(5)A provisional taxpayer’s estimate under subsection (2) or (3) shall remain in force for the whole of the year of income unless the taxpayer furnishes a revised estimate to the commissioner which revised estimate shall only apply to the calculation of the provisional tax payable by the taxpayer after the date the revised estimate was furnished to the commissioner.

(6)Where a provisional taxpayer fails to furnish an estimate of gross turnover or chargeable income as required by subsection (2) or (3), the estimated gross turnover or chargeable income of the taxpayer for the year of income shall be such amount as estimated by the commissioner.

Refund of tax

113. Refunds

(1)A taxpayer may apply to the commissioner for a refund, in respect of any year of income, of any tax paid by withholding, installments or otherwise in excess of the tax liability assessed to or due by the taxpayer for that year.

(2)An application for a refund under this section shall be made to the commissioner in writing within five years of the later of—

(a)the date on which the commissioner has served the notice of assessment for the year of income to which the refund application relates; or

(b)the date on which the tax was paid.

(3)Where the commissioner is satisfied that tax has been overpaid, the commissioner shall—

(a)apply the excess in reduction of any other tax due from the taxpayer; and

(b)apply the balance of the excess, if any, in reduction of any outstanding liability of the taxpayer to pay other taxes not in dispute or to make provisional tax payments during the year of income in which the refund is to be made.

(4)Where the commissioner is required to refund an amount of tax to a person as a result of—

(a)an application made to him or her under this Act;

(b)a decision under section 99;

(c)a decision of the High Court or a tax tribunal under section 100; or

(d)a decision of the Court of Appeal under section 101,

the commissioner shall pay simple interest at a rate of 2 percent per month for the period commencing on the date the person paid the tax refunded and ending on the last day of the month in which the refund is made.

(5)The commissioner shall, within thirty days of making a decision on a refund application under subsection (1), serve on the person applying for the refund a notice in writing of the decision.

(6)A person dissatisfied with a decision referred to in subsection (5) may only challenge the decision under the objection and appeal procedure in this Act.

Part XII – Procedure relating to gross rental tax

114. Gross rental tax

(1)A resident individual charged to tax under section 5 shall furnish a return of gross rental income for each year of income not later than four months after the end of that year.

(2)Sections 92, 94 to 110 and 113 apply, with the necessary changes made, to the tax imposed under section 5.

(3)For the avoidance of doubt, the commissioner shall prescribe the form for return of gross rental income under this section.

Part XIII – Withholding of tax at the source

115. Interpretation of Part XIII

In this Part—

(a)“payee” means a person receiving payments from which tax is required to be withheld under this Part; and

(b)“withholding agent” means a person obliged to withhold tax under this Part.

116. Withholding of tax by employers

(1)Every employer shall withhold tax from a payment of employment income to an employee as prescribed by regulations made under section 164.

(2)The obligation of an employer to withhold tax under subsection (1) is not reduced or extinguished because the employer has a right, or is otherwise under an obligation, to deduct and withhold any other amount from such payments.

(3)The obligation of an employer to withhold tax under subsection (1) applies notwithstanding any other law which provides that the employment income of an employee shall not be reduced or subject to attachment.

117. Payment of interest to resident persons

(1)Subject to subsection (2), a resident person who pays interest to another resident person shall withhold tax on the gross amount of the payment at the rate prescribed in Part V of the Third Schedule to this Act.

(2)This section does not apply to—

(a)interest paid by a natural person;

(b)interest paid to a financial institution;

(c)interest paid by a company to an associated company; or

(d)interest paid which is exempt from tax in the hands of the recipient.

(3)In this section, “associated company”, in relation to a company, in this subsection referred to as the “payer company”, means—

(a)a company in which the payer company controls 50 percent or more of the voting power in the company either directly or through one or more interposed companies;

(b)a company which controls 50 percent or more of the voting power in the payer company either directly or through one or more interposed companies; or

(c)a company, in this subsection referred to as the “payee company”, where another company controls 50 percent of the voting power in the payee and payer companies either directly or through one or more interposed companies.

118. Payment of dividends to resident shareholders

(1)A resident company which pays a dividend to a resident shareholder shall withhold tax on the gross amount of the payment at the rate prescribed in Part V of the Third Schedule to this Act.

(2)This section does not apply where the dividend income is exempt from tax in the hands of the shareholder.

