Tag Archives: REAL ESTATE

East Africa Trade: Uganda’s Tax Appeals Tribunal clarifies on EAC Intra-Trade VAT

The Tax Appeals Tribunal has delivered a landmark decision that strikes at the heart of URA’s aggressive enforcement and over-reach tendencies and restores the much-needed balance in the taxpayer-taxman relationship.

(TRADE WORTH ESTABLISHMENTS LTD V URA TAT APPLICATION 338 OF 2024)

In perhaps the strongest language yet from the Tribunal against the revenue body, TAT observed:

“On the whole, we find that the Respondent acted not only unlawfully but also with impunity and in total abuse of their powers and authority… Rather than doing this [refund VAT unlawfully collected], the Respondent orchestrated a phoney scheme to deny the Applicant their refund – a taxpayer, who is the very reason for the Respondent’s existence.”

Citing its earlier decision in Canaan Sites Limited v URA, TAT further emphasises the ethical and legal obligation of URA to return taxes not legally due: “Where the Respondent collects taxes that are not legally owed, it is generally expected to refund those amounts to the taxpayer… it has an ethical and legal obligation to return those funds to maintain trust in the tax system.”

Uganda Revenue Authority goes after the Digital Economy: Payments Systems and third-Party Transaction Information in Tax Administration.

Whereas the digital economy is mostly composed of digital companies and the web-based commercial marketplace, the brick-and-mortar businesses are also covered since most now take payment through digital payment systems.

What this means is that digital payment systems now permeate nearly every sector, blurring the line between the traditional and digital economy.

The internet marketplace and the digital economy are data-driven and therefore I anticipate the next stage of the government’s tech-driven tax compliance enforcement campaign to be deployment of big data analytics and artificial intelligence in building taxpayer profiles using third-party payments and financial services information to flag transactions that would otherwise have escaped the tax net.

Sectors such as E-commerce, Gaming, Financial Services (fintech), and Telecoms process hundreds of thousands and for some, even millions of daily transactions.

Unlike a few years ago when tax authorities had no means of scrutinising such an
overwhelming volume of transactions and to assess tax upon each and every one including the tiniest of transactions.

Currently, Tax Authorities are able to rely on advanced data analytics and the deployment of artificial intelligence tools to track tax on even the smallest of transactions.

Uganda VAT E-INVOICING(EFRIS) Enforcement: Compliance Insights for Landlords and Tenants.

While initially criticised as premature and fought by taxpayers especially those under the KACITA umbrella, it appears the system is here to stay and has increasingly become the backbone of Uganda’s tax administration.

For commercial property landlords, who fall within the VAT net, strict EFRIS compliance marks a significant shift and fundamentally alters governance and tax reporting obligations for entities, which in turn poses risk to investments controlled under those entities.

The reason is simple; VAT administration directly intersects with income tax and rental tax compliance in a manner many lay taxpayers do not yet appreciate. The increased VAT scrutiny through EFRIS has a direct bearing on the landlord’s other tax compliance obligations under income tax and rental tax.

Landlords and property managers must therefore consider adjusting operating models to align with URA’s strict stance, as informal practices will expose them to heavier tax risk through deduction disallowances, penalties, additional tax assessments and a heavier professional fees burden.

Navigating the Digital Economy: A Guide for Aspiring Entrepreneurs.

Today’s entrepreneur must be tech-savvy, capable of navigating the digital economy with ease and agility. Yet, many business school curricula remain outdated, focusing on traditional theoretical instruction without incorporating critical digital competencies which are now central to modern business.

The reality is, the majority of this week’s graduates will be entering the world of entrepreneurship as opposed to formal employment. And so to all business school students and recent graduates; Please prioritize acquiring digital skills and understanding the digital economy.

MRT TAX SUPPORTS VERTEX INC.

In collaboration with VATSQUARE, a leading VAT advisory Firm in the EU market, we have recently rendered advisory support to Vertex Inc on Uganda’s digital services taxation intricacies under the Value Added Tax(VAT) tax head, covering deemed supplier and foreign exchange statutory rules under the Value Added Tax Act.

Vertex Inc is a Nasdaq listed technology firm whose collaboration with tax experts and financial application technology providers across jurisdictions, delivers best in class tax technology solutions and services in global commerce.

We are honored to have contributed to the firm’s technical survey for the Ugandan tax year 2024-2025.

Tech and Automation in Tax: Key Business Insights

In my recent advisory work with a tech firm that offers tech based tax compliance tools/solutions in the international trade arena, I appreciated the extent to which automated VAT engines are becoming essential for companies operating or selling across multiple borders. These VAT engines and other tech tools ensure that businesses correctly price their products while meeting jurisdiction-specific tax obligations.

Many other technology firms are developing digital tax engines that automate tax compliance across multiple jurisdictions. These tools help businesses calculate VAT, customs duties, and even withholding taxes in real-time. Such solutions are invaluable for companies engaged in cross-border trade, where varying tax laws can create complex compliance challenges, especially for web based transactions.

However, while automation simplifies compliance, it also raises other key questions in other tax processes ancillary to compliance,

THE INTERPLAY BETWEEN LEGAL AND TAX IN BUSINESS TRANSACTIONS

In business, taxation is everything. As a lawyer in commercial advisory, I consider other areas of business law bridesmaids to tax as opposed to the other way round; For any business, Tax risk exposure is the most dangerous since most often it is unascertained and unknown until the taxman comes calling with an audit and there is a dispute as to whether or not tax is due. You don’t see it coming until many years later and concluded certain transactions that were not de-risked or compliance mistakes have gone burst and had the implication of putting the business on the hook for a heavy liability that was never contemplated.

THE COMPLEXITY OF TAX IS WHAT MAKES IT INTERESTING FOR PRACTITIONERS.

In business, taxation is everything. As a lawyer in commercial advisory, I consider other areas of business law bridesmaids to tax as opposed to the other way round; For any business, Tax risk exposure is the most dangerous since most often it is unascertained and unknown until the taxman comes calling with an audit and there is a dispute as to whether or not tax is due. You don’t see it coming until many years later and concluded certain transactions that were not de-risked or compliance mistakes have gone burst and had the implication of putting the business on the hook for a heavy liability that was never contemplated.

TAX JUSTICE AND EQUITY; GOVERNMENT’S OBLIGATIONS TO TAXPAYERS.

URA ought to make reasonable accommodations for all taxpayers, recognizing that small taxpayers, in particular, may face challenges in understanding and complying with tax obligations due to limited resources and expertise. This includes providing simplified guidance, offering assistance programs, and ensuring that tax information is accessible and understandable.

Both large and small taxpayers who make genuine efforts to comply with tax laws should be treated fairly by URA. However, URA may need to exercise greater leniency and understanding towards small taxpayers who may lack the resources to fully comprehend complex tax requirements.

DISPOSAL OF REAL ESTATE ASSETS; WHEN DO WITHHOLDING TAX OBLIGATIONS ARISE?

Withholding tax on real estate transactions is advance capital gains tax on the disposal of ”business assets”. And in turn, Capital gains tax is a subcategory of business income under the Income tax Act. And finally if a transaction does not amount to a trading transaction, withholding tax under business income does not arise because the proceeds of the sale are not received as taxable income.