INCOME TAX – Page 2

A CORPORATE GOVERNANCE MASTERCLASS FOR ENTREPRENEURS FROM THE HUMPHREY NZEYI v BoU CASE.

While shareholders own the company, they DO NOT own the assets of the company. The assets they own are the shares allotted to them. The company owns its assets. Conversely, the shareholders are not the managers of the company. They must first become directors in law for them to exercise managerial roles.

The directors(the Managers) owe a fiduciary duty to the company as ‘a whole’. This fiduciary duty requires directors to act in good faith and in the long-term interests of the entity, balancing the interests of both shareholders and creditors.

This is because the total assets of a company are composed of shareholder equity+liabilities (i.e. creditor interests). For the section of my readership without an accounting background, in law this is the starting point of the accounting equation. The company as a legal entity is therefore subject to these two competing legal(or equitable) claims.

The directors’ duty to act in the company’s best interests logically includes the obligation to weigh and balance these interests at all times.

When a company enters financial distress, the law demands that the board begin to prioritize the interests of creditors alongside those of shareholders and certain transactions are outright void at law in extreme circumstances where this principle is breached.

Good Corporate governance and Board composition matters. A competent, diverse board is better equipped to navigate financial stress and generally, the intricate market and regulatory dynamics in which the company operates. Ensure you have a blend of directors with expertise in risk, tax, legal, and operations as opposed to just investors, friends or family members.

AI’s Disruption of Professional Services: The Rise of Niche Expertise.

The market now favors firms and individuals who deeply understand specific domains or sectors rather than generalists trying to do everything. A “niche within a niche” allows consultants to become irreplaceable for a defined audience or challenge set.

AI may also have provided the easy answer to the all important career decision question for senior consultants and executives in larger legacy firms; Which is whether to choose boutique independence over the politics, processes, and layers of bureaucracy that come with being part of a large firm

MRT Tax in Strategic Partnership with The Cragus Group—The GCC’s Leading Tax and Transfer Pricing Advisory Group

MRT Tax is pleased to announce a new strategic collaboration partnership with The Cragus Group, a ITR (World Tax) Top Tier Tax Firm headquartered in the United Arab Emirates (UAE).

Cragus is consistently ranked ahead of the Big 4 in the GCC, and is widely regarded as one of the region’s most trusted tax and transfer pricing firms, with a specialized oil and gas practice.

“This partnership bolsters our advisory capabilities, bringing together deep local insight and international oil and gas tax expertise for upstream, midstream and downstream investments currently being undertaken in East Africa’s oil and gas sector.” Remarked, Mark Ruhindi, the Managing Partner

Investing in Uganda; Tax Planning and Why Tax Should Lead Your Market Entry Strategy

The decision on corporate structure, i.e, whether to register a subsidiary vs. branch, Financing questions, i.e debt vs. equity, tax residence/domicile/location of holding entities are all strategy questions which are informed by tax considerations.

Choosing the wrong structure can expose the investor to; Transfer pricing risk, Withholding tax inefficiencies, Loss of treaty benefits, Double taxation and generally, tax inefficiency and a higher tax burden across different tax heads.

But what happens when the company is set up in a way that causes preventable tax leakages or unnecessary friction with the tax authorities?

For any foreign investor entering the Ugandan market, undertaking corporate legal structuring advice without any input from a tax practitioner is a grave mistake.

While the structure may be viable on paper, it might ignore certain critical elements of transfer pricing regulation, international tax treaty benefits and domestic tax compliance aspects that might later work against the investor and require a costly restructuring process.

2025 TAX AMENDMENTS; PROPOSED STAMP DUTY AMENDMENTS DO NOT CURE DEFECTS IN THE LAW

The Minister proposes an amendment to Schedule 2 to the Stamp Duty Act, to provide for nil duty for an agreement or memorandum of agreement executed or received in Uganda.

I need to warn at this point that Taxpayers better not celebrate just yet. This is because, the proposed amendment if passed into law might not in fact take away this liability. The Stamp Duty Act as it currently stands is littered with overlapping levies and one of these is the one the Minister proposes to do away with.

The tax sought to be done away with might still be brought home to a taxpayer by enforcing another provision. That other provision happens to be item 52 of Schedule 2 of the Stamp Duty Act, which levies Stamp Duty of a similar amount(Shs. 15000/=) on a RECEIPT as defined by section 2, for any money or other property the amount of value of which exceeds Shs. 50000 /=.

Section 2 of the Act defines the RECEIPT as follows;

“RECEIPT” includes a note, memorandum or writing whether the note, memorandum or writing is or is not signed with the name of a person,

(a) by which any money, or any bill of exchange, cheque or promissory note is acknowledged to have been received;

(b) by which any other movable property is acknowledged to have been received in satisfaction of a debt;

(d) which signifies or imports the acknowledgment;

The definition of a receipt under that Section is so wide that it in fact includes and indeed refers to what essentially is an agreement and a Memorandum of an agreement.

GOLDSTAR INSURANCE LTD v URA; A COMPLIANCE ALARM BELL FOR THE UGANDAN INSURANCE INDUSTRY.

As a result of the decision, complications may now arise as to the accounting and tax treatment of these commissions in the books of the resident taxpayer if the entire premium is now taxed as the income of the non-resident re-insurer, bearing in mind that this is not a final tax.

The decision raises yet another headache for the insurance industry in regards to VAT on importation of services. Although not traversed as an issue as there was no dispute in this regard, the tribunal mentioned in passing that whereas a supply of re-insurance services by resident companies are VAT exempt, this wasn’t the case where a Ugandan insurance company sought to import the re-insurance service. I therefore anticipate that URA may seek to raise assessments in this regard in the future.

TAX COMPLIANCE AND TAX POSITIONS; WHY IT MATTERS TO UNDERSTAND YOUR TAX POSITIONS.

Uganda operates a self assessment taxation system where the presumption is that the tax payer’s reporting is premised on the correct tax positions and that’s why tax problems never emerge immediately until years much later.