Income Tax Act

Section Application of Act Section This Act applies to years of income commencing on or after 1st July, 1997.

Section Interpretation Section In this Act, unless the context otherwise requires— “ amateur sporting association ” means an association whose sole or main object is to foster or control any athletic sport or game and whose members consist only of amateur sports persons or affiliated associations, the members of which consist only of amateur sports persons; “ approved ” means approved by the Minister under regulations made under section 151 ; “ assessed loss ” has the meaning in section 36 ; “ assessment ” means— (a) the ascertainment of the chargeable income of, and the amount of tax payable on it by, a taxpayer for a year of income under this Act; (b) the ascertainment of the rental income of, and the amount of tax payable on it by, an individual for a year of income under this Act; (c) the ascertainment of the amount of penal tax payable by a person under this Act; or (d) any decision of the Commissioner General which, under this Act, is subject to objection and appeal; “ associate ” has the meaning in section 3 ; “ beneficial owner ” means the natural person who ultimately owns or controls a customer or the natural person on whose behalf a transaction is conducted and includes...

Section Associate Section Without limiting the generality of subsection (1) , the following are treated as an associate of a person — where the person is a company — For the purposes of this Act, where any person , not being an employee , acts in accordance with the directions, requests, suggestions or wishes of another person whether or not they are in a business relationship and whether those directions, requests, suggestions or wishes are communicated to the first-mentioned person , both persons are treated as associates of each other. a relative of the person , unless the Commissioner General is satisfied that neither person acts in accordance with the directions, requests, suggestions or wishes of the other person ; a partner of the person , unless the Commissioner General is satisfied that neither person acts in accordance with the directions, requests, suggestions or wishes of the other person ; a partnership in which the person is a partner where the person , either alone or together with an associate or associates under another application of this section, controls fifty percent or more of the rights to income or capital of the partnership ; the trustee of a trust under wh...

Section Income tax imposed Section Where a taxpayer is allowed more than one tax credit for a year of income , the credits shall be applied in the following order— Subject to subsection (8) , where the gross turnover of a resident taxpayer for a year of income derived from carrying on a business or businesses is less than one hundred fifty million shillings, the income tax payable by the taxpayer for the year of income shall be determined in accordance with Schedule 3 to this Act, unless the taxpayer elects by notice in writing to the Commissioner General for subsection (2) to apply; and— Subject to and in accordance with this Act, a tax to be known as income tax shall be charged for each year of income and is imposed on every person who has chargeable income for the year of income . Subject to subsections (4) and (5) , the income tax payable by a taxpayer for a year of income is calculated by applying the relevant rales of tax determined under this Act to the chargeable income of the taxpayer for the year of income and from the resulting amount are subtracted any tax credits allowed to the taxpayer for the year of income . the foreign tax credit allowed under section 80 ; then the...

Section Rental tax imposed Section The tax payable by any person under this section for a year of income is— The tax imposed under this section on any person is separate from the tax imposed under section 4 and— Subject to and in accordance with this Act, a tax shall be charged for each year of income and is imposed on every person who has rental income for the year of income . where the person is an individual, calculated by applying the relevant rates of tax determined under section 6(2) to the rental income derived by the individual for the year; where the person is a company , calculated by applying the relevant rates of tax determined under section 7(2) to the rental income derived by the company for the year; where the person is a trustee of a trust or a retirement fund , calculated by applying the relevant rates of tax determined under section 8(5) to the rental income derived by the trustee or retirement fund for the year; where the person is a partnership , calculated by applying the relevant rates of tax on the individual partners under section 6(2) to the rental income derived by the partnership for the year. the rent derived by a person shall not be included in the gros...

Section Resident company Section A company is a resident company for a year of income if it— is incorporated or formed under the laws of Uganda; has its management and control exercised in Uganda at any time during the year of income ; or undertakes the majority of its operations in Uganda during the year of income .

Section Resident trust Section A trust is a resident trust for a year of income if— the trust was established in Uganda; at any time during the year of income , a trustee of the trust was a resident person ; or the trust has its management and control exercised in Uganda at any time during the year of income .

Section Resident partnership Section A partnership is a resident partnership for a year of income if, at any time during that year, a partner in the partnership was a resident person .

Section Resident retirement fund Section A retirement fund is a resident retirement fund for a year of income if it— is organised under the laws of Uganda; is operated for the principal purpose of providing retirement benefits to resident individuals; or has its management and control exercised in Uganda at any time during the year of income .

