EMPLOYMENT EMPLOYMENT INCOME I NCOME INCOME TAX ACT CAP 340 F/Y:2008/09 IMPORTANT IMPORTANT DEFINITIONS EMPLOYER: individual EMPLOYEE:
A person (individual or corporate) who employs/remunerates an
An individual engaged in an employment
EMPLOYMENT: (i) Position Position of an individual individual in employment of another. another. (ii) Directorship Directorship of a Company Company (iii) (iii) A position position entitling entitling an indivi individual dual a xed xed or ascertain ascertainale ale remuner remuneration ation.. !his may e contractual" permanent or part#time. (iv) $olding/ Acting Acting in a Pulic %&ce %&ce
COMPOSITION OF EMPLOYMENT INCOME Employment income comprises of the folloin! "mo#nts "ccor$in! to the l":% o Amount Amount of privat private/p e/pers ersona onall expen expendit ditur ure e dis discha charg rged ed or reim reimurs ursed ed y the employer. o
!he value of any enets in 'ind provided provided y/on ehalf of the employer employer..
o
Any amount in compensation of termination termination of employment employment or contract.
nsurance premiums paid y a tax#exempt employer for life insurance of an employee and/or his dependants.
o
Payments Payments in respect of change change of employment/contr employment/contract act terms or payment for agreement to any restrictive conditions of employment.
o
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ages" salary" salary" leave leave pay" payment payment in lieu of leave" leave" overtime overtime pay" fees" commissio commission" n" gratuity" gratuity" onus" allowance allowance (entertainm (entertainment" ent" duty" utility" utility" welfare" welfare" housing" medical" any other) o
Discounts in shares allotted to an employee and prot/gain on disposal of such shares. o
NOTE: ALL OR ANY OF THE ABOVE ABOVE IN COMBINATION COMBINATION COMPRISE EMPLOYMENT INCOME. EMPLOYEE&S RELIEF 'Employment 'Employment !"ins not incl#$e$ in ch"r!e"(le income) Pension* Pension is tax exempt. Me$ic"l E*penses: expenses .
Discharg Discharge e or reimur reimurseme sement nt of an employee employee+s +s medical medical
Life Ins#r"nce: Premiums Premiums paid y a taxale employer for insurance of the life of an employee or his/her dependant. O+ci"l Employment E*pen$it#re: Allowances for or discharge or reim reimur ursem sement ent of expen expenses ses met met y an emplo employee yee while while perfor performin ming g dutie duties s of employment. Me"ls "n$ Refreshments: Refreshments: !he value of meals/refreshments meals/refreshments provided to all employees at e,ual terms in premises premises operated y or on ehalf of the employer. employer. Retirement f#n$: -mpl -mploy oyer er+s +s cont contri riu uti tion on to a retir etirem emen entt fund fund for for the the enet of the employee (employee+s contriution is taxale). Loc"l Ser,ice T"*: Other -ene.ts: the month.
!his is deductile efore efore computing tax. Any enet whose value is less than shs " during
Threshol$: !he rst 0sh.1" per month is tax free for all resident employees. Termin"l -ene.ts: 234 23 4 of ter termina minall ene enet ts s (for (for empl employ oyee ees s who who have have served the employer for at least years)
COMMON -ENEFITS IN /IND 0e h",e "lre"$y note$ th"t the ,"l#e of "ny (ene.t in 1in$ pro,i$e$ (y "n employer is p"rt of employment income2 income2 2
0h"t is " -ene.t In /in$3 t is facilitati facilitation on directl directly/indi y/indire rectly ctly y an employer employer of an employee employee in relation to past" present or future employment (not necessarily contractual). T"*"(le Non c"sh Employment (ene.ts #n$er the L" "re:% Private use of o&cial motor vehicle o o Provision Provision of Domestic 5ervants" 0tilities. o 6eals" 7efreshment" -ntertainment 7elief 7elief of Det %ligations/nterest. o Provision Provision of property y employer employer to employee (at non arm+s length length terms). terms). o Provision Provision of 7esidential 7esidential Accommodation. o nterest on loans elow the statutory rates. o o Any other enets not classied aove. 0hen is " (ene.t $eeme$ to h",e (een pro,i$e$ (y "n employer3 Note Note:: A enet need not e provided y the employer or e provided to the empl employ oyee ee.. t can can e prov provid ided ed y the the asso associ ciat ate e of an empl employ oyer er or it can can e provided to an associate of the employee. A (ene.t is s"i$ to h",e (een o(t"ine$ in respect of employment: hen it is provided y an employer or y a third party under arrangement with o the employer or an associate of an employee. o hen it is provided to an employee or an associate of an employee o hen it is provided in respect of past" present or prospective employment. employment.
