For years, the URA’s approach to these businesses may have seemed heavy-handed, as it focused on aggressive tax collection without adequately guiding these entrepreneurs on the right path to compliance. It was a recipe for failure, and everyone suffered the consequences. Businesses struggled to survive, and the government continued to miss out on the tax revenue it deserved.
Tag Archives: TAX COMPLIANCE
THE AIRTEL UGANDA IPO: EVALUATING AIRTEL’s TAX RISK AND DIVIDEND POLICY – KEY CONSIDERATIONS FOR INVESTORS.
I do note from the prospectus that, Airtel Uganda has taken commendable steps in securing such private rulings pertaining to a significant portion of its inter-party transactions. In my assessment, this proactive measure effectively mitigates a significant risk factor, particularly regarding the prospect of the Uganda Revenue Authority (URA) raising any future unanticipated tax liabilities against the business in respect of these transactions.
RESIDENCY TAX AVOIDANCE: THE STORY OF BRITISH BILLIONAIRE LORD SUGAR AND HIS £186M TAX TAB AFTER A RECENTLY FAILED AVOIDANCE SCHEME.
Ugandan tax residency rules, just like those of many commonwealth jurisdictions are in many respects similar to those pertaining in the UK. Under Ugandan law, a taxpayer who is a natural person is resident for tax purposes if they have a permanent home in Uganda, or they are present in Uganda for an aggregate of 183 days in the year of income or are present in Uganda for a period averaging 122 days in the year of income and in the two years preceding the year of income or if they are a Government employee posted abroad during the year of income.
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.
SHAREHOLDER PROCEEDINGS AGAINST DIRECTORS AND IN THE NAME OF THE COMPANY; WHEN DOES A CAUSE OF ACTION ARISE?
In a shareholder suit, remedies are sought on behalf of the company because the company itself is unwilling or unable to take action.
Such proceedings are however subject to the following cardinal rules of corporate law, to wit;
That the company being a distinct entity from its members, it has the right to sue on its own and that,
Court’s will not normally interfere into the internal management affairs of a company
TAKING A BANK LOAN TO PAY TAX; 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 informal sector and URA’s struggles with widening the tax base.
“Trading through companies is much more technical and with recent increased enforcement from the regulators, this means entities can no-longer get away with non-compliance as has been the case, and yet tiny businesses can’t absorb the steep compliance costs (both with URA and URSB).
I have in the past advised owners of tiny enterprises to stick to sole proprietorship or partnerships as business vehicles until it becomes absolutely necessary to incorporate, in which case those businesses can be sold to corporations in consideration for equity.”
TAXATION AND CORPORATE GOVERNANCE; BUSINESS LESSONS FROM THE KANSAI PLASCON EXPERIENCE AFTER THE SADOLIN PAINTS TAKEOVER.
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.