1. Accountants & business advisers Implications of Tax Proposals GOU Budget 2014/2015 Albert Beine Senior Tax Manager PKF Uganda 13 June 2014

2. Accountants & business advisers 2014/15 Budget Theme “Maintaining the Momentum for Infrastructure Investment, Growth and Social Economic Transformation”

3. Accountants & business advisers 2014/2015 Tax Proposals

4. Accountants & business advisers Preamble Revenue Shortfall Net URA revenues for FY2013/14 were projected at 8,578 billion; Cumulative collections to date are at 8,104 billion; Provisional shortfall of 475 billion; Underperformance mainly due to lower than projected growth in the economy that affected profitability;

5. Accountants & business advisers Preamble cont’d…. Talking Tough! In 2014/15 FY, government will take corrective measures to improve revenue performance- including: - Strengthening tax revenue administration, - Vigorous collection of arrears, and - New tax revenue enhancement measures.

6. Accountants & business advisers Objectives to raise revenues; enhance transparency in collection and enforcement; improve compliance; encourage investment; clarify ambiguous provisions; and Simplify laws.

7. Accountants & business advisers Income Tax Termination of exemption of income derived from educational institutions - 15 billion; Elimination of initial allowance on eligible property – 53.2 billion;

8. Accountants & business advisers Income Tax cont’d… Increase the presumptive tax threshold from 1% to 3%- 8 billion; Imposition of 15% tax on sports and pool betting winnings and designation of gambling houses to withhold the tax – 8 billion;

9. Accountants & business advisers Income Tax cont’d… Termination of exemption on interest income on agricultural loans – 25 billion; Capital gains tax on sale of commercial property – 52 billion;

10. Accountants & business advisers Income Tax cont’d… Thin capitalization rules-allowable interest not to exceed 50% of earnings before interest and depreciation; Start up costs restricted only to non recurring preliminary costs associated with starting up a business;

11. Accountants & business advisers Value Added Tax Termination of exemptions under the second schedule of the VAT act: o Supply of new computers, desktop printers, computer parts & accessories and computer software licenses; o Supply of hotel accommodation in tourist lodges and hotels outside Kampala District;

12. Accountants & business advisers Value Added Tax cont’d… o Supply of Liquefied Petroleum Gas; o Supply of Feeds for Poultry and Livestock; o Supply of Agriculture and Diary Machinery; o Supply of Packaging Materials to the Diary and Milling Industries

13. Accountants & business advisers Value Added Tax cont’d… o Supply of Salt; o Supply of Insurance Services except medical and life; o Supply of Specialized Vehicles, Plant and Machinery services and civil works related to roads and bridges construction, Agriculture, Water, Education and Health. Measure to generate 215bn

14. Accountants & business advisers Value Added Tax cont’d… Termination of Zero-rated Supplies under the Third Schedule of VAT Act o Supply of Printing Services for Educational Materials; o Supply of cereals, grown, milled or produced in Uganda; o Supply of processed milk and milk products; o Supply of Machinery and Tools for Agriculture

15. Accountants & business advisers Value Added Tax cont’d… o Supply of Seeds, Fertilizers, Pesticides and Hoes Measure to generate 30.4bn

16. Accountants & business advisers Item Old rate New rate Petrol and diesel Increase of Shs 50 (Expected to raise Shs 60 billion) Petrol – Shs 900 Diesel – Shs 580 Shs 950 Shs 630 Kerosene (Expected to raise Shs 15 billion) Nil Reinstate excise duty of Shs 200 per litre Sugar (Expected to raise Shs 7 billion) Shs 25Shs 50 Changes in Excise Duty rates

17. Accountants & business advisers Item Old rate New rate Mobile money withdraw fees (Expected to raise Shs 16 billion) Nil 10% on fees charged on withdrawals Bank charges and money transfer fees (Expected to raise Shs 22 billion) Nil 10% on bank charges and money transfer fees Changes in Excise Duty rates

18. Accountants & business advisers Other Tax Measures o All goods and services procured by Government will be tax inclusive o Write off of all outstanding taxes owed to URA by Central and Local Government (excludes PAYE and WHT)

19. Accountants & business advisers NTR & other reforms o More NTR rates to be revised raising further revenue of 40bn o New bills for excise duty, stamps duty, Lotteries and Gaming laws and Tax procedure code are now before parliament

20. Accountants & business advisers Tax Administration o eTAX System to be linked with IFMS; o To improve tax administration, a list of key performance indicators has been developed between finance and URA to monitor efficiency.

21. Accountants & business advisers Food for thought! o Will these measures achieve the objectives they are meant to achieve? o Will URA hit their increased target of UGX 9,577 billion this time round? o Are we milking a starving cow?

22. Accountants & business advisers ….and lest I forget  Comply, comply and comply;  The noose is being tightened on tax evaders;  Don't say I never warned you.

23. Accountants & business advisers

24. www.pkfea.com Presenters’ contact details Albert Beine Senior Tax Manager – PKF Uganda Plot 1B, Kira Road Off: +256 414 341523/5 Mob: +256 772 404788 email: abeine@ug.pkfea.com