With Uganda’s compliance systems undergoing significant changes, SMEs must adapt their management teams in a manner that ensures they keep abrest of these changes. This article highlights the critical importance of governance and taxation non-compliance risk due diligence in mergers and acquisitions but more importantly, it provides for SMEs a key lesson to draw; which is that bad tax compliance practices and inadequacies in governance will almost without a doubt always end up shackling the business with substantial tax liabilities which can easily kill off the business.
Tag Archives: corporate governance
A TRADER’S SIMPLE GUIDE TO IMPORT VAT.
In the world of VAT, importation is considered a form of ‘value addition.’ When an item is imported, its value is enhanced because it has entered a new stage of the production or trade chain. It’s important to note that a product doesn’t have to be manufactured locally to be subject to VAT. As long as it plays a role in the extended production or trade chain that leads to a final consumer’s purchase of any good in Uganda, VAT applies to the transaction so long as it is not in respect of an exempt supply. This is where the concept of import VAT becomes significant, as it can be treated as an input tax credit to the benefit of the importer at compliance stage.
KACITA Vs LANDLORDS; ADDRESSING THE QUESTIONS ON VAT ON COMMERCIAL PROPERTY RENT PAYMENTS.
At law, in transactions involving VAT traders, the absence of a clear segregation of the VAT component from the agreed-upon price implies that VAT is inherently integrated into the total amount paid. In the absence of a clear distinction being made of the VAT component from the consideration paid or rather if provision is not made for the VAT from the price agreed upon with the buyer(the tenant in this case), then VAT is deemed to have formed part of the price invoiced. In this case the 18% VAT already forms part of the rent that’s currently being paid by tenants, regardless of whether or not there was an express agreement to the contrary from the beginning.
TAKING A BANK LOAN TO PAY TAX; HERE’S WHY YOU SHOULD TAKE TAX ADVICE FIRST.
Leveraging your business to pay taxes through loans might create a situation where you trade one liability for another with more adverse commercial implications, bearing in mind that whereas tax due attracts interest at minimal rates(2%), commercial banks lend at much higher rates(above 15%).
THE MRT TAX AND GOVERNANCE MASTERCLASS.
The training seeks to enable participants understand the nexus between governance and taxation and highlights some of the most critical governance and management traps and lapses to avoid going forward, in order to protect businesses from taxation troubles and other commercial risk with roots in governance, while highlighting through illustrations, tax planning strategies to employ in order to keep liabilities at a minimum.
The masterclass is also aimed at equipping participants with the right knowledge needed to adapt businesses to the complexity in tax compliance introduced by changes in revenue law and taxation over the the past few years starting with the year 2020.
UGANDAN COMMERCE AND GOVERNANCE; THE IMPORTANCE OF A ROBUST ORGANISATIONAL CULTURE FROM AN EARLY STAGE.
This is the conundrum most Ugandan SMEs and young firms grapple with; Financial propriety, proper governance and risk control are neglected in the early years and this breeds a culture that later haunts the business when the operation has become too big to be ran informally.
THE MRT TAX BANKING AND FINANCIAL SERVICES TAX RISK MASTERCLASS.
This training will be most beneficial to professionals in credit risk, legal, taxation and finance roles in the banking and financial services industry but generally to all individuals with a keen interest in understanding tax risk in transactions. It’s aimed to enhance participants’ knowledge and understanding of the taxation peculiarities of banking and financial services and the transaction tax risk mitigation strategies applicable.
Participants will get to appreciate the taxation peculiarities and complexities applicable to the banker-customer relationship and tax risk that arises as a result of this special relationship. We will be discussing at length the pitfalls and tax risk apparent in the various transactions including international money transfers, mortgages and securities, finance leases among others and how it arises as well as transaction best practices to mitigate this risk.
EXPLORING THE CULTURE OF KICKBACKS IN CORPORATE KAMPALA; BUSINESSES BEING ENSNARED INTO TAX PROBLEMS.
Businesses are finding themselves trapped in a double edged sword situation, where refusing to partake in these illicit transactions means losing lucrative opportunities, while succumbing to the pressure to pay kickbacks undermines the financial integrity of transactions and creates a taxation conundrum for the business paying the kickback especially if the kickback forms a sizeable component of the transaction.So the dilemma is pay the kickback and the transaction won’t make commercial sense or don’t pay the kickback you lose the business altogether. This creates a Catch-22 for businesses, a classic case of heads you lose, tails you lose.
The repercussions of this systemic issue are far-reaching, as businesses find themselves ensnared in a struggle to account for and treat a transaction as wholly legitimate, even though a portion of it is done off record on their side(the kickback component).
Income Tax(Amendment) Act 2023: Repeal of investment incentives could hamper industrialization and job creation efforts.
The government of Uganda grants fiscal incentives to qualifying investors to promote both domestic and foreign investment. These incentives focus on industrialization with the objective of job creation, value addition to local raw materials, export promotion, and promotion of tourism, among others. These include incentives for investments located in industrial parks or free zones and establishment of new factories. For investors who are able to take the full advantage of all incentives for which they qualify under the different heads, they are able to minimise their chargeable income and consequently minimise tax liabilities in the short and long term.
TAX NON-COMPLIANCE RISK IN CREDIT TRANSACTIONS: THE IMPORTANCE OF KYC TAX COMPLIANCE DUE DILIGENCE FOR FINANCIAL INSTITUTIONS.
The multifaceted nature of risk mitigation for banks means that SMEs (small and medium-sized enterprises) not only need business and risk advice, but they also require ongoing guidance to align with the constantly evolving commercial regulatory and compliance landscape in corporate governance and taxation. Without this continuous alignment, there will be a disconnect between the risk tolerance of banks and the actual realities faced by the SMEs and create a lose-lose situation for both sides.
And so SMEs need constant advice and alignment with evolving requirements to ensure that their risk profile matches the expectations of the banks they seek credit from and banks must expand their scope of KYC due diligence to include both governance and tax compliance due diligence at deal stage.