UGANDA, Kampala | Real Muloodi News | In December last year, Uganda Revenue Authority (URA) announced that buyers and sellers of land worth USh10 million or more must now have a tax identification number (TIN).
Robert Wamala, URA’s Supervisor for Tax Education, explains 10 important facts about the new procedure.
1. What has URA introduced in relation to land transactions?
Effective December 6th 2021, URA made it a requirement for buyers and sellers of land where the value of such land is USh10 million or more, to have Taxpayer Identification Numbers (TINs).
If the land transaction involves a Company, it is mandatory to have a TIN even if the amount is below USh10 million.
2. What should I do if I do not have a TIN, but need to perform a land transaction?
Wamala advises persons without TINs intending to transact in land to apply for a TIN via the Instant Tin Registration Form, or visit the nearest URA Domestic Taxes office with a copy of their National Identification Card for assistance.
You can also take advantage of the URA’s online services and toll-free helpline 0800117000/0800217000.
Please note that a TIN is issued for free; there is no cost to get a TIN.
3. Why is URA looking at transactions of USh10 million?
According to Wamala, URA continues to explore ways to attract more qualifying citizens to contribute towards national revenue mobilization for improved service delivery. Therefore, this measure is intended to register all potential taxpayers and ensure that URA has visibility in land transactions to grow the tax base.
Wamala explains that the URA will not tax income earned from the land transaction at the time of declaring the land transaction. However, income earned from the transaction may be chargeable to tax at a later time.
For example, if a person is engaged in the business of buying and selling land, and the income earned is chargeable to tax, the person will be required to register for income tax and to declare and pay income tax on the profit earned from the business of buying and selling land.
4. Does it mean that if I acquire or sell land with a value of 10 million, URA will charge me tax?
Ordinarily, the only tax paid on land transactions is stamp duty on the value of the land upon being transferred from the buyer to the seller.
However, other taxes such as Withholding Tax (WHT), Income Tax, and Value-Added Tax (VAT) may be applicable in certain circumstances.
For example, where one sells land held as a business asset, the income earned from the sale is subject to income tax.
Further, a resident person who purchases a business asset is under an obligation to withhold tax at the rate of 6 per cent of the gross payment to the seller, and remit this tax to the URA.
In addition, where one sells improved land or commercial premises with a value above the VAT threshold of USh150 million, the transaction will attract Value-Added Tax.
5. If I inherited land from a deceased person and I need to transfer it to my name, does this new requirement apply to me?
Yes. As a buyer, you will be required to have a TIN. The person selling on behalf of the deceased becomes the seller, and therefore such a person will also be required to have a TIN.
6. What is stamp duty on land?
Stamp duty is a tax that is levied on single property purchases or documents. Stamp duty fees are paid to the Government to authenticate documents and make them legally binding in courts of law.
Stamp duty on land is paid at the point of transfer of title of the said land from the seller to the buyer, based on the value of the land as assessed by the Chief Government Valuer.
Generally, duty is payable on every document that confers any right or liability upon being created, transferred, limited, extended, extinguished, or recorded.
The documents on which stamp duty is paid are referred to as instruments, and they are listed in Schedule 2 of the Stamp Duty Act as amended. Without stamp duty, such documents are not admissible in court, i.e. cannot be provided as evidence, for example, to prove ownership of the land.
7. Who is required to pay stamp duty on land, and does it apply to all types of land tenure?
The buyer of land is required to pay the stamp duty. In the case of leasing, it is paid by the person the land is leased to. Yes, this applies to all land tenure systems such as Mailo, Freehold, and Leasehold.
8. How much stamp duty is paid on land?
Stamp duty is currently paid at a rate of 1.5% of the total value of land as determined by the Chief Government Valuer.
However, this value may not necessarily be the same as the actual purchase price paid for the land, since the value of land can fluctuate considerably.
The Government Valuer will periodically research to determine new land values in various locations.
9. What is the process of declaring the Instrument/Document for stamp duty?
The taxpayer declares the total value of the land on the URA portal at www.ura.go.ug.
Steps:
- Once on the URA portal, click e-Services and scroll down to Stamp Duty, and complete the Declaration of Instrument form.
- The buyer fills in the details of Section A.
- Under Section B: Type Of Instrument, select ‘Transfer of the total value-Land’ from the dropdown menu and complete the required fields.
- The seller fills in the details of Section C.
After the the sections have been completed, the Taxpayer then submits the Declaration of Instrument and Consent Form to the Chief Government Valuer in the Ministry of Lands, Housing and Urban Development
The Chief Government Valuer values the land signs the Declaration of Instrument and Consent Form, and posts the amount to URA E-tax.
The taxpayer obtains a Payment Registration Form with a Payment Registration Number (PRN) from a URA officer by presenting the declaration form, the transfer form and the signed consent form.
Prior to generating the PRN, the URA officer checks the amount on the consent form to match it with the one in the system. The information in the system (e.g. the buyer and seller’s names, plot and block numbers) should match what is on the forms
The officer confirms that the date on the consent form signed by the Chief Government Valuer doesn’t go beyond 6 months from the time the taxpayer delivers the declaration for the PRN.
10. What do I require to transfer land?
When transferring land, you are required to submit the consent form signed by the Chief Government Valuer, passport photos of the seller and buyer, your national IDs, and a payment registration slip dully paid.
In the case of subdivision, you will also need a Mutation Form, which can be downloaded from the Ministry of Lands website.
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