Uganda is ranked as one of the best entrepreneurial countries with a 28% rate. Unfortunately, most of the enterprises that come to life often do not live to see their 5th birthday. The cause for failure include a number of reasons ranging from a lack of capital or funding, an inadequate team, failure to keep proper books of accounts.
Another issue ailing most business owners is the requirement to fulfill tax obligations. In fact, many business owners look at taxes as a form of ‘business suffocation’ rather than an opportunity to grow and expand operations.
To counter this, The Innovation Village in partnership with Uganda Revenue Authority recently hosted a tax education online info-session for entrepreneurs to highlight the importance of paying taxes and its long term benefits.
It was noted during the session that when running a business, ensuring proper books of accounts is critical in operating a start-up for a positive relationship with taxation.
Representing the Ugandan Tax Authority, David Rusoke advised entrepreneurs on how to be organized when aligning with the tax system. To start with, every business must have a Tax Identification Number also known as a TIN. The number is given to businesses by the Authority, a legal requirement that enables businesses to meet their tax obligations. Without it, businesses are limited to achieve growth. Some of the requirements to successfully acquire a TIN include;
- A national identification card or an employee identification card for individuals
- A sole proprietor of a business requires a certificate of registration or statement of particulars
- A Certificate of Incorporation, Form 20 for companies
- Partnerships require a Certificate of Registration, Statement of particulars and the Partnership Deed
- Trusts require registration details
As much as having a TIN number widens the tax base for URA, it enables businesses transactions, import payments through the customs office and accountability for your taxes through returns. Speaking of returns, these are forms on which a taxpayer makes a statement of income and is used by the tax authority to assess any liabilities which are filed differently with various timelines. For example, there are annual returns filed every year calculated Between the annual financial year between June and July. Annual returns are further categorized into provisional returns and final returns. Provisional returns are an estimate of what you have accounted for during the year, you have a right to amend it if there is reason that the income will be significantly different from what was declared. Final returns are the definite and eventual returns that you have accounted for during the year. Furthermore, there are quarterly returns and these are particularly assessed for the petroleum, oil and gas companies involved in exploration and production. There are also weekly returns that are assessed for the Gaming, Pool and Betting companies and monthly returns that include Value Added Tax (VAT), Pay As You Earn (PAYE), Withholding tax (WHT), Local Excise Duty (LED) for both services and goods and Operators returns.
Entrepreneurs must remember imports require a TIN number for transactions. Taxes are deducted after calculating the returns and it is important to file annual returns as long as you have the TIN number unless one is employed by a company which obligates payment of monthly taxes. Although virtue is its own reward, complying and adhering to the taxation policy and system earns you withholding exemption, receipt of tax clearances, transacting with other compliant businesses and reduction of business costs. Additionally, after three years, you can be offered total tax exemption only if you import and supply to the different ministries. Paying no heed to tax obligations and laws and filing tax returns later than the timelines only leaves you missing out on business opportunities, susceptible to high penalties and delays in clearance of goods, denied tax refunds and clearances, facing legal actions among others. It also harms your reputation as a businessperson.
To sum up the session, the startup community was advised that every business can qualify, it does not matter what sector or industry. Although taxes were subsidized after Covid-19 hit, it is important to follow these procedures in organising businesses better;
- Register your business.
- Get a Tax Identification Number. This is issued for free
- File returns as promptly as required by the governing laws
- Keep records. Put structure in place to handle international business
- Create a profile for the company that will enable it to be ready for the Great Door
- Acquaint yourself with the Prequalification Process. Apart from the government and banks, other corporate institutions require your details and profile for example the East African Community.
- Get a tax consultant to guide you on the tax issues
- Contact 0800117000/0800217000 – toll free line email to in case of any inquiries