Understanding tax compliance

When it comes to tax compliance, businesses should acquaint themselves with the Uganda Revenue Authority (URA), an organization created by the Constitution of Uganda to collect taxes on behalf of government and consolidate those funds so the government can fulfill its mandate each year. The COVID-19 Business Info Hub sat down with David Rusoke, a team lead for tax literacy in the domestic tax department at URA, who works to “enlighten people on tax matters, their tax obligations and information that will enable them make informed decisions about the subject.” David helped us understand the ins-and-outs of tax compliance and how businesses can navigate Uganda’s tax compliance framework.

In simple terms, tax compliance is making sure that a business fulfills its tax obligations as outlined by the URA, which administers laws such as the Income Tax Act and the Value Added Tax Act, among others. The URA is responsible for collecting taxes stipulated under these laws – including the Value-Added Tax (VAT) and Pay As You Earn (PAYE) Employment Tax; both of which are critical to the operation of tax compliant businesses.

Fulfilling tax obligations starts with obtaining a TIN

To fulfill tax obligations, businesses start by obtaining a free, ten-digit Taxpayer Identification Number (TIN), which is used to account for a business’ obligations as well as for other purposes such as obtaining an operating license. Once a business acquires a TIN, it is required to file annual tax returns and pay any taxes arising. Businesses become fully tax compliant once they pay any obligations after filing annual, bi-annual, quarterly, or monthly returns.

Businesses without a TIN may find their opportunities limited when it comes to partnering with other firms. Wherever you stand on the supply-line of the value chain, major players will require you to have a TIN so that they can fulfill their own tax compliance requirements. Ugandan law limits a business’ purchasing from businesses without TINs to 5M UGX. Purchasing any more than that creates a risk for larger businesses maintaining their own compliance. If a business is looking to work with the government, for instance, they’ll need to obtain a Tax Clearance Certificate (TCC) to be eligible to engage with any government agencies. government agencies.

Next, it is important to understand the rights and obligations that apply to your specific business with regards to fulfilling tax obligations. While these are outlined in Uganda’s taxpayer charter, there are many details and nuances that exist. For instance, many goods are taxed at higher tax rates to discourage their consumption and can impose larger tax burdens on a business.

Where to turn for help

It’s important for business owners to ask the right questions about their tax obligations and understand how to navigate the system, and there are a few options if business owners need somewhere to turn for help.

David explains that the URA is ready and able to help business owners through various advisory services including training and information made available in person, via radio, through webinars,  toll free lines and a Whatsapp Chat, and even on YouTube. Business owners can also access the URA’s web portal at ura.go.ug to download PDF forms to fulfill requirements as well as a library of information that can help answer any questions.

Business owners can also consider hiring a tax consultant, but David highlights that it is important to ensure the consultant is URA-designated, as any liability for a faulty return will fall directly on the business owner. He also suggests that business owners learn to understand their tax obligations for themselves because they will benefit from having greater ownership of their compliance obligations. Keeping on top of your tax obligations requires careful bookkeeping, so business owners who do so are more often in tune with their business records and sales performance.

Business owners are encouraged to contact the URA directly with specific questions for which training or support are made available online via the URA’s site. Callers can access a toll-free line at 0800117000 or 0800217000 that is available until 11 pm for help. Alternatively, questions can be submitted through email at services@ura.go.ug. For those who prefer an in-person experience, the URA’s service centers are open for business owners to visit their offices.