UGANDA, Kampala | Real Muloodi News | As the end of 2022 draws near, Uganda Revenue Authority (URA) is predicted to net record rental income tax revenues in this last quarter of the 2022 calendar year.
If the earnings predictions for the quarter September – December 2022 come to fruition, then not only will URA register the highest-ever quarterly earnings from rental income tax in the Authority’s history, but it will surpass 50% of its rental revenue targets for the 2022/23 financial year.
Government expects the URA to collect at least USh145 billion from rental income tax within Kampala Metropolitan Area over the July 2022 – June 2023 period.
Mr Ramathan Ggoobi, the Ministry of Finance permanent secretary, says Government has enacted several initiatives to improve rental income tax collections, both in terms of technological advancements and refinements to legislation, upon which the Authority’s USh145 billion rental tax target has been set.
For example, URA deployed a new data science intelligence tool in April 2022 that identifies landlords who don’t comply with their rental income tax obligations, coined the Rental Tax Compliance System (rTCS).
“We have access to information from local councils, the utility service providers, and others, so we can ascertain that this other person owns this particular property,” says Mr Robert Wamala Lumanyika, URA Manager of Public and Corporate Affairs.
“The Minister sanctioned different agencies within the government to share information,” he adds.
Eight Ministries, Departments, and Agencies (MDAs) contributed data to the collaboration to identify landlords not declaring income, including Ministry of Lands, Housing and Urban Development (MLHUD), National Identification and Registration Authority (NIRA), Kampala Capital City Authority (KCCA), Ministry of Local Governments (LG), National Water and Sewage Corporation (NWSC), Uganda Communications Commission (UCC), and URA.
Furthermore, this year parliament approved a raft of Tax (Amendment) Bills which came into force on July 1, 2022, aimed at improving tax administration, streamlining tax exemptions, reducing tax leakages, and boosting tax revenues collected by the Government of Uganda.
Mr Lumanyika explains what has changed.
“For individuals, the tax rate reduced from 30% to 12%, and we have done away with having to deduct expenditures. So now you only deduct the threshold of USh 2,820,000 from the amalgamated gross rental income you have earned for the year of income, and multiply the balance by 12%,” Mr Lumanyika explains.
“For companies, the 30% rental income tax rate was maintained. However, we have capped expenditures at 50%, whereas they were previously capped at 75%,” he explains, adding, “You can carry the rest of the expenditures forward to the next year of income.”
“For example, if you earn rental income of 8 million a year, then you have expenditures such as plumbing, security, cleaners etc, you can expense 50% of those, carry the rest forward, and then subtract the 50% you have computed from the gross rents that you earned. The balance is taxed at 30%,” explains Mr Lumanyika.
When asked about landlords passing the taxes onto their tenants, Mr Lumanyika says this is very unlikely, citing the requirement for landlords to provide their tenants with a tenancy agreement that spells out the obligations of either party.
“It’s unlikely that the landlord will send the 12% or 30% down; we do not expect them to deviate from the tenancy agreement that is signed with the tenant. We are also giving them allowances on expenses that have been incurred, meaning that there is no reason a landlord will push the 30% to tenants,” he says.
“We are talking about an economy that is tight for every one of us, so an attempt to raise the rent on a tenant will cause alarm. Secondly, it may lead to your commercial or other property being vacated by the tenant. You will find many buildings that do not have tenants, and when you ask the managers why they will tell you the terms are not appropriate or favourable,” he adds.
Mr Lumanyika also reminds those companies with a 30th June tax-year end, which is the tax period July 1, 2021 – June 30, 2022, that they are supposed to have filled their final tax return and paid their taxes due by December 31. Taxpayers who fail to file a return will incur a penalty.
“The penalty for not filing a return is USh200,000 every month, from when the return became outstanding up to when you file the return. For example, If you don’t file your return until June next year, then the penalties you would accrue from January until June would be USh 1.2 million”, he says.
However, according to Mr Lumanyika, filing a return is easy. “You just go to the URA.go.ug website, download the form, fill the form, upload the form, and you are done with the process,” he says.
“The penalty for non-payment is 2% of the outstanding tax, applied monthly”, adds Mr Lumanyika.
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