Property Rates: Frequently Asked Questions

Yes. Property rating in Uganda is governed by the Local Governments (Rating) Act, No.8 of 2005 (LGRA) as amended, the Local Governments (Rating) Regulations 2006. The law (Section 3 of the LGRA) empowers local governments to value, assess and collect taxes within their areas of jurisdiction.

Under the Local Government (Rating) Act, 2005, property rates are levied on commercial properties. It is a tax on all immovable property (buildings or structures) that are commercially managed like schools, rented houses, rented shops, factories, hotels, universities and any part of a property that is used for the purpose of business, even if it is occupied by the owner. 

However, the tax does not apply to residential dwellings where the owner resides, or to vacant land.

The Ugandan Government’s current Local Government Management and Service Delivery Programme does not provide City Administrations with adequate funding to meet their budgetary needs necessary to deliver much needed services to their local communities. Therefore, City Administrations must raise their own revenues to make up for the budget shortfalls.

The revenue from property rates is one way City Administrations can raise the revenues they need to exercise their discretionary power while providing services at the local level.

Local services include things like city planning and management, road construction and maintenance, street lights, sanitation and garbage collection, antimalarial drugs and clean water services that are important to the entire local community, including property owners.

Local services impact the quality of life and health of all residents.

Local services also impact property values; property values tend to be higher in cities that are well planned and maintained and have access to services, and lower in cities that are lacking these qualities.

Section 6(1) of the Local Government (Rating) Act provides "that the person liable for payment of the rate shall be the owner of the property in respect of which the assessment is made.

” Therefore, anyone who owns a building which is used for commercial purposes (including residential rented properties) is eligible to pay.

Demand Notes are printed and issued to the property owners indicating the amounts payable for the given property.

In Mbarara City, Property Rates are Payable to the following account details:

Account Name: Mbarara City Property Tax Account
Account Number: 3100075901
Bank: Centenary Bank
Branch: Mbarara Branch

Property rates shall be paid in not more than two equal installments on such dates, as the Local Government may appoint, within the financial year for which it is levied.

Payment of rates should be made in the first 30 days of the financial year when the rate becomes due.

It is important to pay property rates on time, since amounts payable are planned to provide services within that same financial year.

The Local Government may charge and collect interest on any rate which remains in arrears for more than thirty days from the day it becomes payable, at the rate of 2 per cent per month for the period the rate remains unpaid.

This means that after a year of non-payment, a property owner would owe an additional 24% on top of the original amount they were charged. In other words, if your property rate levy was USh1,000,000, and you didn’t pay

the levy for 12 months, you now owe a total of USh1,240,000. This is USh240,000 more than if you had paid the rate on time.

Where the owner of the property, upon prior approval by the Local Government, spends money on any infrastructural work otherwise meant to be done by the Local Government, e.g. access roads, this expenditure shall be offset against his or her pending rate.

The following conditions must be fulfilled before such expenditure is undertaken:

• The Local Government must approve the Proposal
• The Proposal must be for the general good of the rate payer and other rate payers in the area like a road, a community not for profit health facility, etc.
• The Proposal must comply with infrastructure planning of the Local
  Authority.
• The Local Government Engineer must certify that the works conform to the standards of the local government and all regulatory bodies and will be provided in a cost effective manner.

If a property owner fails to pay his/her property rates due, the Local Government will recover these funds through the following:

Recovery by warrant:
(1) If a rate is not paid by the date appointed for that purpose, the Local Government may cause a demand notice to be served upon the person liable, requiring him or her to pay the rate together with interest, if any, on that rate within two months after the service of the notice.

(2) If, after the service of the demand notice, the amount is not paid within two months, the Local Government may apply to the magistrate having jurisdiction within the area where the property is situated for a summary warrant to recover the amount from the person liable.

(3) The magistrate shall grant the warrant upon satisfaction that the person sought to be proceeded against is the person liable to pay the amount that the amount is due from him or her and that he or she has been duly served with a demand notice.

(4) Every warrant granted under sub-section (5) shall be executed as if it were a writ of execution issued by the court of the magistrate granting it.

Recovery by action:
(1) The Local Government may bring an action for the recovery of the amount of rate and interest, if any, without serving a demand notice over a property. In this action courts of law will weigh all options and grant the Local Government ways of recovering the debt which may include, but not limited to, taking over management of the Building or other rights of set off.

Recovery from tenants and current occupiers

This is where the Tenants in the building are compelled by law to pay the rate and deduct all such amounts from the amount of rent they would have paid the Landlord. When a Tenant pays under these circumstances, the law bars the Landlord from claiming for the rent in as far as the period covered by the amount paid by the tenant to the Local Government.

(2) The action above shall be effected within six years after the rate became due.

The contents of the valuation list constitute public information and the Rate Payer has the right to check and even take certified copies of the same upon payment of a prescribed fee (as council may determine from time to time).

The contents of a valuation list as for the time being in force or an extract from any such list may be proved by the production of a copy of the list or the extract of it certified by the Valuation Office or Executive Director of Municipal Council or Town Clerk of Municipal Council Division Urban Councils to be a true copy.

Buyer to satisfy himself or herself about arrears:
Before purchase of a rateable property, the Buyer should seek information from the Local Government on whether the property in question is in default of rates due. The Local government will be obliged to issue a certificate of arrears in respect of such a property.

It is the right of the buyer to demand a certification of arrears from the Seller, and if the seller does not produce the certificate, the Buyer may inquire from the Authority upon the payment of a prescribed fee.

Prohibition against transfer of property in arrears of rate:
No transfer, registration of titles or documents of any property shall be processed unless a certificate that no arrears of rates are due in respect of that property has been issued by the Local Authority of the area where the property is situated.

Person liable to notify transfer of the property:

A seller who is liable to pay rates before the transaction will notify the Local Government that he/she has sold the property and is no longer liable to pay the rate. If the seller does not do this, the Local Government may continue to demand rates from him/her as though he/she still owns the property.

The following properties are exempted from paying property rates tax under the Local Government Act 2005 and its amendments of 2006;

• Vacant Land, residential dwellings where the owner resides
• Any official residence of the President
• Any official residence of a traditional or cultural leader.
• Any property used exclusively for public worship, and as a residence of a religious leader.
• Any property used exclusively as a cemetery or as a crematorium.
• Any property used exclusively for the purposes of any charitable or
  educational institution of a public character supported only by endowments or voluntary contributions.
• Any property laid out and used exclusively for the purpose of outdoor sport or recreation.
• Any property belonging to a mission/organization entitled to privileges under the diplomatic privileges Act.
• Any property belonging to an organization in respect of which Uganda is obliged under any international convention or treaty.
• Any property belonging to any institution with which the Government has contractual obligation not to levy fees and tax against it.

Every Owner of an Exempt property is required to notify the Local Government concerned in writing about the exempt status of the rateable property once every year. For example, if what was a Residential Owner Occupied is now Rented, it loses exempt status. It is the obligation of the Owner to inform the Local Government about this fact.