4AL5ATION AL5ATION OF -ENEFITS IN /IND !he valuation of enets for the purposes of susection (1) of section 2 of the Act is determined as follows. . her here e a ene enett prov provid ided ed y an an empl employ oyer er to to an empl employ oyee ee con consi sist sts s of the the use or availaility for use" of a motor vehicle wholly or partly for the private purposes of the employee" the value of the enet is calculated according to the following formula #
'678 * A * -9C) % D where" A is the mar'et value of the motor vehicle at the time when it was rst provided for the private use of the employee8 is the numer of days in the year of income on which the motor vehicle was used or availale for use for private purposes y the employee for all or a part of the day8 C is the numer of days in the year of income8 D is any payment made y the employee for the enet. 3
2. her here e a ene enett prov provid ided ed y an an empl employ oyer er to to an empl employ oyee ee con consi sist sts s of the the provision of a house'eeper" chau9eur" gardener" or other domestic assistant" the valu value e of the the ene enet t is the the tota totall empl employ oyme ment nt inco income me paid paid to the the dome domest stic ic assis assista tant nt in respe espect ct of serv servic ices es rende enderred to the the empl employ oyee ee"" reduc educed ed y any any payment made y the employee for the enet.
For e* e*"m "mpl ple e if the the comp comp"n "ny y p"ys p"ys " !"r$ !"r$en ener er sh2 sh2 ;7< ;7<77 777 7 per per month< (#t the employee contri(#tes sh2 67<777 per month< the (ene.t $eri,e$ (y the employee is sh2 =7<777 ' i2e2 ;7<777 > 67<777)2 If the employee $oes not contri(#te "nythin!< the (ene.t is sh2 ;7<7772 1. her here e a ene enett prov provid ided ed y an an empl employ oyer er to to an empl employ oyee ee con consi sist sts s of the the provision of any meal" refreshment" or entertainment" the value of the enet is the cost to the employer of providing the meal" refreshment" or entertainment" reduced y any consideration paid y the employee for the meal" refreshment" or entertainment.
For e*"mple e*"mple if the me"ls "re pro,i$e$ for 6? $"ys in " month< e"ch me"l costin! =<777 "n$ the employee not contri(#tin! "nythin!< then the (ene.t is sh2 @<777 per month '=<777 * 6?)2 :. her here e a ene enett prov provid ided ed y an an empl employ oyer er to to an empl employ oyee ee con consi sist sts s of the the provision of utilities in respect of the employee+s place of residence" the value of the enet is the cost to the employer of providing the utilities reduced y any consideration paid y the employee for the utilities.
In this c"se< the "ct#"l p"yment receipts from the #tility comp"ny c"n c"n (e #se$ #se$ to "sce "scert rt"i "in n the the ,"l# ,"l#e e 'les 'less s "ct# "ct#"l "l cont contri ri(# (#ti tion on (y the the employee if "ny)2 3. her here a ene ene t prov proviided ded y an empl employ oyer er to to an empl employ oyee ee con consi sist sts s of a loan" or loans in total" exceeding one million shillings at a rate of interest elow the statutory rate" the value of the enet is the di9erence etween the interest paid during the year of income" if any" and the interest which would have een paid if the loan had een made at the statutory rate for the year of income. 5tat 5tatut utor ory y rate ate her here refe efers to the the ;an' an' of 0gan 0ganda da disc discou ount nt rate ate at the commencement of the year of income.