119. Payment for goods and services

(1)Where the Government of Uganda, a Government institution, a local authority, any company controlled by the Government of Uganda, or any person designated in a notice issued by the Minister, in this section referred to as the “payer”, pays an amount or amounts in aggregate exceeding one million shillings to any person in Uganda—

(a)for a supply of goods or materials of any kind; or

(b)for a supply of any services,

the payer shall withhold tax on the gross amount of the payment at the rate prescribed in Part VIII of the Third Schedule to this Act, and the payer shall issue a receipt to the payee.

(2)Where—

(a)there are separate supplies of goods or materials, or of services and each supply is made for an amount that is one million shillings or less; and

(b)it would reasonably be expected that the goods or materials, or services would ordinarily be supplied in a single supply for an amount exceeding one million shillings,

subsection (1) applies to each supply.

(3)Every person who imports goods into Uganda is liable to pay tax at the time of importation on the value of the goods at the rate prescribed in Part VIII of the Third Schedule to this Act.

(4)The value of goods under subsection (3) shall be the value of the goods ascertained for the purposes of customs duty under the laws relating to customs.

(5)This section does not apply to—

(a)a supply or importation of petroleum or petroleum products, including furnace oil, lubricants, other than cosmetics, and fabrics or yarn manufactured out of petroleum products;

(b)a supply or importation of plant and machinery;

(c)a supply or importation of human or animal drugs;

(d)a supply or importation of scholastic materials;

(e)importations by organisations within the definition of “exempt organisation” in section 2(bb)(i)(B); or

(f)a supplier or importer—

(i)who is exempt from tax under this Act; or

(ii)who the commissioner is satisfied has regularly complied with the obligations imposed on the supplier or importer under this Act.

(6)The tax paid under subsections (1) and (3) is treated as withholding tax for the purposes of section 128.

120. International payments

(1)Any person making a payment of the kind referred to in section 83 or 85 shall withhold from the payment the tax levied under the relevant section.

(2)Any promoter, agent or similar person—

(a)paying remuneration to a nonresident entertainer or sportsperson; or

(b)responsible for collecting the gross receipts from a performance in Uganda by a theatrical, musical or other group of nonresident entertainers or sportspersons,

shall withhold from the remuneration or receipts the tax levied under section 84.

(3)This section does not apply where the payment is exempt from tax.

121. Nonresident services contract

(1)Every person who enters into an agreement with a nonresident for the provision of services by the nonresident which services give rise to income sourced in Uganda shall, within thirty days of the date of entering into such agreement, notify the commissioner in writing of—

(a)the nature of such agreement;

(b)the likely duration of the agreement;

(c)the name and postal address of the nonresident person to whom payments under the agreement are to be made; and

(d)the total amount estimated to be payable under the agreement to the nonresident person.

(2)The commissioner may, by notice in writing served on the person who has notified the commissioner under subsection (1), require that person to withhold tax from any payment made under the agreement at the rate specified by the commissioner in the notice.

(3)This section does not apply to a contract to which section 85 applies.

122. Withholding as a final tax

Where —

(a)tax has been withheld under section 117 on a payment of interest by a financial institution to a resident individual, other than in the capacity of trustee, resident retirement fund or to an exempt organisation; or

(b)tax has been withheld under section 118 on a payment of dividends to a resident individual;

the withholding tax is a final tax, and—

(c)no further tax liability is imposed upon the taxpayer in respect of the income to which the tax relates;

(d)that income is not aggregated with the other income of the taxpayer for the purposes of ascertaining chargeable income;

(e)no deduction is allowed for any expenditure or losses actually incurred in deriving the income; and

(f)no refund of tax shall be made in respect of the income.

123. Payment of tax withheld

(1)Subject to subsection (2), a withholding agent shall pay to the commissioner any tax that has been withheld or that should have been withheld under this Part within fifteen days after the end of the month in which the payment subject to withholding tax was made by the withholding agent.

(2)Where a person withholds or should have withheld tax as required under section 120(2), the tax shall be paid to the commissioner within five days of the performance or by the day before the date the nonresident leaves Uganda, whichever is the earlier.

(3)The provisions of this Act relating to the collection and recovery of tax apply to any amount withheld under this Part as if it were tax.

124. Failure to withhold tax

(1)A withholding agent who fails to withhold tax in accordance with this Act is personally liable to pay to the commissioner the amount of tax which has not been withheld, but the withholding agent is entitled to recover this amount from the payee.

(2)The provisions of this Act relating to the collection and recovery of tax apply to the liability imposed by subsection (1) as if it were tax.

125. Tax credit certificates

(1)Subject to subsection (3), a withholding agent shall deliver to the payee a tax credit certificate setting out the amount of payments made and tax withheld during a year of income.

