Rwos & Partners

09/07/2022

15/06/2022

No new taxes -Budget Speech

Its almost 24hrs we received budget speech from the Finance minister Hon Kasaija.
Below are important highlights for taxpayers.

1.No new taxes introduced.

2.The Minister exempts Shs 2,820,000 ,earned by an individual,from tax.
3.Any amount in excess of she 2,820,000 shall be taxed @12%.

4. For companies with rental income,expenses allowed are capped to 50%.is where expenditure incurred to generate rental income exceeds 50% of rental income,allowable deduction shall be 50% and taxed @30%.

5.Carry forward of excess expenditure is nol allowed.

6.Suppliers of goods and services to Government shall be account and pay for VAT only when payment is received from Government.

7.Supply of oxygen cylinders or oxygen for medical use is exempt from VAT.

25/01/2022

Change of tax law on Rental Income has made it a levelled playground for both companies and individual taxpayers.

A company is an artificial person that exists independent of its owners and an individual of course is a single human being.
One of the tax amendments made in 2021/2022 financial year, was Section 22(1)(c) of the income tax Act that was amended to allow 75% of rental income as expenditure and losses incurred in production of rental income.

Prior to this amendment, investors such individuals wanting to invest in rentals would transfer ownership of all their rental houses to a company for the company would be allowed tax deductions of all expenses incurred during the tax period to generate rental income.Then the net balance between the rental income and all allowable expenses is charged to tax at 30%.
This was different on the account of an individual.An individual would be allowed only 20% of total rent collections as expenses. The balance, which is 80%, would be charged to tax at 20%.This would apply regardless of whether there would be profits or not.
Take a look.
Assume ABC, a taxpayer having rental houses as a company and as an individual earning 30m annually from rental houses and incurring 20m to generate this income.

Company Individual
Income. 30m. 30m
Less expenses. 20m. 6m(20%)
Net income. 10m. 24m
Tax @30%/20% 3m. 4.8m
You will realise that ,the individual would pay more tax than a company on the same income.

Why was the law changed?
Despite the exponential growth in real estate industry, the government was not collecting enough taxes from the industry.Why?Taxpayers would apply aggressive tax planning strategies to minimise their tax liabilities as much as possible.
How?
1.Change of ownership of rental houses from individual to companies.
2.Overstatement of their expenses to reduce their chargeable income to zero

Who are the benefiaries of this new law?

1.The government.The government is set to realise more tax revenues. Just because, whether the company has made profits or not ,only 75% of rent collections will be allowed as expenses,implying that 25% is chargeable income taxed @30%.

2.Individaul taxpayers.Individuals would be allowed 20% of rent collections as expenses in previous law vs 75% as per the current legislation.
However, what was forgotten by the legislators, is to repeal section 22(1)(ca) which allows interest on mortgages from financial institutions as an expenditure for tax purposes.This part is still in force unless there is a practice note to override it.

ALL IN THE NEW LAW IS GOOD FOR TAXPAYERS & THE GOVERNMENT.

HAPPY NEW YEAR.

25/01/2022

Change of tax law on Rental Income has made it a levelled playground for both companies and individual taxpayers.

A company is an artificial person that exists independent of its owners and an individual of course is a single human being.
One of the tax amendments made for 2021/2022 was,Section 22(1)(c) of the income tax Act that was amended to allow 75% of rental income as expenditure and losses incurred in production of rental income.
Prior to this amendment, investors such individuals wanting to invest in rentals would transfer ownership of all their rental houses to a company for the company would be allowed tax deductions of all expenses incurred during the tax period to generate rental income.Then the net balance between the rental income and all allowable expenses is charged to tax at 30%.This was different on the account of an individual where an individual would be allowed only 20% of total rent collections as expenses. The balance, which is 80%, would be charged to tax at 20%.This would apply regardless of whether there would be profits or not.This law would create more tax benefits to the companies than individual taxpayers.

Take a look.
Assume ABC, a taxpayer having rental houses as a company and as an individual earning 30m annually from rental houses and incurring 20m to generate this income.

Company Individual
Income. 30m. 30m
Less expenses. 20m. 6m(20%)
Net income. 10m. 24m
Tax @30%/20% 3m. 4.8m
You will realise that ,the individual would pay more tax than a company on the same income.

Why was the law changed?
Despite the exponential growth in Real Estate industry, the government was not collecting enough taxes from the industry.Why?Taxpayers would apply aggressive tax planning strategies to minimise their tax liabilities as much as possible.
How?
1.Change of ownership of rental houses from individual to companies.
2.Overstatement of their expenses to reduce their chargeable income to zero

Who are the benefiaries of this new law?

1.The government.The government is set to realise more tax revenues. Just because, whether the company has made profits or not , only 75% of rent collections will be allowed as expenses,implying that 25% is chargeable income taxed @30%.

2.Individaul taxpayers.Individuals would be allowed 20% of rent collections as expenses in previous law vs 75% as per the current legislation.
However, what was forgotten by the legislators, is to repeal section 22(1)(ca) which allows interest on mortgages from financial institutions as an expenditure.This part still is in force unless there is a practice note to override it.

ALL IN THE NEW LAW IS GOOD FOR BOOTH THE TAXPAYERS & THE GOVERNMENT.

HAPPY NEW YEAR.

25/01/2021

Every day we think of how we can make you win in your business. We partner with you in auditing services and beyond

22/01/2021

And that's why we want to partner with you

09/11/2020

The harder you work for something, the greater you'll feel when you achieve it

27/10/2020

We are your cost effective partners. Reach out to us for reliable Tax, Audit and accounting consultancy services.

12/10/2020

Because we understand what you need With our skilled & experienced staff
When you hire us for business advice and audit services, you can be confident that the work will be carried out by dedicated professionals with relevant expertise. We deal with you directly and be your regular point of contact. Our dear clients be assured of;

A firm that firmly established and respected
Partners who work hard to understand your business and its needs
Access to guidance and support from the firm members
Consistent continuity of service for business needs

08/10/2020

We join our customers and well wishers to celebrate our mother land's 58th independence. At Rwos & Partners we promise to offer professional and affordable accounting, taxation and audit services.

05/10/2020

We want to be part of your week. Be part of us to by having better services from Rwos & Partners

03/10/2020

Because we know how it feels to go to a weekend with your business not doing well in accounts and book keeping. contact us we shall help you