Deputies approve VAT on gifts and donations from workers

Parliament passed the Value Added Tax Amendment Bill 2024, which gives the government powers to collect VAT on goods or services donated by an employer to an employee.

The government had argued that employers had been abusing the provision by using it as a means of giving taxable goods to their employees without consideration but claiming credit for the goods supplied, arguing that this was an abuse of the law since URA, in On the contrary, they cannot recover the output VAT.

In the minority report, the opposition called this measure inhumane and stated that it would deter companies from making donations.

Opposition Leader Joel Ssenyonyi asked the Government when it plans to address concerns raised by traders about the need to reduce VAT rates from 18% to 16%, given that this would have been the time for the Government to remedy the situation. , in order to avoid future strikes within the business community.

“When traders approached us as Government and as leaders, we understood that there were meetings scheduled with the Executive, and they had critical concerns and the assumption they had is that this bill (value added tax amendment bill) It is the remedy. “In response to their concerns, they are now wondering exactly what remedies are being applied because they had certain proposals such as reducing VAT to 16%,” Ssenyonyi said.

“Not long ago, the government told us there was going to be a meeting to harmonise, but this House has not been informed about exactly what is happening. Now merchants are going to assume that we have responded to their concerns through this bill, which is not true. The government needs to tell us, have we just swept the traders issue under the carpet and moved quickly because the traders have not moved forward and said if these concerns are not addressed they will protest again? I don’t know if we want to continue having a tug of war because when they close their businesses it affects the economy,” he added.

Income tax

Parliament also passed the Income Tax Amendment Bill 2024, further extending Bujagali Energy Limited’s tax exemption for another year, despite a warning from Auditor-General John Muwanga over the hemorrhaging of 1,417 trillions Uganda lost through tax breaks in 2022/23 alone.

In his December 2023 audit report, Muwanga noted that taxes forgone by Uganda through tax exemptions amounted to Sh1.417 trillion, with Parliament leading the distribution of tax exemptions worth Sh1.293 trillion, while that the Ministry of Finance waived taxes worth Sh118.5 billion and John Musinguzi, Commissioner General of URA, also joined the exemption trend by exempting taxes worth Sh5.575 million.

Overpaid tax

MPs also approved the proposal to increase the threshold for claiming refund of overpaid taxes from Sh5 million to Sh10 million.

The government had proposed increasing the threshold to Sh50 million. However, Parliament rejected the Sh50 million threshold, noting that raising the threshold to such an amount will have the effect of disabling small and medium enterprises (SMEs) from reclaiming the overpaid tax, thereby adversely affecting their business.

In the proposal, refunds less than Sh10 million will be automatically carried forward to offset the next financial year’s production.

The government’s proposal to impose a penalty on withholding agents for not withholding taxes has been rejected by Parliament on the grounds that such proposal transfers the mandate of URA to the taxpayer, however, all taxpayers registered with URA must issue EFRIS or invoices and this gives visibility to URA. of transactions carried out by said taxpayers for reasons.

The Ministry of Finance had initially proposed that a withholding agent who does not withhold tax in accordance with this Act will be personally liable to pay to the Commissioner the amount of tax that has not been withheld, but the withholding agent has the right to recover this amount. of the person.