How To Pay Tax In Uganda

Transcription

1 INTERNATIONAL EXECUTIVE SERVICES Thinking Beyond Borders Uganda kpmg.com

2 Uganda Introduction An individual s liability to income tax in Uganda is determined according to the nature of income earned and tax residence status. Contact Benson Ndung u KPMG in Uganda Partner T: /6 E: bndungu@kpmg.co.ug For a tax resident individual, tax is charged on worldwide income, while for a nonresident tax individual, tax is charged on income sourced from Uganda. The rate of tax is charged based on the tax residence status of the individual and the amount of income earned as reflected in the table below. Chargeable income(annual) Uganda shillings (UGX) Not exceeding UGX1,560,000 Exceeding UGX1,560,000 but not exceeding UGX2,820,000 Exceeding UGX2,820,000 but not exceeding UGX4,920,000 Exceeding UGX4,920,000 Tax residents rate of tax Nil this income is not taxable 10% of the amount exceeding UGX1,560,000 UGX126,000 plus 20% of the amount exceeding UGX2,820,000 UGX546,000 plus 30% of the amount exceeding UGX4,920,000 Nonresidents rate of tax 10% of any income earned totaling to UGX2,820,000 UGX282,000 plus 20% of the amount by which chargeable income exceeds UGX2,820,000 UGX702,000 plus 30% of the amount by which chargeable income exceeds UGX4,920,000 Key messages Business travelers to Uganda must understand the nature of income earned, where it is sourced from, their tax residence status and obligations arising therein KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of

3 If an individual is earning rental income from Uganda, the levy of tax is 20 percent of the chargeable income in excess of UGX1,560,000 annually. Income tax Liability for individual s income tax Residency status An individual is a resident individual for a year of income (1 July to 30 June) if that individual: has a permanent home in Uganda is present in Uganda: for a period of, or periods amounting in aggregate to, 183 days or more in any 12-month period that commences or ends during the year of income during the year of income, and in each of the two preceding years of income, for periods averaging more than 122 days in each such year of income. The gross income of a resident person includes income derived from worldwide sources. Nonresident person A person is a nonresident for a year of income if the person does not fulfill the requirements set out above. The gross income of a nonresident includes only income derived from sources in Uganda. Type of income The gross income of a person for a year of income is the total amount of: business income employment income property income, derived during the year by a person, other than income exempt from tax. The chargeable income of a person for a year of income is the gross income for the year, less total deductions allowed under the Income Tax Act. Source of income Income is derived from sources in Uganda to the extent to which it is derived from any employment exercised or services rendered in Uganda. Rates of tax for individuals The rate of tax for individuals is stated in the table above. Foreign employment income Foreign-sourced employment income derived by a resident individual is exempt from tax if the individual has already paid foreign income tax on it. Proof of payment of tax has to be obtained. Social security Liability for social security An employer who has five or more employees is mandated to register and contribute to the national social security fund (NSSF). NSSF is based on gross wages earned by an employee. Wages are termed as all cash remunerations earned by an employee. Any employee of, or above, the age of 16 and below the age of 55 is an eligible employee for mandatory social security except: an employee employed in excepted employment a nonresident employee (strictly residing in Uganda for work reasons for less than three years) an employee not employed in Uganda. Contribution to NSSF is made by both the employee and employer. The standard contribution is 15 percent of the total monthly gross cash remunerations earned by the employee. An eligible employee s share of the standard contribution is 5 percent, calculated on the total wages paid during that month to the employee. A contributing employer is mandated to pay into the reserve account a special contribution of 10 percent of the total wages payable to such persons if they employ: a nonresident employee who is not an eligible employee an employee of, or above, the age of 55 in respect of whom the Minister has, through a statutory order, ordained to make contributions an eligible employee. The 10 percent is part of the standard contribution. The employer is charged with the responsibility of deducting and remitting the contributions to NSSF within 15 days following the last day of the month for which the relevant wages are paid. Reciprocal agreements International convention to which Uganda is a member As stated earlier, a person in excepted employment is discharged from contributing to NSSF. The schedule of excepted employment includes individuals entitled to exemption from contribution to social security schemes under any international convention to which Uganda is a member. Therefore if the individual is exempted from contributing to social security by an international convention to which Uganda is a member, then that individual will be exempted from contributing to NSSF KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of

