Uganda's Minister of Finance tabled several bills for the 2021-22 Budget for the first reading in parliament on 1 April 2021, including bills containing amendments to the Income Tax Act, The Value Added Tax, The Tax Procedure Code Act, and others. The main proposed changes include the following:

• The introduction of a new definition of "Beneficial Owner", which means:
  • a natural person who has final ownership or control of another person or a natural person on whose behalf a transaction is conducted, and includes a natural person who exercises absolute control over a legal person and includes:
    • in relation to a legal person, the natural person who either directly or indirectly holds at least 10% of the shares or voting rights;
    • the natural person exercising control of the legal person through other means including personal or financial superiority; and
    • the natural person who has the power to make or influence a decision of the legal person;
  • in relation to trusts includes:
    • the settlor;
    • the trustee;
    • the protector;
    • the beneficiaries; and
    • any other natural person exercising absolute control of the trust;
  • in relation to other legal persons similar to trusts, a natural person holding a position equivalent to any of the positions referred to above in relation to trusts;
• The introduction of a new definition of "Consideration", which includes the total amount in money or of payment in kind, paid or payable for the supply of goods, services, or sale of land by any person, directly or indirectly, including any duties, levies, fees, and charges other than tax paid or payable on, or by reason of, the supply, reduced by any discounts or rebates allowed and accounted for at the time of the supply or sale;
• Changes regarding rental income, including:
  • taxpayers earning rental income from more than one rental building are required to account for income, expenses, and tax separately for each building;
  • deductible expenses and losses allowed to persons earning rental income is fixed at 60% for both individuals and companies and the applicable tax rate will be 30%;
• Income tax exemption changes, including:
  • the repeal of the tax exemption for income derived from agro-processing;
  • the introduction of a tax exemption for income derived from the manufacture of chemicals for agricultural use, industrial use, textiles, glassware, leather products, industrial machinery, electrical equipment, sanitary pads, and diapers; and
  • the introduction of a tax exemption for manufacturers making a capital investment of at least USD 50 million, with the conditions that at least 70% of raw materials are locally sourced, subject to availability, and that at least 70% of employees are Ugandan citizens earnings at least 70% of the total wages;
• Changes in depreciation, including:
  • a reduction in the number of asset classes for depreciable assets from four classes to the following three:
    • computers and data handling equipment - 40% (unchanged)
    • plant and machinery used in farming, manufacturing, and mining - 30% (new class)
    • automobiles, buses, construction equipment, specialized trucks, furniture, fixtures, and other depreciable assets not included in another class - 20% (new combined class)
  • new rules providing that a deduction for the depreciation of an asset or industrial building that qualifies for initial allowance is to be deferred to the next year;
• New rules for capital gains tax, including:
  • the cost base of assets sold after 12 months from the date of purchase will be adjusted for inflation according to a prescribed formula based on the consumer price index; and
  • capital gains arising from the sale of investment interests of a registered venture capital fund will not be recognized for capital gains tax purposes if at least 50% of the proceeds is reinvested within the year of income, with the entitlement to non-recognition equivalent to the percentage of reinvested proceeds;
• VAT changes, including:
  • the introduction of a 6-month time limit from the invoice date for claiming an input tax credit;
  • the introduction of quarterly VAT return filing requirement with returns due 15 days after the quarter (three-month) period for taxable persons supplying certain services to non-taxable persons in Uganda, including services in connection to:
    • immovable property in Uganda;
    • radio or television broadcasting services received at an address in Uganda;
    • electronic services delivered to a person in Uganda;
    • transfer, assignment, or grant of a right to use a copyright, patent, trademark, or similar right in Uganda; and
    • telecommunication services other than those by a supplier of telecommunication services or services to a person who is roaming while temporarily in Uganda;
  • the expansion of VAT exemptions to include:
    • an exemption for imported services if the service would be exempt if supplied in Uganda;
    • an exemption for supplies of liquified gas; and
    • an exemption for the supply of services in the nature of feasibility study or design and construction to manufacturers qualifying for the tax exemption for investments of at least USD 50 million;
  • the removal of certain VAT exemptions, including:
    • the exemption in connection with certain supplies provided to hotel or tourism facility developers with investment capital of at least USD 10 million and to conference and exhibition facility developers with investment capital of at least USD 300,000;
    • the exemption for the supply of production inputs to taxpayers engaged in iron ore smelting into billets in Uganda; and
    • the exemption for the supply of production inputs to taxpayers engaged in limestone mining and processing into clinker in Uganda;
  • the expansion of VAT zero-rating to include supplies of leased aircraft, aircraft engines, spare parts for aircraft, aircraft maintenance equipment, and repair services are zero-rated;
• The repeal of the over-the-top tax for social media, along with the introduction of a 12% excise levy on internet data fees;
• Various tax administration changes, including:
  • the introduction of measures for the Commissioner to facilitate the automatic exchange of information as may be provided for in international agreements and for the making of regulations for automatic exchange;
  • changes regarding the due date for payment of tax, including that tax under self-assessment is due on the due date for furnishing the return to which the assessment related and, in any other case, within 45 days from the date of service of the notice of assessment;
  • the extension of the time limit for filing amended self-assessment returns from within 12 months to within 3 years (if not under investigation), including for income tax, VAT, and excise duty;
  • the introduction of alternative dispute resolution procedures when dissatisfied with an objection decision of the Commissioner; and
  • the increase of tax-related penalties overall, including the following, among others:
    • failing to furnish a tax return by the due date or within further time allowed by the Commissioner - up to UGX 1,000,000 (up from UGX 500,000)
    • failure to maintain proper records - up to UGX 2,000,000 and/or imprisonment up to 6 years (up from UGX 960,000 and/or imprisonment up to 2 years)
    • making false or misleading statements - up to UGX 4,000,000 and/or imprisonment up to 10 years (up from UGX 960,000 and/or imprisonment up to 2 years)

Subject to approval, the changes will generally apply from 1 July 2021.