PAYE(Pay As You Earn) Guide for foreign investors in Uganda.

TAX REGISTRATIION AND PAYMENT

Many of you have been asking me about income tax payment by individuals employed in Uganda by Foreign companies.

Whenever you choose to sell products/services in Uganda and employ people staying in Uganda to work for you,

There is income earned by your employees in Uganda and in accordance to section 17(2)(a) of the income tax ACT CAP 340 of the laws of Uganda,the employees are Ugandan residents for tax purpose.

Tax residents must pay tax on incomes earned in Uganda  and else where in the world. Non residents pay tax only on incomes earned in Uganda(Section 17(2)(b). Non residents taxation will be exhausted in our next blog.

These residents are supposed to pay income tax in accordance with section 19 (Employment income) of the Income tax Act CAP 340.   The monthly tax rates are as follows;

Monthly Chargeable Income Rate of tax  
Not exceeding Ushs235,000 Nil
Exceeding Ushs235,000 not exceeding Ushs335,000 10% of the amount by which chargeable income exceeds Ushs. 235,000
Exceeding Ushs.335000 but not exceeding shs. 410,000 Ushs. 10,000 plus 20% of the Amount by which chargeable income exceeds Ushs. 335,000
Exceeding Ushs.410,000 (a)Ushs 25,000plus 30% of the amount by which chargeable income exceeds Ushs. 410,000and (b) where the chargeable income of an individual exceeds shs.10, 000,000 an additional 10% charged on the amount by which chargeable income exceeds shs. 10,000,000.

The above rates are monthly and can as well be computed annually.

Tax registration and payment can either be done by the employer on a monthly basis on behalf of employees or by the employees through making individual tax  returns an paying resultant tax liability.

  1. Submission and payment of tax  by  the employer

For an employer to file and pay income tax for employees, the employer must register with Uganda Registration service Bureau (URSB), obtain an incorporation certificate plus form 20 showing company directorship, proceed to Uganda Revenue Authority to get a Tax Identification Number(TIN).

With the TIN, the employer submits on a monthly basis the names and gross amounts earned by employees every month, the resultant liability is paid every month with in 15 days after end of month in form of Pay As You Earn(PAYE).

In this case , employees will only have a duty to file annual income tax return and show how tax was deducted and paid by the employer to URA on their behalf.

2.Submission and payment of tax by employees.

If the employer is not registered and does not submit monthly PAYE on behalf of employees, the employee can individually register with URA, obtain a TIN, and file annual income tax returns for individuals indicating how much is earned from employment and other sources of income. The resultant liability is paid by the employee to URA.

An individual files 2 income tax returns in a year that is an estimate called provisional return  at beginning of year showing estimated annual income.

The employee is allowed to pay in 4 quarter install ments and expected to complete liability payment by end of tax year and a final return with in 6 months after end of tax year showing actual earnings and how tax was paid and pay liability balance there on.

In which ever way that is the option of company submissions or individual submissions, the liability ends up being paid to URA.

Other issues to consider.

In case a company registers and submits monthly PAYE returns, there are other tax filing and paying obligations  to be done by the company as follows;

  1. The company would it self have to file corporate income tax returns to pay tax on profit earned from incomes in Uganda. The current rate for companies is 30% of annual profit made in Uganda.
  2. The  individual directors of the company will also have to file individual returns and pay resultant liability.
  3. The company will have to file and pay VAT that is if the service offered in Uganda is Vatable.
  4. The company will have to file with holding tax returns showing amounts paid to suppliers and amounts with held there on.
  5. The company will have to obtain annual trading licenses depending on the area in Uganda where their offices are located.
  • The company will have to file annual URSB returns with the registra of companies once every year.

I hope the above narrative answers your questions about employment income.

In case of furuther questions please do not hesitate to consult me.

Call +256701228058

or visit web:www.elitebestbusiness.com

or send inquiries to customercare@elitebestbusiness.com

VALUE ADDED TAX

Frequently Asked Questions.

  1. What is VAT? VAT is Value Added Tax in full. It is is a consumption tax added to a product/Service sales price. It represents a tax on the “value added” to the product/service throughout its distribution/provision process. 
  2. Which items attract VAT? The VAT law groups all products and services into 3 categories. The exempt items as stated in second schedule , the zero rated as stated in third schedule of VAT ACT of Uganda. Whatever is not exempt or zero rated is standard rated and attracts VAT at a rate of 18%
  3. Who pays VAT? VAT is paid by the final consumer of a product/service on which it is levied. it is paid by a person that can not pass it on to another person.
  4. Who accounts for VAT? VAT is accounted for by persons that sell taxable supplies, and importers of goods and services.
  5. What is the threshold for VAT registration? Currently, if your taxable sales in a period of 12 months amount to Ushs 150Million or Ushs 37.5 Million in 3 consecutive months, you are eligible to register for VAT. The above registration is based on historic performance. There is however registration based on futuristic projections. If you project to make 150million in next 12 months or Ushs37.5 million in next 3 months, you can apply to register on futuristic basis. There is a voluntary VAT registration which we will exhaust in our next blog regarding VAT.
  6. When do I register for VAT? If you sales hit the registration threshold, you are mandated to register in the next 20 days in the month following the one in which you hit the threshold.
  7. When is my effective date of VAT registration? Your Effective Date of Registration(EDR) for VAT will be the first date of the month following the month in which you applied for registration. However, your effective date of Registration may be back dated by a Uganda Revenue Authority officer to a day he /she sees fit.
  8. How and when do I file VAT returns? VAT returns are filed monthly. The return must be filed on or before the 15th date of the month following the month for which VAT is being accounted. For more information regarding VAT registration, filing, assessments/objections, reconciliations and training, please contact us on +256701228058 , Email: customercare@elitebestbusiness.com, or visit our website:www.elitebestbusiness.com