UGANDA, Kampala | Real Muloodi News | Late last year, Uganda Revenue Authority (URA) announced that buyers and sellers of land worth Shs10 million or more must have a tax identification number (TIN). A TIN is a unique ten-digit number assigned to every taxpayer by Uganda Revenue Authority (URA) for tax administration purposes.
URA has also simplified the process for applying for a TIN on-line. Effective January 1st, a TIN is now issued instantly after providing basic documents, to include either a National Identification Number, passport or driving license.
It’s been almost two months since the requirement was announced, and landowners are still reluctant to get a TIN.
For example, a recent article by Denis Jjuuko tells the story of a young man whose family recently divided land their grandfather bequeathed them. Each of the beneficiaries is getting a land title for their inheritance.
The surveyor who parceled out the land on the family’s behalf asked the young man to provide a TIN so that the land could be transferred to his name. The title was originally in the name of the administrators the grandfather had indicated in the will.
However, the requirement to get a TIN really bothered the young man, so much so that he is considering simply not transferring the land into his name.
Per Jjuuko’s article, his reluctance is partly because he is uninformed about TINs, but primarily he wishes to avoid paying the required taxes for the transfer.
For a person to transfer real estate into their name, they must pay a stamp duty tax of 1.5% of the property’s value. The young man objects to paying the tax on the basis that the land was bequeathed by his grandfather, and no money had exchanged hands.
However, stamp duty is not computed out of purchase price; it is instead assessed based on a valuation of the land by a government valuer.
Someone ought to explain to the young man that delaying the transfer of title means that he will likely end up paying a much larger sum of money in stamp duty at some future date for the transfer, if the land significantly increases in value.
In the meantime, his failure to transfer the title into his name increases his vulnerability to land grabbing. Getting the TIN and paying the required stamp duty helps to secure his land.
There are also other benefits to getting a TIN. A TIN allows a person to obtain an operating license from KCCA/municipal councils, or any regulatory body in Uganda. A TIN is also necessary to open bank accounts, obtain bank loans, and secure business opportunities. The next big opportunity with a reputable company or government agency will require registration for taxes, and opportunity meets those who are prepared.
To take advantage of the benefits mentioned above, you need to obtain a TIN and make your contribution to tax. Uganda depends on tax revenue to fund basic state functions as well as investment in physical infrastructure, education, health and other development initiatives.
However, the prevalence of tax evasion and tax avoidance in Uganda has seen it’s tax to GDP ratio stagnate at 13%, making Uganda one of only 49 countries worldwide whose taxation collections are less than 13% of their GDP, and increasing Uganda’s dependance on borrowing.
Every person (individual or company) who earns income and is liable to pay tax is required to get a TIN. Whether the income be from salary, business income or income from property, such as rental income or dividends.
The URA is already targetting business transactions with the implementation of EFRIS, which stands for Electronic Fiscal Receipting and Invoicing System. EFRIS is to be used by all businesses to manage issuance of e-receipts and e-invoices, where the details are transmitted to the URA in real time. EFRIS came into force in Uganda on July 1, 2020, and its use became mandatory in 2021.
URA has also gone after manufacturing with digital tax stamps (DTSs). DTSs are a mark or label applied on goods and their packaging. The stamps contain security features and codes to prevent counterfeiting of goods, and they also enable the government to obtain real time production data from manufacturers. This aids the government in curbing revenue leakages and also in determining in advance the amount of tax to be paid as excise duty, value-added tax and income tax.
Therefore, it only makes sense that the tax authority is now turning it’s eyes to property owners, hence the requirement for buyers and sellers of land to have a TIN. And with the recent deployment of the Rental Tax Compliance System (rTCS), and the use of Yaka Metres to track landlords, property owners earning income from their property investments are going to be forced to start contributing to Uganda’s formal economy.
The move to widen the tax base has been welcomed by real estate industry veterans, who have long complained at the unfairness for the few who are paying taxes, as they are carrying more than their fair share of the burden, particularly so in the very visible real estate sector.
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