(2)A payee who is required to furnish a return of income shall attach to the return the tax credit certificate or certificates supplied to the payee for the year of income for which the return is filed.

(3)A withholding agent shall at the end of each year of income deliver to the employee to which section 4(4) applies a certificate setting out the amount of tax withheld during a year of income.

126. Record of payments and tax withheld

(1)A withholding agent shall maintain, and keep available for inspection by the commissioner, records showing, in relation to each year of income—

(a)payments made to a payee; and

(b)tax withheld from those payments.

(2)The records referred to in subsection (1) shall be kept by the withholding agent for five years of income after the end of the year of income to which the records relate.

(3)The commissioner may call upon a withholding agent to allow an auditor to examine the agent’s records to verify their accuracy against the agent’s tax credit certificates.

127. Priority of tax withheld

(1)Tax withheld by a withholding agent under this Act—

(a)is held by the withholding agent in trust for the Government of Uganda; and

(b)is not subject to attachment in respect of a debt or liability of the withholding agent,

and in the event of the liquidation or bankruptcy of the withholding agent, an amount withheld under this Act does not form a part of the estate in liquidation, assignment or bankruptcy; and the commissioner shall have a first claim before any distribution of property is made.

(2)Every amount which a withholding agent is required under this Act to withhold from a payment is—

(a)a first charge on that payment; and

(b)withheld prior to any other deduction which the withholding agent may be required to make by virtue of an order of any court or any other law.

128. Adjustment on assessment and withholding agent’s indemnity

(1)The amount of tax withheld under this Part is treated as income derived by the payee at the time it was withheld.

(2)A withholding agent who has withheld tax under this Part and remitted the amount withheld to the commissioner is treated as having paid the withheld amount to the payee for the purposes of any claim by that person for payment of the amount withheld.

(3)Tax withheld from a payment under this Part is deemed to have been paid by the payee and, except in the case of a tax that is a final tax under this Act, is credited against the tax assessed on the payee for the year of income in which the payment is made.

(4)Where the tax withheld under this Part for a year of income, together with any provisional tax paid under section 111 for that year, exceeds the liability under an assessment of the taxpayer for that year, the excess shall be dealt with by the commissioner in accordance with section 113(3).

(5)Where a person who pays tax in accordance with section 119(3) is an individual whose only source of income is employment income, the tax shall be refunded on application by that person in accordance with section 113.

Part XIV – Records and information collection

129. Accounts and records

(1)Unless otherwise authorised by the commissioner, a taxpayer shall maintain in Uganda such records as may be necessary to explain the information provided in a return or in any other document furnished in terms of section 92 or to enable an accurate determination of the tax payable by the taxpayer.

(2)The commissioner may disallow a claim for a deduction if the taxpayer is unable without reasonable excuse to produce a receipt or other record of the transaction, or to produce evidence relating to the circumstances giving rise to the claim for the deduction.

(3)The record or evidence referred to in this section shall be retained for five years.

130. Business information returns

(1)Every person carrying on business in Uganda who makes a payment of income sourced in Uganda, being services income, other than employment income, interest, royalties, management fees or other income specified by the commissioner shall furnish a return of such payments, in this section referred to as a “business information return”, to the commissioner within sixty days after the end of the year of income in which the payment was made.

(2)A business information return shall be in the form specified by the commissioner and shall state the information required.

(3)Subsection (1) does not apply to the payment of any income subject to withholding of tax at the source under Part XIII.

131. Access to books, records and computers

(1)In order to enforce a provision of this Act, the commissioner, or any officer authorised in writing by the commissioner—

(a)shall have at all times and without any prior notice full and free access to any premises, place, book, record or computer;

(b)may make an extract or copy from any book, record or computer-stored information to which access is obtained under paragraph (a) of this subsection;

(c)may seize any book or record that, in the opinion of the commissioner or the authorised officer, affords evidence which may be material in determining the liability of any person to tax, interest, penal tax or penalty under this Act;

(d)may retain any such book or record for as long as it may be required for determining a person’s tax liability or for any proceeding under this Act; and

(e)may, where a hard copy or computer disk of information stored on a computer is not provided, seize and retain the computer for as long as is necessary to copy the information required.

(2)No officer shall exercise the powers under subsection (1) without authorisation in writing from the commissioner, and the officer shall produce the authorisation to the occupier of the premises or place to which the exercise of powers relates.

(3)The occupier of the premises or place to which an exercise of power under subsection (1) relates shall provide all reasonable facilities and assistance for the effective exercise of the power.

