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Withholding Tax in Uganda - A Comprehensive Guide

CPA Innocent MUGISHA
Apr 10, 2024
5 min read
Withholding Tax
CPA Innocent MUGISHA

The Income Tax Act Cap 340 specifies the persons who are required to withhold tax as well as those upon whom the tax should be imposed, depending on the nature of the transaction. This tax is deducted at source by a withholding agent upon making payment to another person.

A withholding agent is the person making payment and obliged to withhold tax; and the recipient of the payment is the payee.

CPA Uganda April Intake
  1. Employment income: Tax is deducted by the employer from the employment income of every liable employee on a monthly basis under the PAYE system.


  2. Payments on professional fees: A resident person who pays management or professional fees to a resident professional is required to withhold tax at 6% of the gross amount of payment. Excluded from this provision are professionals whom the Commissioner is satisfied have regularly complied with the obligations imposed by the Income Tax Act, and those professionals ordinarily engaged as payroll employees.


  3. Withholding tax on payments to foreign entertainers and sports persons:

    Tax is charged at a rate of 15% on payments to nonresident entertainers, sports persons or theatrical, musical or other group of nonresident entertainers or sports persons who derive income from any performance in Uganda. The obligation to withhold the tax is placed with the person making the payment e.g. promoter, agent, or such similar person.


  4. Withholding tax on Interest: A resident person who pays interest to another resident person is required to withhold tax at 15% of the gross amount of the interest paid. Withholding tax is, however, not applicable where interest is paid by a natural person (individual), paid to a financial institution, paid by a company to an associated company or exempt from tax in the hands of the recipient. Where tax is withheld on payment of interest by a financial institution to an

    individual, the tax withheld is a final tax on the income.


  5. Payments to non-resident contractors or professionals: Tax is imposed on every non-resident person deriving income under a Ugandan source service contract. The tax is charged at 15% of the gross amount of payment and the person making the payment should withhold the relevant tax before effecting the payment.


    Note: A Ugandan source service contract is a contract under which the principle purpose is the performance of services which gives rise to income sourced in Uganda, and any goods supplied under the contract are only incidental to the purpose. A Ugandan-sourced service contract excludes an employment contract.


  6. Payments on dividends: A resident company which pays a dividend to a resident shareholder is required to withhold tax at 15% of the gross amount of the dividend paid, except where the dividend income is exempt from tax in the hands of the shareholder. However, where the dividend is paid by a company listed on the stock exchange to a resident shareholder, the rate is 10% on the gross amount.


  7. Payment for Goods and services: Any payment of amounts in total exceeding Shs 1,000,000 to any person in Uganda for the supply of goods, materials of any kind or services, is required to withhold 6% of the gross amount. The threshold of Shs 1,000,000 is in respect of the total contract value, implying that separate supplies which constitute one contract are subject to the 6% withholding tax regardless of the fact that the amount paid per a single supply or transaction

    is less than the threshold value.


  8. International payments: Tax is imposed on every non-resident person who derives any dividend, interest, royalty, natural resource payment or management charge from sources in Uganda. The tax is withheld by the payer at the rate of 15% on the gross amount before payment.


  9. Payment on imports: Every person who imports goods into Uganda is liable to pay withholding tax at 6% based on Customs Value in Uganda, at the time of importation. This provision, however, does not apply to a supplier or importer who is exempted from withholding tax.


  10. Withholding tax on commissions to insurance agents: A person paying commission to an insurance agent or advertising agent shall withhold tax at a rate of 10%.


  11. Gaming and pool betting: A person who makes payment for winnings of betting or gaming shall withhold tax on the gross amount of the payment at a rate of 15 %.


  12. Commission paid to telecom service providers on airtime distribution and mobile money: A telecommunication service provider who makes a pay-ment of commission for airtime distribution or provision of mobile money services shall withhold on the gross amount of the payment at a rate of 10%.

CPA Uganda April Intake 2024

Taxpayer

Description

Withholding Agent

Tax Rate

Employee

Monthly employment income

Employer

PAYE Rates

Resident Professionals

Management / professional fees

Resident Person

6%

Foreign Entertainers and sports persons

Income derived from any performance in Uganda

Promoter, Agent or such a person

15%

Resident Person

Interest income derived

Resident person

15%

Non-resident contractors / professionals

Income derived under a Ugandan sourced service contract

Resident Contractee

15%

Resident Shareholders

Dividend Income

Resident Company

10% / 15%

Resident Suppliers

Payment received of amouts in total exceeding shs. 1,000,000 for the supply of goods, materials of any kind.

Resident Person

15%

Non-resident persons

International payments e.g. interest, management fees, rental income, royalties, natural resource payments, etc

Resident Person

15%

Importer in Uganda

Every person who imports goods into Uganda

Customs

6%CIF

Insurance / Advertsing Agents

Commissions

Insurance Company / Media House

10%

Winner of gamming / Sports betting

Winning of betting or gamming

Sports Betting Enterprise

15%


CPA Innocent MUGISHA

CPA Innocent Mugisha is a Professor of Finance and Accounting with over 10 years experience in teaching Accounting and Finance related courses including Financial Accounting both at University and Professional level. His qualifications are: PhD (candidate), MBA(Finance), CPA(U), FCCA, CIPS, CTA and BCOM (Accounting). Innocent has also published various books on most topics in Accounting and Finance for Business and Professional Studies.

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CPA Innocent MUGISHA
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