Birungyi Cephas Kagyenda of Birungyi, Barata & Associates (BBA) is probably Uganda’s foremost tax professional with rich legal knowledge spanning 36 years in Taxation, Commercial and Corporate Law, Energy and Construction; Dispute Resolution, Insolvency and Employment as well as Advisory and Consultancy. He has worked for the Ministry of Finance from 1984 and later Uganda Revenue Authority where he retired as a Deputy Commissioner in 2004 after cofounding BBA in 2003. He is now the Managing Partner at the firm. BBA itself is one of the leading tax law firms in Uganda that handles up to 35% of all tax litigation in Uganda, including some game-changing cases that have resulted in tax law being amended. In this conversation with CEO East Africa’s Muhereza Kyamutetera, Cephas discusses his key 10 highlights of 2021 and how they are likely to shape the tax landscape in 2022 and beyond.
#1: The appointment of Sarah Chelangat as the URA, Commissioner Domestic Taxes
On 1st November, the Board of Directors of Uganda Revenue Authority appointed Chelangat Sarah Muzungyo as the Commissioner Domestic Taxes. Having worked with the Uganda Revenue Authority (URA) at the beginning of her career, then joined Ernst & Young, where she garnered immense tax exposure from the global Audit firm, she should be able to introduce some new perspectives into tax administration. I would say the tax practitioners have big expectations of her; challenging as it is.
#2: Value-added tax on imported services – the URA vs. COWI A/S Court Verdict
Value-added tax on imported services has been a thorny issue to many taxpayers and for the last ten years, several amendments have been made to cater for the apparent unfairness in the law. Nothing however is likely to be as impactful as the COWI A/S decision made on 18th October 2021 on appeal in the Commercial Court. The decision by Hon Justice Mubiru turned on its head the hitherto accepted position that allocation of costs between a branch and its headquarters are not taxable as imported services. Multinationals have got to go back to their tax planning drawing board.
#3: The Electronic Fiscal Receipting Solution (EFRIS)
The Electronic Fiscal Receipt and Invoicing solution (EFRIS) was launched in January 2021 and is one of the major innovations of the URA to achieve efficiency in tax administration. As expected, there are many critics and supporters of this innovation which has had mixed results in some other African countries. Dealers in multiple goods such as supermarkets have had their tussle with the URA to the extent that URA deployed armed personnel at the tills of some supermarkets in October and November 2021. We are yet to see the full impact of the system when it is rolled out to other retailers such as fuel stations.
#4: 6% VAT Withholding Goes into Play
Although the gazetting of withholding tax agents for VAT was completed way back in May 2021, the actual implementation did not start until 1st December 2021. The first returns are expected on 1st January 2022 and that may explain why we have not heard the public reaction to this tax project which had a monumental failure when it was tried a few years back. This time, it being at a reduced rate of 6% and administered by gazetted withholders it may turn out more positively.
#5: Rental Tax and The Rental Tax Compliance System
Few tax heads have been subject as much tinkering and experimentation as rental taxation to the extent that a foreign company, RippleNami has after a lot of hassle and bustle been recruited to assist URA to collect more rental tax. The amendment introducing allowable deductions amounting to 75% of the rental income has been as welcome to the landlords as it has been loathed by the URA but let us watch this space.
Irene Mwoyogwona: Beyond the Numbers – How Pride Bank's Award-Winning CFO Combines Profitability and Social Impact#6: URA Gets Tougher of Tax Credit And Debit Notes
Not many people are well-grounded in the realm of credit and debit notes but they are a key feature in VAT accounting especially when the transactions between a buyer and seller are reversed such as when goods already sold are returned by the buyer to the seller. During the month of December 2021, it became clear that URA is very suspicious about how some traders are playing games with credit notes. Consequently, URA announced that it will have to approve each and every credit note that is supposed to be registered in tax returns filed to it. Looks like a tall order but the exercise may end up creating some jobs on both sides of the tax spectrum.
#7: A New VAT Bill in the offing
The Ministry of Finance, Planning & Economic Development, is rolling out a new Value Added Tax Bill to overhaul and replace the one in place. The bill is apparently driven by the need to catch up with modern economic trends especially digitization and may become law as soon as this FY 2022/23. Considering what the bill attempts to solve is quite novel and may appear like Greek to our legislators, many tax practitioners received the bill with lots of apprehensions.
#8: The Search for a More Credible and Predictable Taxpayers Ledger Continues
The account maintained by the Uganda Revenue Authority (URA) for every taxpayer, is called a taxpayers’ ledger. It records assessments, payments, penalties, interest and the general status of the taxpayer. To say that the state of the taxpayers’ ledger has been a major headache for both the tax agents and for the URA is an understatement. Something radical has to be done to make this ledger gain the credibility and predictability that it should have. If you imagine the ledger as your bank statement and then you have to negotiate your balances with your bankers all the time then you understand what I mean.
#9: Did the Government Give a False Waiver of Interest and Penalty on Unpaid Principal Tax?
In the year 2020, all interest and penalties outstanding as of 30th June 2020 were waived. That sounded like very good news for taxpayers. However, many soon found that they celebrated too soon because URA found a way out. Using section 38 of the Tax Procedures Code Act it so happens that the so-called waiver is not as good as it sounds. When the tax paid is applied first to the principal then penalties and finally to interest you find that in many cases nothing is waived. Either the Ministry of Finance needs to come out and clarify whether it gave a false waiver or how URA is applying Section 38 is what was intended
#10: Tax Appeals Tribunal makes significant steps in reducing caseload
The Tax Appeals Tribunal has made very significant strides in reducing caseload. For the last year, the tribunal has averaged 30 hearings per week- a great job, if you ask me. And the good job has not only been done by the members of the Tribunal but also, there has been significant input in the mediation arena where very high levels of effort and performance are clear for all to see. Reducing caseloads is both good for the revenue authority as it frees up government revenue, where cases have been decided in URA’s favour but also good for the taxpayers as it removes uncertainty in planning but also frees up capital for growth where cases have been decided in their favour. We certainly are looking forward to an even more exciting 2022 from the Tax Appeals Tribunal.