Section Non-resident person Section Subject to subsection (2) , a person is a non-resident person for a year of income if the person is not a resident person for that year. Where section 9(2) or (3) applies, an individual is a non-resident person for that part of the year of income in which the individual is not a resident individual .

Section Resident individual Section Subject to subsections (2) and (3) , an individual is a resident individual for a year of income if that individual— is present in Uganda— has a permanent home in Uganda; for a period of, or periods amounting in aggregate to one hundred eighty-three days or more in any twelve-month period that commences or ends during the year of income ; or during the year of income and in each of the two preceding years of income for periods averaging more than one hundred twenty-two days in each such year of income ; or is an employee or official of the Government of Uganda posted abroad during the year of income . An individual who is a resident individual under subsection (1) for a year of income , in this section referred to as the “current year of income ”, but who was not a resident individual for the preceding year of income is treated as a resident individual in the current year of income only for the period commencing on the day on which the individual was first present in Uganda. An individual who is a resident individual for the current year of income but who is not a resident individual for the following year of income is treated as a resident indiv...

Section Chargeable income Section Subject to section 16 , the chargeable income of a person for a year of income is the gross income of the person for the year less total deductions allowed under this Act for the year.

Section Chargeable income arising from insurance business Section The chargeable income of a person for a year of income arising from the carrying on of a short-term insurance or general takaful business is determined in accordance with Schedule 5 to this Act. Where a person to whom subsection (1) applies derives income charged to tax other than income arising from the carrying on of a short-term insurance or general takaful business for a year of income , the chargeable income determined under subsection (1) is added to that other income for the purposes of determining the person ’s total chargeable income for the year of income . In this section— “insurance business ” means the business of, or in relation to the issue of, or the undertaking of liability under, life policies, or to make good or indemnify the insured against any loss or damage, including liability to pay damages or compensation contingent upon the happening of a specified event; “ life insurance business ” means business of any of the following classes— (a) effecting, carrying out and issuing policies on human life or contracts to pay annuities on human life; (b) effecting, carrying out and issuing contracts of ins...

Section Interpretation of Part Section In this Part— “ branch ” means a place where a person carries on business , other than investing in Islamic financial business in the case of equity or partnership agreement and includes— (a) a place where a person is carrying on business through an agent, other than a general agent of independent status acting in the ordinary course of business as such; (b) a place where a person has, is using, is installing substantial equipment or substantial machinery for ninety days or more; (c) a place where a person is engaged in a construction, assembly or installation project for ninety days or more, including a place where a person is conducting supervisory activities in relation to such a project; or (d) the furnishing of services, including consultancy services, by a person through employees or other personnel engaged by the person for such purpose, but only if the activities of that nature continue for the same or a connected project for a period or periods aggregating more than ninety days in any twelve-month period; “ immovable property ” includes a mining right , petroleum right , mining information , or petroleum information, any intangible as...

Section Source of income Section Income is derived from sources in Uganda to the extent to which it is— employment income or a fee for the provision of services— an amount— a royalty — interest where— a pension or annuity where— derived by a resident person in carrying on a business except to the extent that it is attributable to a business carried on by the person through a branch outside Uganda; derived by a non-resident person in carrying on a business through a branch in Uganda; derived by a resident person in carrying on a business as owner or charterer of a vehicle, ship or aircraft, wherever such vehicle, ship or aircraft may be operated; derived from employment or services exercised or rendered in Uganda; paid by a resident person , other than as an expenditure of a business carried on by a person outside Uganda through a branch ; or paid by non-resident person as an expenditure of a business carried on by a person through a branch in Uganda; derived by a resident individual from any employment exercised or services rendered as a driver of a vehicle, or an officer or member of a crew of any vehicle, ship or aircraft, wherever the vehicle, ship or aircraft may be operated; d...

Section Foreign source employment income Section Foreign source employment income derived by a resident individual is exempt from tax if the individual has paid foreign income tax in respect of the income. A resident individual is treated as having paid foreign income tax on foreign source employment income if tax has been withheld and paid to the revenue authority of the foreign country by the employer of the individual.

