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On 15th June 2023, the Uganda Revenue Authority (URA) issued a public notice, serving as a reminder to the public “to pay stamp duty on all Agreements or Memorandum of Agreement executed or received in Uganda in relation to the purchase and transfer of property”.
In their notice URA stated that “any person who purchases or transfers property should present the Agreement or Memorandum of Agreement together with the Transfer and Consent forms to URA for stamp duty assessment, payment, barcoding, and generation of Stamp Certificate. Stamp duty payable on each Agreement or Memorandum of Agreement is UGX 15,000, while stamp duty on the transfer of land is at a rate of 1.5% of the total value of the land as determined by the Chief Government Valuer”.
Legal Framework
Section 3(a) of the Act provides that “every instrument mentioned in Schedule 2 which not having been previously executed by a person, is executed in Uganda and relates to property situated, or to a matter or thing done or to be done, in Uganda.”
Section 14 of the Act provides that an instrument subject to duty and executed within Uganda must be stamped within forty-five days of execution. Conversely, according to Section 15, an instrument executed outside Uganda must be stamped within thirty days of being received in Uganda.
Section 52 stipulates that once duty becomes due and payable, it becomes a debt to the Government of Uganda and according to Section 57, failure to pay stamp duty on agreements attracts a fine of 100 currency points (UGX 2,000,000) or imprisonment not exceeding six months or both.
Where are the red flags?
Whereas the URA notice specifically addressed the transfer of property, it is important to note that the scope of the provision in the law extends beyond just the transfer of property.
Stamp duty essentially encompasses a broad spectrum of products and services, some of which are straightforward to understand, while others are not. The Act outlines 53 instruments subject to duty, ranging between specific rates of UGX15,000 per instrument and UGX 100,000, as well as ad-valorem rates calculated based on the total value.
The fifth item in the Second Schedule provides for a duty of UGX 15,000 on “Agreements” or “Memorandum of Agreement”. However, Section 2 of the Act, which is the interpretation section does not define the term agreement or a memorandum of agreement which means any agreement one can think of provided it captures the wishes of two people. It could be a sale above the counter in a bar or supermarket. It could be a marriage certificate signed by spouses. Good legislation aims at minimising ambiguity and absurdity. There is a lot of ambiguity and absurdity in this largely obscure piece of legislation
The Oxford Advanced Learner’s Dictionary defines an Agreement as an arrangement, a promise or a contract made while a memorandum is defined as a record of a legal agreement which has not yet been formally prepared and signed. These definitions raise more questions than they provide answers one question being whether every arrangement entered, promise made or contract is subject to this tax. If not, how then can one know the exceptions and ensure compliance with the law.
Assuming that all the agreements we routinely execute are, in fact subject to Stamp Duty but we have not paid the required tax, the question which arises is, whether non-payment of stamp duty renders these transactions void.
Most tax laws have a minimum monetary threshold below which duty should not apply. The Stamp Duty Act does not.
The fact that someone may find oneself in prison for up to six months for a possible offence under this Act well knowing that almost every adult in Uganda may be an offender should be a wake-up call to our legislators to have a detailed look at this law
Hopefully our dear Parliamentarians will pay attention to this often under looked tax head.