E*"mple: if "n employer !i,es "n employee " school fees lo"n of sh2B77<777 " f#rnit#re lo"n of sh2 ;77<777 "n$ "n "ppli"nces lo"n of sh2 =77<777 "t 78 interest per month hen the st"t#tory r"te is ;8< the (ene.t o#l$ (e sh2 ?7<777 ' i2e2 <677<777 * ;8) > '<677<777 * 78) 7<777 > 67<7772
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<. her here e a ene enett prov provid ided ed y an an empl employ oyer er to to an empl employ oyee ee con consi sist sts s of the the waiver y an employer of an oligation of the employee to pay or repay an amount owing to the employer or to any other person" the value of the enet is the amount waived. E*"mple: In the month of "n#"ry 677< "n employee oe$ " ("n1 sh2 sh2 =77< =77<77 7772 72 The The empl employ oyer er $eci $eci$e $e$ $ to p"y p"y the the f#ll f#ll "mo# "mo#nt nt fo for r the the st employee on = "n#"ry "n$ opte$ not to reco,er th"t "mo#nt from the employee2 The employee h"s o(t"ine$ " (ene.t eG#"l to sh2 =77<777 for the month of "n#"ry< hich sho#l$ (e p"rt of her employment income2 =. her here e a ene enett prov provid ided ed y an an empl employ oyer er to to an empl employ oyee ee con consi sist sts s of the the transfer or use of property or the provision of services" the value of the enet is the mar'et value of the property or services at the time the enet is provided" reduced y any payment made y the employee for the enet.
E*"mple: The comp"ny tr"nsferre$ tr"nsferre$ " c"r ,"l#e$ sh2 ;<777<777 to "n employee in Fe(r#"ry 6772 The employee "s "s1e$ to contri(#te sh2 <777<777 for th"t c"r2 The employee $eri,e$ " (ene.t eG#"l to sh2 B mill millio ion n in Fe(r# e(r#"r "ry y< hic hich h sho# sho#l$ l$ (e incl incl#$ #$e$ e$ in his his empl employ oyme ment nt income22
>. her here e a ene enett prov provid ided ed y an an empl employ oyer er to to an empl employ oyee ee con consi sist sts s of the the provision of accommodation or housing" in 'ind the value of the enet is the lesser of# (a) the ma mar'et re rent of o f th t he ac accommodation or o r ho housing re reduced y y an a ny payment made y the employee for the enet8 or ( ) fteen p er er c en ent of the employment i nc ncome" including the amount referred referred to in paragraph (a)" paid y the employer to the employee for the year of income in which the accommodation or housing was provided. -xample* A company pays an employee asic salary sh. 1"" per month8 transport allowance sh. 1" per month and medical allowance sh. 2" per month. !hey provided him with a company house whose mar'et rent is sh. <" per month for which he contriutes 3" per month. !he enet derived y this this employee is the lesser lesser of*
")
(<" ? 3") @ ;;7<777 and
()
34 ( 1"" 1" 2" 33") @ ?7@<;77
n this case the housing enet is sh. ;;7<777 B. !he !he valu value e of any non non cash cash en ene ett prov provid ided ed y y an empl employ oyer er to an an empl employ oyee ee which is not covered y the aove clauses is the mar'et value of the enet" at 5
the time the enet is reduced y any payment made y the employee for the enet.
PAY AS YO5 EARN RATES OF TAH Ch"r Ch"r!e !e"( "(le le Inco Income me
R"te R" te of T"*
ot exceeding shs 1"
il
-xceeding 5hs. 1" ut not exceeding exceeding 5hs. 213"
4 of the amount y which chargeale income exceeds exceeds 5hs. 1".
