Question one (a)

With reasons, justify the above statements showing how it's a price for civilization and why
it has existed as long as the society existed and will continue to exist as long as the society
exists.
 Question two

a)Distinguish between

I) What is tax impact and tax incidence?

The final burden of tax is known as tax incidence and the initial burden of tax is known as tax impact.
Tax incidence is upon the person who eventually pays it and the tax impact is upon the person from
whom the tax is collected.

Tax incidence will fall on the consumers who pay the price for buying a product, and the tax impact
will fall upon the producers for producing a product

Ii) Tax avoidance and tax evasion

Legally reducing one’s taxable income is known as tax avoidance. Hiding, concealing or manipulating
the information about one’s income with the tax authorities is known as tax evasion. Tax evasion is
completely illegal in the eyes of the law.

tax avoidance is also the arrangement of one's financial affairs to minimize tax liability within the
law.

Tax avoidance is the legal usage of the tax regime in a single territory to one's own advantage to
reduce the amount of tax that is payable by means that are within the law.

Tax evasion means concealing income or information from tax authorities — and it's illegal. Tax
avoidance means legally reducing your taxable income.

Tax evasion is the use of illegal methods of concealing income or information from the IRS or other
tax authority. Tax evasion can result in fines, penalties and/or prison time. While

Tax avoidance is the use of legal methods of reducing taxable income or tax owed. Claiming allowed
tax deductions and tax credits are common tactics, as is investing in tax-advantaged accounts

b) What is presumptive tax

Presumptive taxation involves the use of indirect means to ascertain tax liability, which differ from
the usual rules based on the taxpayer's accounts.

The 2020 reform reduces presumptive tax revenue. The 2020 reform contains four turnover bands.
Companies are liable when their turnover is between 10 and 150 million Uganda shillings (UGX) per
year. Annual tax liability also depends on whether the firm keeps records or not.

This is a process where a registered small taxpayer makes changes in their Income tax return
previously submitted to URA.

Under Income tax- Presumptive Tax

The threshold for presumptive Taxpayers is 150 Million Uganda Shillings.

For rate for Presumptive Taxpayers with Annual income between UGX 10M - UGX 50M are based on
the location and nature of business.

For Presumptive Taxpayers with Annual income above Shs 50Million shillings but not exceeding Shs
150M, there are specific tax.

question two (c)

 Question three

a) Describe the legal foundation of taxation in uganda

Income Tax:

Income tax in Uganda is imposed under the Income Tax Act Cap.340 (“ITA”) and is based on
whether a person is a resident or non-resident for tax purposes. Residents are taxed on their
worldwide income whereas non-residents are taxed only on income sourced in Uganda.

A company is resident in Uganda if it is incorporated or formed under Ugandan law, has

management and control of its affairs exercised in Uganda or the majority of its operations
are carried out in Uganda during the year of income.

An individual is a tax resident if they have a permanent home in Uganda, spend at least 183
days in any 12-month period in Uganda or are present in Uganda for an average of more
than 122 days during 3 consecutive tax years.

Tax rate:

The ITA imposes tax on every person who has chargeable income for the year of income.
Chargeable income under the ITA is a person’s gross income less their allowable deductions.
The corporate tax rate under the ITA is 30% for resident companies and branches of foreign
companies. The rate for individuals ranges from 10% to 45% depending on their chargeable
income.

Withholding Tax:

Withholding tax (“WHT”) of 15% is imposed on every non-resident person who derives any
dividends, rent, natural resource payment, interest, royalties and management fees from
sources in Uganda.

Value-added tax (“VAT”):

VAT is chargeable on taxable supplies of goods and services in Uganda and the import of
certain goods. The standard rate of VAT is 18%. However, the supply of certain goods and
services like unprocessed agricultural produce, financial services and insurance services
(health insurance, micro-insurance, re-insurance and life insurance) are exempt from VAT.

Double Tax Agreements (“DTA’s”):

Uganda has DTA’s with 9 countries i.e., Denmark, India, Italy, Mauritius, Netherlands,
Norway, South Africa, United Kingdom and Zambia. The purpose of these DTA’s is to
eliminate double taxation and allocate taxing rights.
 The ITA however imposes restrictions on the enjoyment of benefits under these DTA’s. It
lays down 3 (three) conditions that must be fulfilled before a non-resident can benefit from
a DTA that Uganda has signed with their country.

The non-resident must be the beneficial owner of the income, have full and unrestricted
ability to enjoy the income as well as determine its future use and have economic substance
in the treaty country.

Taxation has always been a mandate of the Uganda Revenue Authority (URA), a semi-
autonomous body of the central government. This is pursuant to articles 152 (i) of the
Ugandan Constitution, which provides that no tax shall be imposed except under the
authority of an Act of Parliament. Therefore, the Uganda Revenue Authority Act Cap 196
was put in place to provide the administrative framework in which taxes under various acts
are collected, including:

Income Tax Act Cap 340

Value Added Tax Act Cap 349

Customs Tariff Act. Cap 337

East African Customs Management Act 2004

Excise Duty Act, 2014

The Tax Procedures Code Act 2015

Stamp Duty Act 2014

The various Finance Acts.

b) Using ugandas tax regime describe the features of a good tax regime and show whether uganda
tax regime qualify to be called good.

Question Four

a)Define zero rated supplies and give examples as per the income tax amendment act 2014.

Zero rated commodities.

VAT helps
encourages
in the exports
distribution
sinceofnothe
VAT
tax burden
is charged
since
onitexports
is paid and
at different
this makes
stages
export
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competitive in the world.
production.
It also widens the tax base that raises the government revenue/income because it is charged
on a variety of commodities.
VAT avoid the problem of double taxation since charged on value that is added on each
stage in the production process.
VAT promotes efficiency in business management because it involves proper maintenance of
books of accounts.
These are goods or services where VAT is charged at a rate of zero (0%) and the trader does not
charge VAT on the goods his is suppling.

Exempt commodities.

A person dealing in exempt supplies does not pay any VAT and still can not cliam any VAT paid on in
puts. They include:

The zero-rated supplies include the supply of goods and services exported from Uganda; the supply
of drugs and medicines manufactured in Uganda; the supply of seeds, fertilisers, pesticides, and
hoes; and the supply of leased aircraft, aircraft engines, spare engines, spare parts for aircraft, and
aircraft Maintenance.

b) How is it important for a bussines to register for VAT even if it does not reach threshold.

VAT is relatively economical in terms of administration and collection , that is costs are low.
The use of VAT eliminates corruption in the tax system simply because the tax payer are the
tax collectors.

Modernization of trade is increased / encouraged where books of account are properly kept
since VAT is never successful under conditions of improper records.

C) mukiibi bought 1000 iron sheets at 20,000 tax inclusive each, from Uganda baati, a
VAT registratered tax payer. He later sold these sheets to okello at a profit margin of
25%, who later sold them to Ande at a profit margin you are required to compute.

i) VAT remitted by each party in the channel of distribution.

Ii) the selling price of all the parties.