Section Foreign tax credit Section The foreign income tax paid by— A resident taxpayer is entitled to a credit, in this section referred to as a “foreign tax credit”, for any foreign income tax paid by the taxpayer in aspect of foreign source income included in the gross income of the taxpayer . The amount of the foreign tax credit of a taxpayer for a year of come shall not exceed the Ugandan income tax payable on the taxpayer ’s foreign source income for that year, calculated by applying the average rate of Ugandan income tax of the taxpayer for that year to the taxpayer ’s net foreign source income for that year. The calculation of the foreign tax credit of a taxpayer for a year of income is made separately for foreign source business income and other income derived from foreign sources by the taxpayer during the year. a partnership is treated as paid by the partners; a trustee is treated as paid by the beneficiary where the income on which foreign income tax has been paid is included in the gross income of the beneficiary under this Act; or a beneficiary is treated as paid by the trustee where the income on which foreign income tax has been paid is taxed to the trustee under thi...

Section Taxation of branch profits Section A tax shall be charged for each year of income and is imposed on every non- resident company carrying on business in Uganda through a branch which has repatriated income for the year of income . The tax payable by a non- resident company under this section is calculated by applying the rate prescribed in Part V of Schedule 4 to this Act to the repatriated income of the branch of the non- resident company for the year of income . The repatriated income of a branch for a year of income is calculated according to the following formula— A + (B - C) - D where— A is the total cost base of assets, net of liabilities, of the branch at the commencement of the year of income ; B is the net profit of the branch for the year of income calculated in accordance with generally accepted accounting principles; C is the Ugandan tax payable on the chargeable income of the branch for the year of income ; and D is the total cost base of assets, net of liabilities, of the branch at the end of the year of income . In calculating the repatriated income of a branch , the total cost base of assets at the end of a year of income is the total cost base of assets at t...

Section Tax on international payments Section Interest paid by a resident company in respect of debentures is exempt from tax under this Act where the following conditions are satisfied— Subject to this Act, a tax is imposed on every non-resident person who derives any dividend , interest , royalty , rent , natural resource payment , agency fee in case of Islamic financial business or management charge from sources in Uganda. The tax payable by a non-resident person under this section is calculated by applying the rate prescribed in Part V of Schedule 4 to this Act to the gross amount of the dividend , interest , royalty , rent , natural resource payment , agency fee in case of Islamic financial business or management charge derived by a non-resident person . Notwithstanding section 78(m) a dividend derived by a non-resident person is only treated as income derived from sources in Uganda for the purposes of this section to the extent to which the dividend is paid out of profits sourced in Uganda. For the purposes of subsection (3) , where a resident company has profits sourced both within and outside Uganda, the company is treated as having paid a dividend out of the profits source...

Section Tax on payments to non-resident public entertainers or sports persons Section The tax payable by a non-resident person under this section is calculated by applying the rate prescribed in Part V of Schedule 4 to this Act to the gross amount of— Subject to this Act, a tax is imposed on every non-resident entertainer, sports person or theatrical, musical or other group of non-resident entertainers or sports persons who derive income from any performance in Uganda. remuneration derived by a non-resident public entertainer or sports person ; or receipts derived by any theatrical, musical or other group of non-resident public entertainers or sports persons. Tax is imposed under this section on any group regardless of whether or not the performance is conducted for the joint account of all or some members of the group. Every member of a group shall be jointly and severally liable for payment of the tax imposed under this section and, subject to section 87(1)(c) , shall remit to the Commissioner General the tax due before leaving Uganda.

Section Tax on payments to non-resident contractors or professionals Section In this section, “Ugandan source services contract” means a contract, other than an employment contract, under which— Subject to this Act, a tax is imposed on every non-resident person deriving income under a Ugandan source services contract. The tax payable by a non-resident person under this section is calculated by applying the rate prescribed in Part V of Schedule 4 to this Act to the gross amount of any payment to a non-resident under a Ugandan source services contract. Subsection (1) does not apply to a royalty or management charge charged to tax under section 82 . the principal purpose of the contract is the performance of services which gives rise to income sourced in Uganda; and any goods supplied are only incidental to that purpose. For avoidance of doubt, income derived from the carriage of passengers who do not embark or cargo or mail which is not embarked in Uganda is not income derived from a Ugandan-source service contract.

