The Ugandan government has introduced several tax measures aimed at enhancing revenue collection and promoting technological advancements. This is as part of the UGX 72 trillion total resource envelope that the country seeks to run for the financial year running 2024 to 2025.
In order to raise more revenue as well as improve the budget environment in this financial period, the following are the changes in technology-related taxes that were approved by Parliament to be effected on 1st July 2024.
These were detailed by Prosper Ahabwe, an Associate Director on Tax at Ernst & Young, during a post-budget breakfast meeting held to analyze the key notes to take from the budget readings done across East Africa.
Excise Duty on withdrawals from non-mobile money platforms
The government has proposed an excise duty of 0.5% on withdrawals from platforms other than mobile money. This measure is aimed at increasing revenue and reducing the reliance on mobile money for financial transactions. The duty will not apply to withdrawals from agent banking or banking halls, which are considered more formal and regulated channels for financial transactions.
This means that if you withdraw money from payment service providers such as Yo Pay!, Beyonic, and the likes; as well as Automated Teller Machines (ATMs) or via online and mobile banking platforms, you will likely have to incur this extra cost depending on how the providers assemble it.
This will be an added duty to what we saw with the introduction of a similar tax on mobile money withdrawals back in 2018. If you may as well recall, this mobile money excise duty was initially a tax of 1% on all transactions but would be later reduced to 0.5% on only withdrawals following a backlash and friction from stakeholders and service users.
Ahabwe states that for individuals, this measure may lead to a slight increase in the cost of withdrawals from non-mobile money platforms. However, it is likely that the increased revenue will be used to improve financial infrastructure and services, ultimately benefiting the general public.
VAT exemptions for Electric Vehicles and related services
The government has exempted the supply of electric motorcycles, vehicles manufactured or fabricated in Uganda, and their respective charging stations and batteries from Value-Added Tax (VAT). This measure is aimed at promoting the growth of e-mobility and affordability of electric cars and motorcycles, as well as protecting the environment.
With more private sector players joining the e-mobility space and supplying more vehicles to the growing market, this is going to be a win for the industry. This move is expected to make electric vehicles more competitive and affordable, encouraging more people to adopt environmentally friendly transportation options.
The exemption of VAT on electric vehicles and related services is part of the government’s efforts to promote sustainable development and reduce the country’s carbon footprint.
For individuals, this measure means that they will not have to pay VAT on the purchase of electric vehicles and related services, making them more accessible and cost-effective.
Read About: CFAO MD: E-mobility in Uganda needs collaboration to thrive
Income Tax holiday for Electric Vehicle manufacturers
The government has introduced an income tax holiday for individuals who manufacture and fabricate electric motor vehicles, electric motorcycles, electric batteries, and electric vehicle charging equipment.
This measure, like the VAT exemption, is aimed at encouraging the growth of the electric vehicle industry in Uganda; and it is expected to attract more investors and encourage local innovation, ultimately leading to the growth of the industry.
For individuals involved in the manufacturing and fabrication of electric vehicles, this measure means that they will not have to pay income tax on their earnings, providing them with a significant incentive to invest in the industry.
Withholding tax on commission paid to Banking and Fintech agents
The government has introduced a 10% withholding tax on commission paid to banking agents and fintech agents (payment service providers). This measure is aimed at increasing revenue and ensuring that the government receives its fair share of taxes from these agents.
Of course, the tax on commission paid to banking and fintech agents is part of the government’s efforts to increase revenue and ensure that all sectors contribute to the national coffers. The expectation is that this will increase revenue for the government and reduce the burden on other taxpayers.
For individuals who receive commissions from banking and fintech agents, this measure means that they will have to pay a withholding tax on their earnings, which may affect their take-home pay. Ahabwe indicates that the agents do not have to file this in their returns as it is a final tax all-through.
Read About: Uganda to tax foreign online service providers in VAT Bill
Strengthening EFRIS and Digital Tax Stamps (DTS)
The government has strengthened the Electronic Fiscal Receipting and Invoicing System (EFRIS) and Digital Tax Stamps (DTS) to improve tax compliance and reduce tax evasion.
Ahabwe asserts that for individuals and businesses, this measure means that they will have to use electronic systems for invoicing and receipting, making it easier for the government to track and monitor tax compliance.
The bottom line
The Ugandan government has introduced several tax measures aimed at enhancing revenue collection and promoting technological advancements.
These measures include the imposition of excise duty on withdrawals from non-mobile money platforms, VAT exemptions for electric vehicles and related services, income tax holidays for electric vehicle manufacturers, withholding tax on banking and fintech agents, and the strengthening of electronic fiscal receipting and invoicing systems.
Each of these measures has its own implications for Ugandans, from increased revenue for the government to the promotion of sustainable development and the growth of the electric vehicle industry.
Read About: Does more tax on fuel mean more EV adoption in Uganda?
