TAX LAW – Page 4

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.

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.

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.

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).

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