Accountancy in Uganda

>> Withholding Taxes in Uganda

This is a form of advance income tax that is paid by the taxpayer on specific supplies. It is collected at source on behalf of the tax body by specific persons (upon effecting payment to another) that are designated by the tax body as withholding tax agents and remit the withheld amount to the tax body on a monthly basis by fifteenth (15th) day of the month following the month in which payment is made.

Withholding tax is not a final tax and therefore is claimable from the tax body, except for; International payments by a resident person to a non-resident person, Payment to non-resident entertainers, PAYE by an individual whose only source of income is employment by one employer, Royalties and insurance commissions received by residents, Interest from banks, building societies, bank of Uganda and others received by resident companies, trust, clubs, etc.

Withholding tax on dividends

The rates include: Residents Notes Non residents
Management fees 6% 15%
Goods & Services 6% i 15%
Royalties Nil 15%
Professional fees 6% ii 15%
Dividends 15% iii 15%
Dividends from listed Companies 10%
Shipping, Air craft & Telecommunication services 2% 2%
Interest 15% iv 15%
Consultancy, Agency and Contractual fees 6% 15%
Artists and Public Entertainers, sports N/A iv 15%
Disposal of a building by a non-resident person N/A 10%
WHT applicable to winnings from betting 15% 15%

Notes

i. For residents it’s only applicable on imports and where the payee is a Government body.

ii. For residents it’s only applicable if the professional is not registered.

iii. Does not apply where the dividend income is exempt from tax in the hands of a shareholder 15. Dividend income is not final if paid to a resident limited liability company.

iv. The WHT rate applicable for interest payments on Government securities to a resident person is 20% (section 117), Does not apply to, Interest paid to a natural person, Interest paid to a financial institution, Interest paid by a company to an associate company or Interest paid which is exempt from tax in hands of the recipient.

15 Extracted from section 118 (2) of the Income Tax Act as amended 2017.

Thin capitalization

The recommended interest bearing debt to equity ratio by a foreign controlled resident company, which is not a financial institution, at any time during the year is 2:1. A foreign controlled resident company is considered to be thinly capitalized if the ratio of its interest bearing debt to its equity contribution exceeds 2:1. Where a company is thinly capitalized any interest charges arising on the debt in excess of the 2:1 ratio is not tax deductible.

Proposed tax amendments.

The above mentioned taxes are subject to proposed tax amendment bills 2018 that are currently being discussed in Parliament.


Latest version updated 11th April 2019

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