Section Taxation of non-residents providing shipping, air transport or telecommunications services in Uganda Section Where a non-resident person carries on the business of transmitting messages by cable, radio, optical fibre, or satellite communication, or the business of providing internet connectivity services, the tax payable by the person shall be five percent of the gross amount derived by the person in respect of— Subject to this Act, a tax is imposed on every non-resident person carrying on the business of ship operator, charterer or air transport operator who derives income from the carriage of passengers who embark, or cargo or mail which is embarked in Uganda and on a road transport operator who derives income from the carriage of cargo or mail which is embarked in Uganda. The tax payable by a non-resident person under subsection (1) is calculated by applying the rate of tax prescribed in Part VI of Schedule 4 to this Act to the gross amount derived by the person from the carriage and is treated for all purposes of this Act as a tax on chargeable income . Subsection (1) does not apply to any income derived from the carriage of passengers who embark, or cargo or mail which...

Section Taxation of non-residents providing digital services Section For the purposes of this section “digital service” includes— A tax is imposed on every non-resident person deriving income from providing digital services in Uganda to a customer in Uganda at the rate prescribed in paragraph 3 of Part V of Schedule 4 to this Act. For the purposes of subsection (1) , income is derived from providing a digital service in Uganda to a customer in Uganda, if the digital service is delivered over the internet, electronic network or an online platform. online advertising services; data services; services delivered through an online marketplace or intermediation platform, including an accommodation online marketplace, a vehicle hire online marketplace and any other transport online market place; digital content services, including accessing and downloading of digital content; online gaming services; cloud computing services; data ware housing; services, other than those services in this subsection, delivered through a social media platform or any internet search engine; and any other digital services as the Minister may prescribe by statutory instrument made under this Act. A non-resident...

Section General provisions relating to taxes imposed under sections 82, 83, 84 and 85 Section The tax imposed on a non-resident person under sections 82 , 83 , 84 , 85(1) and 85(4) is a final tax on the income on which the tax has been imposed and— that income is not included in the gross income of the non-resident person who derives the income; no deduction is allowed for any expenditure or loss incurred by the non-resident person in deriving that income; and the liability of the non-resident person is satisfied if the tax payable has been withheld by a withholding agent under section 137 and paid to the Commissioner General under section 140 . In this section, “ withholding agent ” has the meaning in section 125 .

Section International agreements Section Except for a public listed company , where an international agreement concluded by the Government of Uganda with another contracting State provides that income derived by a person resident in such other contracting State from sources in Uganda is exempt from Ugandan tax or is subject to a reduction in the rate of Ugandan tax , the benefit of that exemption or reduction shall not be available to any person who— In this section, “international agreement” means— An international agreement entered into between the Government of Uganda and the government of a foreign country, or governments of foreign countries shall have effect as if the agreement was contained in this Act. To the extent that the terms of an international agreement to which Uganda is a party are inconsistent with the provisions of this Act apart from subsection (7) and Part XI which deals with tax avoidance or any other law of Uganda dealing with matters covered by this agreement the terms of the international agreement prevail over the provisions of this Act and any other law of Uganda dealing with matters covered by this agreement. Where an international agreement provides for...

Section Substituted year of income Section A taxpayer may apply, in writing, to use as the taxpayer ’s year of income a substituted year of income being a twelve-month period other than the normal year of income ; and the Commissioner General may, subject to subsection (3) , by notice in writing, approve the application. A taxpayer granted permission under subsection (1) to use a substituted year of income may apply, in writing, to change the taxpayer ’s year of income to the normal year of income or to another substituted year of income ; and the Commissioner General , subject to subsection (3) , may, by notice in writing, approve the application. The Commissioner General may only approve an application under subsection (1) or (2) if the taxpayer has shown a compelling need to use a substituted year of income or to change the taxpayer ’s year of income , and any approval is subject to such conditions as the Commissioner General may prescribe. The Commissioner General may, by notice in writing to a taxpayer , withdraw the permission to use a substituted year of income granted under subsection (1) or (2) . A notice served by the Commissioner General under subsection (1) takes effect...

Section Method of accounting Section A taxpayer s method of accounting shall conform to generally accepted accounting principles. Subject to subsection (1) and unless the Commissioner General prescribes otherwise in a particular case, a taxpayer may account for tax purposes on a cash or accrual-basis. A taxpayer who intends to change the taxpayer ’s method of accounting shall apply, in writing, to the Commissioner General and the Commissioner General may, by notice in writing, approve the application where the Commissioner General is satisfied that the change is necessary to clearly reflect the taxpayer ’s income. A taxpayer dissatisfied with a decision under this section may only challenge the decision under the objection and appeal procedure in Part VIII of the Tax Procedures Code Act. If the taxpayer ’s method of accounting is changed, adjustments to items of income, deduction or credit or to other items shall be made in the year of income following the change, so that no item is omitted and no item is taken into account more than once.

