Tax relief for businesses affected by the Covid-19 pandemic.

Due to the Covid-19 pandemic, nation-wide lockdown and Standard Operating Practices, several businesses have performed below average or not at all. The government considerately provided some relief for businesses to ensure that there is no massive unemployment and business closure due to the pandemic.

The relief is in the form of a waiver for the interest arising from tax liabilities before June 30, 2020, and the deferral of income tax liabilities. This waiver applies to only taxpayers that voluntarily declare that they have tax liabilities and have made effort to clear them while the deferral is only available for businesses with a turnover not exceeding UGX 500,000,000.

Taxpayers who have been approached by the URA for reconciliation before the application of the waiver, URA compliance advisory, URA audit, or return examination will not be granted the waiver.

The waiver is limited to the declaration made by the taxpayer and does not cover any liabilities discovered by the URA after a review. For example, if you declare VAT liability of UGX 50M due to late payment of tax liability and later the URA finds out that you did not account for the self-charged VAT, they will provide for the waiver of interest on the UGX 50M and will not provide remission on the interest arising nor charge you the applicable interest without any room for a waiver.

The appeal to taxpayers is to perform a detailed review or tax health check via a tax agent to ensure that all possible liabilities are brought to light. Taxpayers that can pinpoint their non-compliance will be most likely able to fix the problem when it comes to future compliance.

This relief was also designed to cater for clients who are low on the cash-flow due to the pandemic. The URA is therefore very welcoming to payment plans to ensure that compliance is achieved over a while.

All taxpayers should actively consider making an application for the waiver since it reduces the pressure on the compliance going forward and also saves on the cash-outflows.

For the smaller businesses with a turnover below UGX 500,000,000, a further relief was awarded to allow the business to defer their tax liabilities relating to the period between March and August 2020 to September 2020. 

The relief is applicable for the payments of PAYE, corporation, and presumptive tax that were due between April 1, 2020, and June 30, 2020.

The taxpayers eligible for this relief are those engaged in the tourism, manufacturing, horticulture, and floriculture sectors. Whilst the pandemic had an impact on all businesses, only the ones mentioned were considered as most affected. This may be a very subjective matter since all services industries were at a halt and some businesses had to leap by investing more just to ensure that they don’t close operations. 

The PAYE relief has no specific threshold according to the amendments and is, therefore, to be understood as applicable for all taxpayers in the aforementioned sectors.

The deferral of the payments is only applicable to a business whose turnover is less than USD 120,000 in a year. All businesses whose turnover exceeds the UGX 500M will be required to pay penalties and interest for the late payment of their taxes during the pandemic.