COVID-19 Donations to be Exempted from Tax

The government is proposing tax exemptions on all donations received towards combating the spread of coronavirus in Uganda. The proposal is contained in four tax bills that the State Minister for Planning, David Bahati, re-tabled in Parliament after being rejected by President Yoweri Museveni.

The bills in question include the Excise Duty Amendment Bill, the Income Tax Amendment Bill, the Value Added Tax Amendment Bill and Tax Procedures Code Amendment Bill, 2020.

According to Bahati, the proposals in the Bills are to offer tax relief to Ugandans in different economic activities. Under the proposed Income Tax Amendment Bill, the government seeks to provide an exemption for the deduction of charitable donations made by persons to the government, to fight against the COVID-I9 pandemic.

Equally, under the proposed Value Added Tax Amendment Bill, the government seeks to exempt supplies of specified medical goods used in the prevention of the spread and the treatment of COVID -19 pandemic, from tax.

Those proposed for exemption are disposable medical face masks, medical boots, medical impermeable aprons/cover-all-suits, cap, surgical, bouffant, non-woven, goggles, protective, indirect side ventilation, infra-red thermometers and motorized fumigation pumps.

Meanwhile, Bahati also tabled amendments Tax Procedures Code Act, to defer payment of income tax for companies and other persons involved in the business of manufacturing, tourism and floricultural sectors, whose turnover is less than Shillings 500 million, defer payment of tax on employment income and to waive interest on tax arrears.

The deferred taxes shall apply only to a person who is a registered taxpayer involved in the business of tourism, manufacturing, horticulture or floriculture with a turnover of less than Shs 500 million per annum or is liable to a tax chargeable on employment income.

The government also proposes that no interest or penalty shall accumulate on the outstanding amount of tax during the period referred to. The government also proposed a waiver of interest on tax arrears.

“Any interest on tax arrears that are unpaid by June 30, 2020, by a taxpayer who voluntarily complies with their tax obligations shall be waived,” further reads the bill tabled by Bahati.

The Minister of Finance Matia Kasaija on Thursday said that the postponed taxes are worth Shs 129.4 billion and they are 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 are paid by smaller businesses in the informal sector. The postponement of tax payment taxes will help boost the cash-flows for the business and ensure business continuity.

The Economic Policy Research Centre (EPRC) survey found that COVID-19 pandemic and the 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 percent of the firms reporting severe decline and 12 percent reporting a 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 a decline in the ability to repay outstanding debts due to the outbreak of COVID-19 compared to those in agriculture.