Parliament exempts tax on educational materials

Kampala, Uganda | THE INDEPENDENT | Parliament has passed the Value Added (Amendment) Tax Bill, 2019 approving VAT exemption of imported mathematical and geometry sets used in schools.

Members of Parliament in a plenary session chaired by Deputy Speaker Jacob Oulanyah approved the Finance Committee report recommendation slightly moving away from the government proposal to exempt only mathematical and geometry sets used for technical and vocational education.

The new tax measure comes into effect on 1st July when the financial year 2019/2020 starts.

The report was presented by the Committee Chairperson Henry Musasizi in which other items like supply of imported crayons, rulers, technical drawings sets, laboratory chemicals and others were also exempted in order to reduce their cost.

Parliament approved the recommendation without debate also approving VAT exemption on other items proposed by government including aircraft insurance services, rice mills, agricultural sprayers, woodworking machines, welding machines and sewing machines.

MPs further zero-rated supply of drugs and medicines manufactured in Uganda and sundries which are necessary in the medical value chain to make health services more affordable.

Musasizi said that the decision means that suppliers of drugs and medicines will be able to recover input VAT incurred.

Meanwhile, parliament approved the re-introduction of withholding of VAT of 6 percent of the taxable value and also provided for exemption of compliant taxpayers. This tax which was previously 18 percent was suspended last year.

The Finance Committee noted that bearing in mind that at times government does not have money to pay all the VAT claims in time, the amount withheld or to be withheld should be included as part payment in the subsequent VAT return.

An analysis by audit experts PricewaterhouseCoopers (PWC) indicates that the exemption for compliant taxpayers is understood to apply to the supplier and is expected to operate in a similar manner to the current Withholding Tax (WHT) exemption list citing 6 monthly renewals conditional on good VAT compliance behaviour.

PWC says that this is to reduce the tax compliance burden and cash flow implications for withholders. It, however, says that the administrative burden for designated VAT withholding agents is to continue.

Under the different new tax measures for the coming financial year, government seeks to collect 860 billion shillings.

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