How To Calculate 6 Withholding Tax In Uganda
Withholding tax (WHT) is a form of income tax that is withheld at source by one person (withholding agent) upon making payment to another person (payee).
This tax is deducted at source and remitted to URA in advance by the withholding agent.
The law stipulates the persons who are required to withhold the tax and the persons from whom the tax is withheld. This depends on the nature and the circumstances of the transaction.
WHO QUALIFIES TO WITHHOLD?
A withholding agent is a person legally obliged to withhold tax on payment.
To become a withholding agent one must;
– Be on the list of selected / designated withholding agents published by the Minister of finance in a gazette or
– Be making a payment on a transaction that is subject to WHT by law.
NOTE: Withholding taxes may be final or creditable;
Final: Under the final withholding tax system, the amount of income tax withheld by the withholding agent is constituted as a full and final payment of the income tax due from the payee on the said income and
a) The payee will not be subjected to further tax on such income
b) The payee is not required to file an income tax return for the particular income that has faced final withholding tax
c) That income is not aggregated with the other income of the taxpayer for the purposes of ascertaining chargeable income;
d) No deduction is allowed for any expenditure or losses incurred in deriving the income and;
e) No refund of tax shall be made in respect of the income. Creditable: Under the creditable withholding tax system, taxes withheld on certain income payments are advance tax payments which are offset against
a final tax liability in an assessment for a particular year of income. The payee may be required to file an income tax return to report the income and/or pay the difference between the tax withheld and the tax due on the income.
A. WITHHOLDING TAX ON EMPLOYMENT INCOME (SEC.116 ITA)
Employment income consists of salary, allowances and benefits in kind. Income tax on employment income (commonly known as Pay As You Earn) is deducted by the employer from the employment
income of every qualifying employee on a monthly basis and remitted to Uganda Revenue Authority.
The tax for resident persons is calculated as follows:
MONTHLY CHARGEABLE INCOME RATE OF TAX
Not exceeding Shs. 235,000 Nil
Exceeding Shs. 235,000 but not exceeding Shs. 335,000 10% of the amount by which chargeable income exceeds Shs. 235,000 per month
Exceeding shs.235,000 but not exceeding Shs. 335,000 10% of the amount by which
chargeable income exceeds Shs. 235000
Exceeding Shs. 410,000 a) Shs. 25,000 plus 30% of the amount by which chargeable income exceeds Shs. 410,000
b) Where the chargeable income of an individual exceeds Shs
10,000,000 per month, an additional 10% is charged on the amount by which the chargeable income exceeds Shs. 10,000,000 per month.
B. WITHHOLDING TAX ON PROFESSIONAL FEES
A resident person who pays management or professional fees to a resident
person is required to withhold tax at a rate of 6% of the gross amount of the
payment.
C. WITHHOLDING TAX ON WINNINGS OF SPORTS OR POOL BETTING
A person who makes payments for winnings of sports betting or pool betting
shall withhold tax on gross amount of the payment at a rate of 15%
D. WITHHOLDING TAX ON GOODS AND SERVICES
Where Government of Uganda; a Government institution; a local authority; a company in which Government has interest or any person designated in a notice issued by the Minister of Finance, pays amounts in aggregate exceeding one million shillings to any person in Uganda for the supply of
goods, materials of any kind or services, the payer is required to withhold tax at a rate of 6 percent of the gross amount paid.
It is important to note that this tax is imposed on any part payments for the contract if all payments for this contract when aggregated exceeds the threshold of one million shillings
E. WITHHOLDING TAX ON IMPORTS
Every person who imports goods into Uganda is liable to pay withholding tax at the time of importation on the Customs Value of the goods at 6% except supplies & imports by organizations or persons exempt from income tax.