Section Cash-basis taxpayer Section A taxpayer who is accounting for tax purposes on a cash-basis derives income when it is received or made available and incurs expenditure when it is paid.

Section Accrual-basis taxpayer Section A taxpayer who is accounting for tax purposes on an accrual basis— For the purposes of subsection (4) , economic performance occurs— derives income when it is receivable by the taxpayer ; and incurs expenditure when it is payable by the taxpayer . Subject to this Act, an amount is receivable by a taxpayer when the taxpayer becomes entitled to receive it, even if the time for discharge of the entitlement is postponed or the entitlement is payable by instalments. Notwithstanding subsection (2) , in the case of a diminishing partnership under Islamic financial business , an amount of the portion of the interest of the person offering Islamic financial business disposed of, is receivable by a taxpayer when the taxpayer becomes entitled to the instalment due in accordance with the partnership agreement. Subject to this Act, an amount is treated as payable by the taxpayer when all the events that determine liability have occurred and the amount of the liability can be determined with reasonable accuracy, but not before economic performance with respect to the amount occurs. Notwithstanding subsection (4) , in the case of a diminishing partnership un...

Section Pre-payments Section Where a deduction is allowed for expenditure incurred on a service or other benefit which extends beyond thirteen months, the deduction is allowed proportionately over the years of income to which the service or other benefit relates.

Section Claim of right Section A taxpayer who is accounting for tax purposes on a cash-basis shall include an amount in gross income when received or claim a deduction for an amount when paid, notwithstanding that the taxpayer is not legally entitled to receive the amount or liable to make the payment , if the taxpayer claims to be legally entitled to receive or legally obliged to pay the amount. Where subsection (1) applies, the calculation of the chargeable income of the taxpayer shall be adjusted for the year of income in which the taxpayer refunds the amount received or recovers the amount paid. A taxpayer who is accounting for tax purposes on an accrual basis shall include an amount in gross income when receivable or claim a deduction for an amount when payable notwithstanding that the taxpayer is not legally entitled to receive the amount or liable to make the payment , if the taxpayer claims to be legally entitled to receive or legally obliged to pay the amount. Where subsection (3) applies, the calculation of the chargeable income of the taxpayer shall be adjusted for the year of income in which the taxpayer ceases to claim the right to receive the amount or ceases to claim...

Section Long-term contracts Section In the case of an accrual-basis taxpayer , income and deductions relating to a long-term contract are taken into account on the basis of the percentage of the contract completed during the year of income . The percentage of completion is determined by comparing the total costs allocated to the contract and incurred before the end of the year of income with the estimated total contract costs as determined at the time of commencement of the contract. Where, in the year of income in which a long-term contract is completed, it is determined that the contract has made a final year loss, the Commissioner General may allow the loss to be carried back to the preceding years of income and applied against an amount in gross income over the period of the contract under subsection (1) for those years, starting with the year immediately preceding the year in which the contract was completed. In this section— “final year loss”, in relation to a long-term contract, occurs where both the following conditions are satisfied— (a) the profit estimated to be made under the contract for the purposes of subsection (1) exceeds the actual profit, including a loss, made u...

Section Trading stock Section The opening value of trading stock for a year of income is— A taxpayer is allowed a deduction for the cost of trading stock disposed of during a year of income . The cost of trading stock disposed of during a year of income is determined by adding to the opening value of trading stock for the year, the cost of trading stock acquired during the year, and subtracting the closing value of trading stock for the year. the closing value of trading stock at the end of the previous year of income ; or where the taxpayer commenced business during the year of income , the market value at the time of commencement of the business of trading stock acquired prior to the commencement of the business . The closing value of trading stock is the lower of cost or the market value of trading stock on hand at the end of the year of income . A taxpayer who is accounting for tax purposes on a cash­ basis may calculate the cost of trading stock on the prime-cost method or absorption-cost method; and a taxpayer who is accounting for tax purposes on an accrual-basis shall calculate the cost of trading stock on the absorption ­cost method. Where particular items of trading stock...

Section Debt obligations with discount or premium Section Subject to subsection (2) , interest in the form of any discount, premium or deferred interest shall be taken into account as it accrues. Where the interest referred to in subsection (1) is subject to withholding tax , the interest shall be taken to be derived or incurred when paid.

