Gov’t to allow companies delay payment of taxes

Kampala, Uganda | THE INDEPENDENT | Some companies will be allowed to delay payment of taxes like Pay As You Earn and corporation taxes to remain in operation.

Medical items required in the fight against the virus including masks, protective goggles, body bags and sanitizers, infra-red thermometers and motorized fumigation pumps among others are now exempted from any tax.

This information is contained in a letter government sent to the International Monetary Fund (IMF) asking for emergence funds. Uganda has been given Shs 1.9 trillion by the IMF this month.

Pay as You Earn is charged on every employee income per month while corporation tax is charged on companies’ income.

Companies whose income is less than Shs 500m a year will be allowed to delay payment of corporation taxes by six months. The country will waive interest on tax arrears to lessen businesses’ tax liability obligations to the government.

According to an April 2020 letter signed by the Minister of Finance Matia Kasaija and Bank of Uganda acting deputy governor Dr Adam Mugume, the government will defer PAYE tax payments by the most affected sectors like manufacturing and tourism.

“This is expected to help the businesses to sustain a level of cash-flow to remain operational and not to lay off staff,” the letter reads.

It adds that “payment of corporation tax for qualifying companies and Small, Medium Enterprises (SMEs) in the most affected sectors with a turnover of less than Shs 500 million per annum has been delayed by six months without attracting interest.”

This is part of the government’s stimulus to help businesses get back to their footing. Allowing them to retain some money – which they would have given to the government in terms of tax – will give them options to keep them running.

The letter says the government will seek to pay Value Added Tax refunds due to businesses.

Some companies have previously complained of VAT refund delays, unnecessarily holding their money for too long.

But to cover the revenue shortfall from these measures, the government says it will seek to borrow more money in the coming days.

For instance, it will run to the World Bank for USD 300m (Shs1.1 trillion) to fund part of the health interventions in response to the COVID this financial year. It will ask the bank to also give USD$50m (Shs 189 bn) million towards dealing with the locust invasion.

Government has also run to the African Development Bank for USD 350 million (Shs 1.3trillion) for budget support for the 2020/21 financial year.

In a cloud of uncertainty, the government admits “the amounts to be received are still unclear.”

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