UGANDA, Kampala | Real Muloodi News | Uganda’s real estate sector continues to be under the spotlight of the Uganda Revenue Authority (URA). The taxman has recently stepped up its efforts aimed at enhancing revenue collection and formalising the informal rental market with door-to-door visitations targeting rental tax in the Kampala Central Business District.
One of the primary goals of the of the visitations is to identify the correct rental tax landlords are eligible to pay, issue assessments and penalties to non-compliant landlords, and ensure VAT-registered landlords are issuing tenants with e-invoices submitted through the Electronic Fiscal Receipting and Invoicing System (EFRIS).
This enforcement follows a long period of tax education and sensitisation about rental tax obligations, EFRIS, the benefits of compliance and the impending consequences of non-compliance. All landlords that fail to comply are subject to hefty fines.
A team of 201 URA officers started going to the field in January and will continue until at least June of this year, under the oversight of Sandra Kaitare, the Assistant Commissioner of the Petroleum and Mining Division, who is directing the field operations.
“Failure to pay rental tax earns you a penalty of 2% interest per month from the time you defaulted until you pay the taxes. Furthermore, both businesses and individual VAT taxpayers that defy EFRIS have to pay a penalty of UGX 6 million per month,” says Kaitare.
John Rujoki Musinguzi, the URA Commissioner General, further emphasises the need to enhance revenue collection and eliminate loopholes. “Though there has been an increase in collections from the real estate sector, which have doubled as per last year’s performance, a lot remains uncollected, and this is what we want to maximise,” he says.
According to Musinguzi, a staggering USh50 billion of rental income was identified from a mere handful of Kampala arcades, as revealed by the recent field visitation exercises. This substantial sum was accumulated from just seven buildings that were audited.
“From an audit of seven arcades, the accumulated amount is up to Shillings 50 billion. Now if I am to audit all the arcades, they might end in closure. So let us do the right thing going forward,” he says.
Musinguzi emphasises that henceforth, commercial building landlords must adopt the practice of issuing e-receipts to ensure the accuracy of income declarations submitted to URA.
The current field visitation exercise follows the effective implementation of the URA’s Rental Tax Compliance System in April 2022, which resulted in record-breaking rental income tax revenues in the 2022/23 financial year. Following implementation of the compliance technology, URA’s rental income collections increased by USh 59 billion, netting the taxman a total USh 215 billion in rental tax revenue.
In light of URA’s beefed-up enforcement efforts, voluntary disclosure has emerged as a crucial strategy for landlords to avoid these penalties, and to ensure compliance while fostering cooperation with tax authorities.
Voluntary disclosure, a proactive initiative undertaken by taxpayers, allows them to rectify errors or omissions in their tax filings without facing punitive measures.
Under the Tax Procedures Code Act (TPCA), taxpayers who voluntarily disclose any undeclared tax may enter into agreements with the Uganda Revenue Authority (URA) to settle outstanding taxes without incurring interest or fines. This approach aims to promote transparency, compliance, and ethical business practices in the tax ecosystem.
Furthermore, voluntary disclosure extends to various income-generating activities, covering penalties and interest under different tax laws, including the Income Tax Act, Value Added Tax Act, Excise Duty Act, Stamp Duty Act, Lotteries & Gaming Act, and Tax Procedures Code Act. This comprehensive framework encourages taxpayers to rectify past discrepancies, enhance their compliance reputation, and mitigate litigation risks.
By fostering cooperation between taxpayers and the tax authority through voluntary disclosure, Uganda can promote a more equitable and sustainable real estate sector, while generating additional resources for public services and infrastructure development.
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