Section Foreign currency debt gains and losses Section Where— either— Subject to subsection (9) , a taxpayer derives a foreign currency debt gain if— Subject to subsection (9) , a taxpayer incurs a foreign currency debt loss if— Foreign currency debt gains are included in gross income and foreign currency debt losses are deductible only under this section. A foreign currency debt gain derived by a taxpayer during the year of income is included in the business income of the taxpayer for that year. Subject to subsections (4) and (6) , a foreign currency debt loss incurred by a taxpayer during a year of income is allowed as a deduction to the taxpayer in that year. A deduction is not allowed to a taxpayer for a foreign currency debt loss incurred by the taxpayer unless the taxpayer has notified the Commissioner General in writing of the existence of the debt which gave rise to the loss by the due date for furnishing of the taxpayer ’s return of income for the year of income in which the debt arose or by such later date as the Commissioner General may allow. Subsection (4) does not apply to a financial institution . a taxpayer has incurred a foreign currency debt loss under a transacti...

Section Application of Part Section This Part applies for the purposes of determining the amount of any gain or loss arising on the disposal of an asset where the gain is included in the gross income , or the loss is allowed as a deduction under this Act.

Section Gains and losses on disposal of assets Section The amount of any gain arising from the disposal of an asset is the excess of the consideration received for the disposal over the cost base of the asset at the time of the disposal . The amount of any loss arising from the disposal of an asset is the excess of the cost base of the asset at the time of the disposal over the consideration received for the disposal . Where as a result of the application of this Act, a gain or loss on disposal of an asset is subject to tax being a gain or loss, the cost base of the asset is calculated on the basis that each item of cost or expense included in the cost base shall be determined according to the following formula— where— CB is the amount of an item of cost or expense incurred determined in accordance with section 50(2) ; CPID is the Consumer Price Index number published for the calendar month of sale; and CPIA is the Consumer Price Index number published for the month immediately prior to the date on which the relevant item of cost or expense was incurred. Subsection (3) shall not apply to an asset that is sold within twelve months from the date of purchase.

Section Disposals Section A taxpayer is treated as having disposed of an asset when the asset has been— Where the Commissioner General is satisfied that a taxpayer — Where a person to whom subsection (5) would otherwise apply— sold, exchanged, redeemed or distributed by the taxpayer ; transferred by the taxpayer by way of gift; or destroyed or lost. A disposal of an asset includes a disposal of a part of the asset. has converted an asset from a taxable use to non-taxable use; or has converted an asset from a non-taxable use to a taxable use, A non-resident person who becomes a resident person is deemed to have acquired all assets, other than taxable assets, owned by the person at the time of becoming a resident for their market value at that time. A resident person who becomes a non-resident person is deemed to have disposed of all assets, other than taxable assets, owned by the person at the time of becoming a non-resident for their market value at that time. intends, in the future, to re-acquire status as a resident person ; and provides the Commissioner General with sufficient security to satisfy any tax liability which would otherwise arise under subsection (5) , In this sectio...

Section Cost base Section Subject to this Act, this section establishes the cost base of an asset for the purposes of this Act. The cost base of an asset purchased, produced or constructed by the taxpayer is the amount paid or incurred by the taxpayer in respect of the asset, including incidental expenditures of a capital nature incurred in acquiring the asset, and includes the market value at the date of acquisition of any consideration in kind given for the asset. Subject to subsection (4) , the cost base of an asset acquired in a non-arm’s length transaction is the market value of the asset at the date of acquisition. The cost base of an asset acquired in a transaction described in section 51 (2) is the amount of the consideration deemed by that subsection to have been received by the person disposing of the asset. Where a part of an asset is disposed of, the cost base of the asset shall be apportioned between the part of the asset retained and the part disposed of in accordance with their respective market values at the time of acquisition of the asset. Unless otherwise provided in this Act, expenditures incurred to alter or improve an asset which have not been allowed as a ded...

Section Special rules for consideration received Section Where an asset is disposed of to an associate or in a non-arm’s-length transaction, other than by way of transmission of the asset to a trustee or beneficiary on the death of a taxpayer , the person disposing of the asset, in this section referred to as the “disposer”, is treated as having received consideration equal to the greater of— The consideration received on disposal of an asset includes the market value at the date of the disposal of any consideration received in kind. the cost base of the asset to the disposer at the time of disposal ; or the fair market value of the asset at the date of disposal . Where two or more assets are disposed of in a single transaction and the consideration paid for each asset is not specified, the total consideration received is apportioned among the assets disposed of in proportion to their respective market values at the time of the transaction.