-xceeding 5hs. 213" ut not exceeding 5hs. :"
5hs. "3 plus 24 of the amount y which chargeal ale income exceeds 5hs. 213"
5hs. :3 :3"3 pl plus 1 14 of of th the income exceeds exceeds 5hs. :"
-xceeding 5hs. :" which chargeale
amount
y
PLEASE NOTE: Non resi$ent resi$ent employees employees "re not entitle entitle$ $ to the threshol$ threshol$ 'shs =7<777) so "t e,ery "mo#nt #n$er r"tes of t"*< "$$ shs2=<777 or '78 of =7<777)
TREATMENT OF PART TIME ALLO0ANCES -mployees who are engaged on part#time asis are deemed in principle to e earning income from more than one source. Part#time Part#time allowances/earnings allowances/earnings are a re taxed taxed at a at rate of 14 of the gross An emplo employee yee aggrie aggrieved ved y this this treat treatmen mentt may sumit sumit a return eturn of emoluments from all sources and ma'e a claim of tax overpaid. EMPLOYER&S O-LIA O-LI ATION The income t"* l" f#rther pro,i$es for o(li!"tion of the employer "s s#mm"riJe$ (elo: 0ithhol$in!* !o deduct the correct correct tax at the time of e9ecting payment to a liale employee. Remittin!: !o following month.
remit
the
total tax y the 3th day of the immediately
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Acco#nt"(ility: monthly asis.
Accou ccount nt for for tax tax dedu deduct cted ed from from ever every y empl employ oyee ee on a
M"inten"nce of Employees& Recor$s: !o !o maintain records records and 'eep them for inspection y 07A on demand for at least ve (3) years.
EMPLOYEE&S O-LIATION9RIKTS o f you are are deriving deriving income income from from more more than one sour source" ce" complete complete an an end of year return and declare* !otal income from all sources sources including usiness income. income. o !otal o !otal !otal tax paid at source such as a s PAE-" PAE-" ithholding tax or provisional tax. (!his excludes excludes presumptive tax and rental tax paid y such employee). !ax payale. o !ax
EMPLOYEE&S RIKTS An -mployee* s not re,uired to furnish return if taxpayer+s source of income is only one employment and tax is fully deducted and paid at source. s entitled to claim refund of over#paid over#paid tax where applicale. s entitled to accountaility for all taxes deducted and paid at source y the employer. •
• •
!herefore !herefore it is in the interest of the taxpayer to le a return return of income where he/she has multiple source source of income. o one can enFoy a refund refund of overpaid tax without ma'ing a declaration.
0KAT KAPPENS IF TAH IS DEFA5LTED3 An employer who fails to withhold tax as re,uired y law is personally liale to pay the tax together with any penal tax and interest thereon. $owever the employer is entitled to recover the tax from the employee" if he wishes to do so" ut c"nnot recover the interest or penalty from the employee.
DISCLAIMER: This Inform"tion is strictly for p#rposes of !#i$"nce to o#r clientele "n$ is s#(ect to ch"n!e on "men$ment of t"* le!isl"tions "ny other re!#l"tions th"t !o,ern t"* "$ministr"tion2
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A Publ!"#$% Publ!"#$% $& '("%)" R*+*%u* Au#,$-#. P.O. B$ 29 2 9 1""l" 1"" l" '("%)". '(" %)". T*l*,$%*: 0456 442074 442077 443570 F": 0454 045 4 334458 E"l: -#*u-".($.u( -#*u-".($.u( *b#*: ,##://;;;.u(-*+*%u*.!$ TOLL FREE KELP LINE: 777@777
A Publication of Uganda Revenue Authority P.O. Box 7279, Ka!ala, Uganda 8 "ele!hone# $%& 7 %%2$'%, %%2$'', %%(&'$, %%(&'% )ax# $%&% ((%%&*+(&7$$9 ail# !rte-ura.go.ug eb/ite# htt!#++000.ugrevenue.co htt!#++000.ugrevenue.co
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