|
Getting your Trinity Audio player ready...
|
The Income Tax Bill published on 30th March 2023 is spectacular in that it attempts to make dramatic reforms in tax.
Apart from doing away with the incentive for investors called initial allowance (50% of the cost base of an eligible property in a radius of 50km outside Kampala and 20% within that radius), it has introduced a wider-ranging tax on digital transactions. Of the proposed reforms, perhaps one that will most likely have wide-ranging effects, if not checked by Parliament, is the redesigning of the policy on the sale of assets which has been upgraded from taxing business assets to practically everything.
The amendment to section 118B euphemistically defines an asset as “a resource with economic value that is expected to provide a future benefit to its holder but does not include trading stock.”
As if that was not strange enough, the cost base of the asset is no longer taken into consideration in determining what is taxed.
This is achieved by repealing Sections 22(1)(b), 22(5), 27, 29,49, 50, and 54 of the Income Tax Act.
The effect of these amendments is that in case of the sale of most property other than between spouse, former spouse and a few expectations that rarely occur, one has to pay tax.
Related
The status quo has been that if a property one is selling is not held for business, say you own a car and you have to dispose of it, there are no tax consequences because you only had the car for transporting yourself. If you have some old furniture in your residence and you dispose of it, it is not a business asset therefore URA doesn’t have to know.
With the proposed amendments, when you sell that old furniture, you not only pay the tax when you sell it but the cost will not be taken into account. Therefore, you are taxed on gross sale rather than the gain. In addition, the provision for the depreciation you may have incurred on the loss is not considered.
This extreme taxation has cast the tested principles of taxation to the winds.
We hope our members of Parliament will have time to analyse this provision.