(4)A person whose books, records or computer have been removed and retained under subsection (1) may examine them and make copies or extracts from them during regular office hours under such supervision as the commissioner may determine.

(5)All records, books or computers removed and retained under subsection (1) shall be signed for by the commissioner or an authorised officer, and the commissioner shall return them to the owner.

(6)Where the records, books or computers referred to in subsection (1) are lost or destroyed in the possession of the commissioner, the commissioner shall appropriately compensate the taxpayer for the loss or destruction.

(7)This section has effect notwithstanding any rule of law relating to privilege or the public interest in relation to the production of or access to documents.

(8)In this section, “occupier” in relation to premises or a place means the owner, manager or any other responsible person on the premises or place.

132. Notice to obtain information or evidence

(1)The commissioner may, by notice in writing, require any person whether or not liable for tax under this Act—

(a)to furnish, within the time specified in the notice, any information that may be required by the notice; or

(b)to attend at the time and place designated in the notice for the purpose of being examined on oath by the commissioner or by an officer authorised by the commissioner, concerning the tax affairs of that person or any other person and, for that purpose, the commissioner or an authorised officer may require the person examined to produce any book, record or computer- stored information in the control of the person.

(2)Where the notice requires the production of a book, record or computer-stored information, it is sufficient if such book, record or computer-stored information is described with reasonable certainty.

(3)A notice issued under this section shall be served by or at the direction of the commissioner by a signed copy delivered by hand to the person to whom it is directed or left at the person’s last and usual place of business or abode, and the certificate of service signed by the person serving the notice shall be evidence of the facts stated therein.

(4)Where the notice is not served personally on the person to whom it is directed, the service shall be witnessed by a member of the executive committee of the local council.

(5)This section has effect notwithstanding any rule of law relating to privilege or the public interest in relation to the production of or access to documents.

133. Books and records not in the English language

Where any book, record or computer-stored information referred to in sections 129, 131 or 132 is not in English, the commissioner may, by notice in writing, require the person keeping the book, record or computer-stored information to provide, at the person’s expense, a translation into English by a translator approved by the commissioner.

Tax clearance certificate

134. Tax clearance certificate

A taxpayer—(a)providing a passenger transport service;(b)providing a freight transport service where the goods vehicle used has a load capacity of more than two tonnes;(c)supplying goods or services to the Government; or(d)transferring funds in excess of 2500 currency points from Uganda to a place outside Uganda,shall obtain a tax clearance certificate from the commissioner as provided for in regulations made under

Income Tax Act

Related documents

Income Tax Act

Chapter 340

Part I – Preliminary

1. Application of the Act

2. Interpretation

3. Associate

Part II – Imposition of tax

4. Income tax imposed

5. Rental tax imposed

Rates of tax

6. Rates of tax for individuals

7. Rate of income tax for companies

8. Rate of income tax for trustees and retirement funds

Part III – Residents and nonresidents

9. Resident individual

10. Resident company

11. Resident trust

12. Resident partnership

13. Resident retirement fund

14. Nonresident person

Part IV – Chargeable income

15. Chargeable income

16. Chargeable income arising from insurance business

Gross income

17. Gross income

18. Business income

19. Employment income

20. Property income

Exempt income

21. Exempt income

Deductions

22. Expenses of deriving income

23. Meal, refreshment and entertainment expenditure

24. Bad debts

25. Interest

26. Repairs and minor capital equipment

27. Depreciable assets

28. Initial allowance

29. Industrial buildings

30. Start-up costs

31. Costs of intangible assets

32. Scientific research expenditure

33. Training expenditure

34. Charitable donations

35. Farming

36. Mineral exploration expenditures

37. Apportionment of deductions

38. Carry forward losses

Part V – Tax accounting principles

39. Substituted year of income

40. Method of accounting

41. Cash-basis taxpayer

42. Accrual-basis taxpayer

43. Prepayments

44. Claim of right

45. Long-term contracts

46. Trading stock

47. Debt obligations with discount or premium

48. Foreign currency debt gains and losses

Part VI – Gains and losses on disposal of assets

49. Application of Part VI

50. Gains and losses on disposal of assets

51. Disposals

52. Cost base

53. Special rules for consideration received

54. Nonrecognition of gain or loss

Part VII – Miscellaneous rules for determining chargeable income

55. Income of joint owners

56. Valuation

57. Currency conversion

58. Indirect payments and benefits

59. Finance leases

60. Exclusion of doctrine of mutuality

61. Compensation receipts

62. Recouped expenditure

Part VIII – Persons assessable

Taxation of individuals

63. Taxation of individuals