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New Taxes: Parliament Approves Revision of Stamp Duty

Parliament approved the government proposal of setting a fixed stamp duty rate of 100,000 Shillings for bank guarantees, insurance performance bonds, indemnity bonds and similar debt instruments.
Deputy Speaker Jacob Oulanyah steering the plenary session.

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Parliament has adjusted the Stamp Duty rate on bank guarantees, insurance performance bonds, and indemnity bonds to 100,000 Shillings.

This followed the adoption of parliament’s Finance Committee chaired by Rubanda East MP Henry Musasizi on proposals carried in the Stamp Duty Amendment Bill, 2019.

Parliament approved the government proposal of setting a fixed stamp duty rate of 100,000 Shillings for bank guarantees, insurance performance bonds, indemnity bonds and similar debt instruments. 

On the other hand, an indemnity bond will be subject to a fixed rate of 50,000 Shillings. These come into effect on 1st July when the new financial year 2019/2020 starts.

The approval by parliament means that the duty applicable to these instruments are adjusted upwards since Bank guarantees have been subject to duty of only 15,000  Shillings while insurance performance bonds have been subject to a rate of 50,000 Shillings. On the other hand, indemnity bonds are currently subject to duty at the rate of 1% of the total value.

Meanwhile, also approved by parliament in a plenary session chaired by Deputy Speaker Jacob Oulanyah is a reduction of the investment thresholds for the Strategic Investment for developers in industrial parks or free zones.

Government had proposed a reduction from US Dollars 15 million to US Dollars 10 million for foreigners and US Dollars 5 million to US Dollars 2 million for citizens. 

State Minister for Finance in-charge of Planning, David Bahati defended the proposal saying that reduction in the minimum investment requirement for investors is to help them benefit from the tax incentives provided for in the Stamp Duty (Amendment) Act, 2018. He also said that the amendment reduces the cost of debt financing and ease tax compliance and administration.

In its report to parliament, the Finance Committee Chaired Okayed the amendment for reduction of investment threshold for foreigners but disagreed with the investment threshold of US Dollars 2 million for citizens. 

Musasizi told parliament that the US Dollars 2 million threshold was still high for citizens to benefit from the incentive. He recommended that the amount is reduced to US Dollars 1 million so that citizens can benefit.

Musasizi said that the proposals seek to provide incentives for investors in technical and vocational institutes and that these will help to provide skills especially to the youth which are relevant to the market.

The committee recommendation was approved by MPs with Kassanda North MP Patrick Nsamba supporting the reduction of investment threshold for citizens saying that it is to encourage local investments.

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Onzima Godfrey, the Aringa North also supported the reduction of the investment threshold for citizens.

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Jinja Municipality East MP Paul Mwiru objected to the reduction of investment threshold for foreign investors saying that the Finance Minister had not produced evidence that the high investment threshold had failed investment.

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Despite objections from Mwiru and other MPs like Kampala Central MP Muhammad Nsereko on reduction of investment threshold for foreigners, parliament voted to reduce the threshold.    

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