Summary:
- Parliament rejected the proposal to impose penalties on withholding agents for failing to withhold tax, citing concerns about shifting URA’s responsibilities onto taxpayers. Instead, all URA-registered taxpayers are required to issue Electronic Fiscal Receipting and Invoicing System (EFRIS) invoices, providing URA visibility into transactions.
KAMPALA: Parliament has passed the Value Added Tax Amendment Bill 2024, granting the Government authority to collect VAT on goods or services donated by an employer to an employee.
This move comes in response to concerns raised regarding the misuse of this provision by some employers, who were providing taxable goods to their employees without proper consideration while claiming input credit for those goods. The Government argued that such actions were an abuse of the law, as the Uganda Revenue Authority (URA) could not recover output VAT in such cases.
In the minority report, the Opposition criticized this measure as inhumane, fearing it would discourage companies from making donations. However, MPs also approved a proposal to increase the threshold for claiming refunds of overpaid tax from Shs5 million to Shs10 million, rejecting the Government’s proposal to set it at Shs50 million. Under the new provision, refunds below Shs10 million will be automatically carried forward to offset the output for the next financial year.
Leader of the Opposition, Joel Ssenyonyi, raised concerns about the Government’s response to traders’ demands to lower the VAT rates from 18% to 16%. He emphasized the need for transparency and communication from the Government regarding ongoing discussions and decisions on this matter, as traders were anxiously awaiting resolution.
Meanwhile, Parliament rejected the proposal to impose penalties on withholding agents for failing to withhold tax, citing concerns about shifting URA’s responsibilities onto taxpayers. Instead, all URA-registered taxpayers are required to issue Electronic Fiscal Receipting and Invoicing System (EFRIS) invoices, providing URA visibility into transactions.
The Ministry of Finance’s initial proposal held withholding agents personally liable for unpaid tax amounts, allowing them to recover these amounts from the relevant parties. However, Parliament’s decision reflects a commitment to balance tax enforcement with ensuring the viability of Small and Medium Enterprises (SMEs) and maintaining clarity in tax obligations.
