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URA: What you need to know about rental income taxation

Rental income tax is the total amount of rent derived by a person for the year of income from the lease of immovable property (land rented for a washing bay, customs bond, selling sand or gravel and/or buildings like a house, flat, apartment, office) in Uganda with the deduction of any expenditures and losses incurred in respect of the property.

Rental income tax is the total amount of rent derived by a person for the year of income from the lease of immovable property (land rented for a washing bay, customs bond, selling sand or gravel and/or buildings like a house, flat, apartment, office) in Uganda with the deduction of any expenditures and losses incurred in respect of the property.

The real estate sector is growing at an exponential rate as manifested by the several properties that have been constructed countrywide.

This sector is among the most profitable business ventures in Uganda contributing 13% to the Gross Domestic Product through the sector’s revenue contribution is only 2%.

In July 2014, the rental expansion project was created under the Domestic Taxes Department Service Management Division headquarters in Kampala.

The objectives were expanding the taxpayer register and enhancing revenue mobilisation in this sector by supporting the players in the sector to fulfill their tax obligations.

The taxpayer obligations include:

  1. a) Maintaining and declaring accurate and complete records of all their transactions to URA;
  2. b) Filing accurate and complete tax returns by the due date to avoid penalties
  3. c) Making timely payment of the right rental tax to avoid interest
  4. d) Timely communication to URA of any changes in the status of their business.

An individual, company, partnership, trustee, retirement fund, a government, a political subdivision of a government, and a listed institution that has rental income for each year of income is liable to rental tax.

Rental income is the total amount of rent derived by a person for the year of income from the lease of immovable property (land rented for a washing bay, customs bond, selling sand or gravel, and/or buildings like a house, flat, apartment, office) in Uganda with the deduction of any expenditures and losses incurred in respect of the property.

Rental income is segregated from business income and taxed separately. Rental income tax is charged for each year of income and is imposed on every person who has rental income.

The rental income of a resident individual for a year of income is charged to income tax at 20% of the chargeable income excess of Shs2,820,000 while the rental income of a company for a year of income is charged to income tax is at 30%.

What is URA doing to curb the challenges in administering this tax?

  1. i) Sensitisation of the local leaders and the public;
  2. ii) Field/ Courtesy visits;

iii) Onsite support;

  1. iv) Dedicated rental project staff
  2. v) Customized tax education (workshops, tax literature, talk shows on TV and radio).

The author is the Commissioner of Domestic Taxes Uganda Revenue Authority.

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