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Committee Rejects Proposal Requiring Landlords to File Separate Returns for Properties

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In its report to parliament, the Committee notes that even when the government proposal is intended to streamline the collection of rental tax and reduce revenue loss to government, it will increase the compliance burden on the property owners.
Finance Committee Chairperson Henry Musasizi.
The Finance Committee of parliament has rejected the government’s proposal in the Income Tax (Amendment) Bill, 2019, which seeks to compel landlords and companies to with more than one property to declare the income from each asset separately. 

The proposal is meant to catch landlords who have been hiding behind making losses to evade taxes. The proposal means that property owners would no longer be able to offset losses from one property using the profits of another.

Government expects to collect Shillings 7 billion with the proposed tax reform in the 2019/2020 financial year. However, the Finance Committee, which scrutnised the bill under the leadership of Rubanda East MP Henry Musasizi has opposed the proposal.

In its report to parliament, the Committee notes that even when the government proposal is intended to streamline the collection of rental tax and reduce revenue loss to government, it will increase the compliance burden on the property owners. 

"It will be costly and complicated for companies or corporations like National Housing and Construction Company Ltd or National Social Security Fund who own several properties to file separate returns for each property,” reads the committee report.  

   

This is line with the submission of experts from PricewaterhouseCoopers (PWC) who asked the committee to reject the proposal, saying it will impose a huge tax compliance burden on taxpayers and real estate developers.  

Francis Kamulegeya, the Senior Partner in PWC told the Committee last week that the tax measure would distort the taxation of companies involved in rental property by forcing them to treat each property as if it is separate business. 

Parliament is set to debate the committee report on Thursday this week.     

If rejected, the current arrangement where land lords or company sums up all the monies earned from rent in different properties is to remain. 

Under the current arrangement, once the rental income doesn’t exceed the Shillings 2.8 million thresholds after deducting the 20 percent allowable expenses, the property is exempted from taxes.           

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