Taxation is a compulsory charge which the government requires people in a country to pay it for a number of reasons which include financing the operations of the government, building infrastructure, promoting equal distribution of wealth, among others.
Of course, whether or not you agree with taxes, you are required to pay them. Taxes can be levied by the central government and the local governments.
In Uganda, the main law governing taxation is the Income Tax Act. This law sets out a description of the different activities that attract tax and how it is charged. Our website contains a page dedicated to providing information about the law regarding taxation of businesses in Uganda, but today we would like to share with you a brief on the presumptive tax rates on small businesses.
WHAT IS A SMALL BUSINESS?
These are businesses whose annual turnover is greater than 10 million shillings but does not exceed 150 million shillings. They are taxed under the presumptive income tax system which is a method used to tax small business enterprises with sales turnover categorized into grades as in the table provided.
The table provided shows the tax rates applicable to small businesses with turnover ranging from 10million to 50million within Kampala city and its division. Tax will be determined in accordance with the second schedule to the ITA cap 340, sec (5) where the gross turnover is less than 50 million.
|BUSINESS||GRADE I||GRADE II||GRADE III|
|Restaurant & bar||550,000||400,000||300,000|
|Hair and beauty saloon||550,000||450,000||300,000|
GRADE I –Turnovers from 35million to 50million.
GRADE II– Turnovers from 20million to 35million.
GRADE III– Turnovers from 10million to 20million.
Tax rates for business turnovers ranging from 50million to 150million are presented below.
|Range of turnovers||Rate of tax|
|>50million but less than 75million||Ugx 937,500 or 1.5% of turnover whichever is lower.|
|>75million but less than 100million||Ugx 1,312,500 or 1.5% of turnover whichever is lower.|
|>100million but less than 125million||Ugx 1,687,500 or 1.5% of turnover whichever is lower.|
|>125million but less than 150million||Ugx 2,062,500 or 1.5% of turnover whichever is lower.|
The different grade shows the different turnover in which the sales amount fall.
It’s only applicable to small business resident tax payers who are dealing in taxable supply.
None residents are not allowed to use these tax system. But note that no deduction will be allowed for expenditures or losses suffered in the production of income included in their gross income.
WHAT TO DO WHEN YOU FEEL OVER TAXED
A tax payer who feels dissatisfied with the tax amount levied upon his business can apply to the commissioner general by writing a notice of complain to be reassessed .This should be done within 45days of receipt of the tax invoice and the commissioner will reply with his decision within 45days as well. For further dissatisfaction, the tax appeal tribunal and the high court shall pass a final ruling.
Every corporate tax payers dealing in taxable supply must submit an annual income tax return by not later than six months from the end of its corporate tax year. However, you can apply for an extension of a maximum period of 90 days before the due date of filing the return. This therefore calls for a proper documentation of all records of transactions before submission to the tax authority.