Section Non-recognition of gain or loss Section No gain or loss is taken into account in determining chargeable income in relation to— a transfer of an asset between spouses; a transfer of an asset between former spouses as part of a divorce settlement or a bona fide separation agreement; an involuntary disposal of an asset to the extent to which the proceeds are re-invested in an asset of a like kind within one year of the disposal ; the transmission of an asset to a trustee or beneficiary on the death of a taxpayer ; or capital gains arising from the sale of investment interest of a registered venture capital fund if at least fifty percent of the proceeds on sale is reinvested within the year of income . Notwithstanding subsection (1)(e) , a registered venture capital fund shall be entitled to a non-recognition of a gain or loss equivalent to the percentage of reinvested proceeds. Where no gain or loss is taken into account as a result of subsection (1)(a) , (b) or (d) , the transferred or transmitted asset is deemed to have been acquired by the transferee, or trustee or beneficiary as an asset of the same character for a consideration equal to the cost base of the asset to the t...

Section Income of joint owners Section Income or deductions relating to jointly owned property are apportioned among the joint owners in proportion to their respective interests in the property. Where the interest of joint owners in jointly owned property cannot be ascertained, the interest of the joint owners in the property shall be deemed to be equal. For avoidance of doubt, subsections (1) and (2) shall apply to takaful participants.

Section Valuation Section For the purposes of this Act and subject to section 19(1)(b) , the value of benefit in kind is the fair market value of the benefit on the date the benefit is taken into account for tax purposes. The fair market value of a benefit is determined without regard to any restriction on transfer or to the fact that it is not otherwise convertible to cash.

Section Other methods of allocating costs and revenue Section In determining the chargeable income of a person , use of input-output ratios and other methods of allocating costs and revenue may be applied.

Section Currency conversion Section Chargeable income under this Act shall be calculated in Uganda shillings. Where an amount taken into account under this Act is in a currency other than the Uganda shilling, the amount shall be converted to the Uganda shilling at the Bank of Uganda mid-exchange rate applying between the currency and the Uganda shilling on the date that the amount is derived, incurred or otherwise taken into account for tax purposes. With the prior written permission of the Commissioner General , a taxpayer may use the average rate of exchange during the year of income or may keep books of accounts in a currency other than the Uganda shilling.

Section Indirect payments and benefits Section The income of a person includes— a payment that directly benefits the person ; and a payment dealt with as the person directs,

Section Finance leases Section Where a lessor leases property to a lessee under a finance lease, for the purposes of this Act— A lease of property is a finance lease if— the lessee is treated as the owner of the property; and the lessor is treated as having made a loan to the lessee, in respect of which payments of interest and principal are made to the lessor equal in amount to the rental payable by the lessee. The interest component of each payment under the loan is treated as interest expense incurred by the lessee and interest income derived by the lessor. the lease term exceeds seventy-five percent of the effective life of the leased property; the lessee has an option to purchase the property for a fixed or determinable price at the expiration of the lease; or the estimated residual value of the property to the lessor at the expiration of the lease term is less than twenty percent of its fair market value at the commencement of the lease. For the purposes of subsection (3) , the lease term includes any additional period of the lease under an option to renew.

Section Exclusion of doctrine of mutuality Section A company which carries on a member’s club, a trade association or a mutual insurance company is treated for the purposes of this Act as carrying on a business subject to tax . The business income of a company to which subsection (1) applies includes entrance fees and subscriptions paid by members. Where a company referred to in subsection (1) is operated primarily to furnish goods or services to members, deductions attributable to the furnishing of goods or services to members are allowed only to the extent of the total income derived from the members, with any excess carried forward and allowed as a deduction in the following year of income . In this section, “members club” means a club or similar institution all the assets of which are owned by or are held in trust for the members of the club or institution.

Section Compensation receipts Section A compensation payment derived by a person takes the character of the item that is compensated.

Section Recouped expenditure Section Where a previously deducted expenditure, loss or bad debt is recovered by the taxpayer , the amount recovered is deemed to be income derived by the taxpayer in the year of income in which it is recovered and takes the character of the income to which the deduction related. For the purposes of subsection (1) , a deduction is considered recovered upon the occurrence of an event which is inconsistent with the basis for the deduction.