Ugandan Manufacturers and Tax Authority Collaborate to Address Tax Challenges Amid Upcoming Reforms. In a concerted effort to tackle pressing tax-related challenges, the Uganda Manufacturers Association (UMA) and the Uganda Revenue Authority (URA) have intensified their collaboration. This partnership aims to foster a more conducive tax environment for the manufacturing sector, which is pivotal to Uganda’s economic growth.
Renewed Commitment Through Memorandum of Understanding
The UMA and URA have reaffirmed their commitment to mutual cooperation by renewing their Memorandum of Understanding (MoU). This agreement facilitates regular dialogues to address strategic and operational tax matters affecting manufacturers. Key aspects of the MoU include:
- URA’s pledge to provide advance tax rulings within 30 days, enhancing clarity and predictability for taxpayers.
- Joint efforts to conduct evidence-based research to inform tax policy reforms.
- Prioritization of alternative dispute resolution mechanisms to expedite the settlement of tax disputes.
Addressing Operational Tax Challenges
Manufacturers have raised concerns over several tax-related operational issues that impact their competitiveness and growth:
- Complexities in tax administration and compliance burdens.
- Delays in duty remission schemes and inefficiencies in customs procedures for importing machinery and raw materials.
- The financial strain of the Digital Tax Stamp (DTS) system and frequent audits.
- Hurdles in regional trade due to varying tax regulations.
A particularly contentious issue is the requirement for a 30% upfront payment of a disputed tax assessment before it can be challenged. UMA argues that this practice hampers cash flow and stifles investment, advocating for reforms to alleviate this burden.
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Anticipating the Impact of Tax Amendment Bills 2025
The manufacturing sector is closely monitoring the proposed Tax Amendment Bills 2025, set to take effect on July 1, 2025. Key proposals include:
- Income Tax Amendments: Introduction of a three-year tax exemption for startups founded by Ugandan citizens, and extension of tax exemptions for strategic projects like the Bujagali Hydro Power Project.
- Value Added Tax (VAT) Amendments: Implementation of an anti-fragmentation rule requiring importers to aggregate separate consignments when determining VAT registration thresholds, and VAT exemptions for renewable energy products.
- Excise Duty Amendments: Adjustments to excise duty rates on specific goods, including fuel and building materials, and introduction of excise duty remission for damaged or obsolete goods.
- Tax Procedures Code Amendments: Simplification of taxpayer registration by allowing National Identification Numbers (NINs) and Business Registration Numbers (BRNs) to serve as Tax Identification Numbers (TINs), and a waiver on interest and penalties for overdue taxes up to June 2026.
These reforms aim to broaden the tax base, promote investment, and enhance compliance. However, manufacturers express concerns about the potential increase in operational costs and the need for adequate support during the transition.
Collaborative Efforts for a Sustainable Tax Environment
The ongoing dialogue between UMA and URA signifies a shared commitment to creating a tax system that supports industrial growth. URA has been proactive in taxpayer education, conducting sensitization campaigns on systems like the Electronic Fiscal Receipting and Invoicing System (EFRIS) and DTS. These initiatives aim to improve voluntary compliance and streamline tax processes.
By addressing operational tax issues and implementing reforms that consider the unique challenges of the manufacturing sector, Uganda seeks to bolster its industrial base, attract investment, and enhance its economic standing in the region.
The outcomes of these collaborative efforts will be instrumental in shaping the future of manufacturing in the country.