4 Certificate of exemption from NSSF The managing director of NSSF may grant a certificate of exemption to an employer on behalf of the following individuals: persons not ordinarily resident in Uganda who are liable to contribute to, or are or will be entitled to, benefit from the social security scheme of another country, if that scheme is approved by the Minister for this purpose persons not ordinarily resident in Uganda who are liable to contribute to, or are or will be entitled to, benefit from any scheme associated with their employment under which benefits comparable to the benefits under the National Social Security Act (NSSF Act) are provided, if that scheme is approved by the Minister for this purpose. Compliance obligations Employee compliance obligations An employee has an obligation to pay tax on income earned, contribute 5 percent of their cash remunerations earned to NSSF and pay local service tax (LST). LST is a tax paid to the local authority by any person engaged in gainful employment. The rates of this tax are determined according to the income after tax earned by the individual. Amount of monthly income earned net of tax (UGX) LST payable per year (UGX) 1 >UGX100,000 but <UGX200,000 UGX5,000 2 >UGX200,000 but <UGX300,000 UGX10,000 3 >UGX300,000 but <UGX400,000 UGX20,000 4 >UGX400,000 but <UGX500,000 UGX30,000 5 >UGX500,000 but <UGX600,000 UGX40,000 6 >UGX600,000 but <UGX700,000 UGX60,000 7 >UGX700,000 but <UGX800,000 UGX70,000 8 >UGX800,000 but <UGX900,000 UGX80,000 9 >UGX900,000 but <UGX1,000,000 UGX90, >UGX1,000,000 and above UGX100,000 This tax is paid within the first and second quarter of the year (August to November) in four equal installments or in one lump sum. Payment is made to the local authority where the employee resides. Employer reporting and withholding requirements An employer is responsible for withholding tax from a payment of employment income to an employee and remitting it to the tax authority within 15 days of the subsequent month. An employer is responsible for contributing and deducting the employee s share of social security and remitting it to NSSF within the stipulated timeframe (15 days of the subsequent month). With regard to LST, the employer is obliged to deduct the tax and remit it to the local authority within 15 days after the end of the month in which the tax has been deducted. The employer is responsible for computing the relevant taxes or deductions on employment income in accordance with the respective legislations. Other issues Double taxation treaties and permanent establishment implications Uganda has double tax treaties with the following countries: India, Denmark, Mauritius, the Netherlands, Norway, South Africa, and the United Kingdom. The general rule regarding employment in the double tax treaty is that remuneration derived by a resident of a contracting state, in respect of an employment exercised in the other contracting state, shall be taxable only in the firstmentioned state if: the recipient is present in the other state for a period or periods not exceeding in the aggregate 183 days in any 12-month period commencing or ending in the fiscal year concerned the remuneration is paid by, or on behalf of, an employer who is a resident of the first mentioned state, and whose activity does not consist of the hiring out of labor the remuneration is not borne by a permanent establishment (PE) or a fixed base which the employer has in the other state. The rate of tax is determined by the respective state s rate where the employee s income is to be taxed. Indirect taxes There are no specific indirect taxes for employees in Uganda KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of

5 Transfer pricing Transfer pricing affects entities that employ employees. In case an associated entity is recharging the cost of the employee to another entity, it should do so at the actual cost incurred by the entity not at a lower cost or higher cost so as to reflect the arm s-length principle. Work permit/visa requirements Visas are required for business meetings and tourism. Work permits are required for non-ugandans who are coming to Uganda to work for more than three months. One can get a special pass if they are in Uganda for work reasons for no more than three months. Local data privacy requirements This is dependent on a case-by-case basis. Exchange control Generally, Uganda has a fairly liberal exchange control policy. Foreign currency remittances in to and out of the country may only be done through licensed commercial banks and/or foreign exchange bureaus. Also no person is allowed to physically carry any foreign currency cash equivalent of UGX30,000,000 in to and/or out of the country. Nondeductible costs for assignees No deduction is allowed for any expenditure or loss incurred by a person to the extent to which it is of a domestic or private nature. These expenditures consist of: the cost incurred in the maintenance of the person and the person s family or residence the cost of commuting between the person s residence and work the cost of clothing worn to work, except clothing which is not suitable for wearing outside of work the cost of education for the person not directly relevant to the person s employment or business, and the cost of education leading to a degree, whether or not it is directly relevant to the person s employment or business KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of

6 kpmg.com/socialmedia The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. Designed by Evalueserve. Publication name: Thinking Beyond Borders Uganda Publication number: Publication date: November 2012