Finance Minister Matia Kasaija has listed tax reliefs for businesses which are struggling as a result of the COVID-19 pandemic, saying the move will address the “short term emergency liquidity requirements of businesses, boost their cash-flows, and ensure business continuity.”
Kasaija, in a budget speech being read at Parliament on Thursday, deferred payment of Corporate Income Tax or Presumptive tax for Corporations and Small, Medium Enterprises (SMEs).
“I am deferring until September 2020, the payment of any Corporate Income Tax and Presumptive Tax due 1st April 2020 to 30th June 2020, for tax complaint businesses with a turnover of less than Shs 500 million per annum,” Kasaija’s budget speech reads in part.
“Furthermore, no interest or penalties will accumulate on these amounts during this period. This is aimed to benefit companies and Small or Medium Enterprises (SMEs) especially in tourism, manufacturing, horticulture and floriculture,” he added.
“The number of taxpayers benefiting from this measure for whom Corporate Incomes Tax is applicable is 10,140 and the deferred tax is estimated to be Ushs 12.5 billion. In addition, the number of tax payers benefiting from the presumptive tax measure is 23,892, and the deferred tax is estimated to be Ushs 1.38 billion.”
The Ugandan economy is being severely hit by the COVID-19 pandemic and, in particular, such key sectors as services (tourism), transport, construction, manufacturing and agriculture.
This challenging external environment is curtailing remittances and foreign direct investments.
The pandemic has also exacerbated the challenges posed by heavy rains in early 2020 and the ongoing locust invasion.
Kasaija also deferred payment until September 2020 of PAYE due from 1 April 2020 to 30 June 2020 for tax compliant Ugandan businesses facing hardships as a result of the COVID-19 pandemic.
He said “no interest will accumulate on tax due during this period. An estimated UShs 65.35 billion due from Pay As You Earn (PAYE) for manufacturing and tourism sectors is being deferred. For floriculture sector, the expected PAYE deferral is Ushs 0.237 billion.”
The Minister also waived interest and penalties on tax arrears accumulated before 1 July 2020 to lessen the tax liability of businesses who voluntarily comply with their tax obligations. The expected tax relief as a result is Ushs 50 billion.
Kasaija also provided for Tax Deductibility of Donations for the Corona Virus Response. He allowed the value of the donations the private sector made towards the Corona Virus Response.
He further revealed Uganda Revenue Authority would speed up payment of outstanding VAT refunds amounting to Ushs 120bn due to businesses accompanied by measures to limit fraud.
Financial Sector Stability
In order to ensure financial sector stability in support of the economy, Kasaija reiterated the Bank of Uganda’s measures being implemented to mitigate risks to overall economic growth, and also ultimately support the financing of businesses.
These include providing for adequate capital buffers for supervised financial institutions to ensure effective operation by deferring payments of all discretionary dividends and bonus payments for at least 90 days effective March 24, 2020.
“This preserves the capital of a financial institution and is intended to support the real economy,” said Kasaija.
Other measures include smoothening out volatility in the foreign exchange market arising from global financial markets; providing exceptional liquidity assistance for a period of up to one year to Supervised Financial Institutions that may need it; and waiving limitations on restructuring of credit facilities.
Supervised Financial Institutions (SFIs) have been permitted to restructure loans and provide loan repayment holidays to companies and individuals affected by the Corona Virus pandemic; and
Kasaija said BoU would encourage the reduction of Mobile Money and other digital Transactions fees that are charged by Mobile Network Operators and commercial banks, in order to limit the use of cash and customer visits to banks.