The Minister of Finance Matia Kasaija has announced the deferring of taxes worth 129.4 billion as a short term emergency relief to businesses due to effects of the Corona virus pandemic.
The Minister of Finance Matia Kasaija arrives at Parliament with the Budget briefcase.
The Minister of Finance Matia Kasaija has announced the
postponement of taxes worth 129.4 billion as a short term emergency relief
measure to businesses affected by Coronavirus pandemic.
The taxes postponed include
corporate income tax, Pay As You Earn (PAYE) and presumptive tax, which paid by
smaller businesses in the informal sector.
The postponement is on until
“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 Shillings 500 million per annum. Furthermore, no interest or penalties
will accumulate on these amounts during this period,” said Kasaija in part.
Kasaija made the revelation
during his Shillings 45.5 trillion 2020/2021 financial year Budget speech on
Thursday to Parliament. The budget is under the theme ‘Stimulating the Economy
to Safeguard Livelihoods, Jobs, Businesses and Industrial Recovery”.
The suspension of taxes is a huge
move for businesses in the informal sector and some smaller businesses in the
formal sector - many of whom are at the edge of collapse due to coronavirus
Kasaija said the postponement of tax payment taxes will help boost the
cash-flows for the business and ensure business continuity.
He deferred payment
of corporate income tax or presumptive Tax for Corporations and Small, Medium
He explained that the move is aimed to benefit companies and Small or Medium
Enterprises (SMEs) especially in tourism, manufacturing, horticulture and
The Economic Policy Research Centre (EPRC) survey found that
COVID-19 pandemic and subsequent lockdown has reduced business activity by more
than 50 percentage points.
The analysis showed that businesses in
agriculture experienced the largest decline in business activity with 76% of
the firms reporting severe decline and 12% reporting moderate decline.
The decline was according to the survey largely attributed
to COVID-19 containment measures such as transport restrictions, quarantine,
social distancing and ban on weekly markets, which have hindered farmers’
access to input and output markets, thus undermining their productive capacities.
It found that high percentages of
businesses in manufacturing and services reported decline in ability to repay
outstanding debts due to the outbreak of COVID-19 compared to those in
According to the Minister, the number of
taxpayers benefiting from this measure for whom corporate incomes tax is
applicable is 10,000 companies and the deferred Corporate Income Tax is
estimated to be Shillings 12.5 billion.
Meanwhile, Kasaija said the number
of tax payers benefiting from the presumptive tax measure is 23,000, and the
deferred tax is estimated to be Shillings 1.4 billion.
Parliament also learnt of that the deadline for payment Pay As You Earn Tax had been pushed to September
2020 from 1st April 2020 to 30th June 2020 for tax compliant Ugandan
businesses facing hardships as a result of the COVID-19 pandemic.
“No interest will accumulate on tax due during this period. An
estimated Shillings 65.4 billion due from Pay As You Earn (PAYE) for
manufacturing and tourism sectors is being deferred. For floriculture
sector, the expected PAYE deferral is Shillings 0.237 billion,” he said.
Government also waived
interest and penalties on tax arrears accumulated before 1st July 2020 to
lessen the tax liability of businesses who voluntarily comply with their tax
obligations. Kasaija said that this tax relief as a result is Shillings 50 billion.
To further support the businesses, Kasaija announced a
whopping 1.4 trillion shillings kitty that will go into Uganda Development
Bank. This will be for businesses to run to and borrow at below market rates
given by commercial banks.
The Minister also said that
government will provide for tax deduction on donations to coronavirus response
The government will also seek to
quicken the payment of outstanding VAT refunds to ensure companies get back
their money to carry on with their activities. A lot of companies complain of
delays in refunding their VAT which leaves them with less cash for investment.
Kasaija said that the Uganda Revenue Authority (URA) will speed up
payment of outstanding VAT refunds due to businesses accompanied by measures to
limit fraud. Kasaija said Shillings 121 billion will be refunded.