Uganda Revenue Authority announces cessation of 6% withholding tax on agricultural supplies
In a public notice published on 3rd September, URA emphasized that while the 6% rate no longer applies to raw agricultural produce, processed products, such as rice, remain subject to the tax.
The Uganda Revenue Authority (URA) issued a fresh reminder to the general public regarding the application of Withholding Tax (WHT) on agricultural supplies.
In a public notice published on 3rd September, URA emphasized that while the 6% rate no longer applies to raw agricultural produce, processed products, such as rice, remain subject to the tax.
This clarification stems from a general public notice initially published on October 15, 2018, which announced the cessation of the 6% WHT rate on supplies of goods, materials, or services in the agricultural sector.
Crucially, this exemption was specifically stated to exclude processed agricultural products.
The URA explicitly reiterated this week that this exemption does not extend to processed agricultural commodities.
To underscore this point and address potential ongoing confusion in the market, the authority specifically stated: “Uganda Revenue Authority would like to reiterate that processed rice attracts withholding tax at a rate of 6% on the gross payments.” This means businesses purchasing processed rice are still obligated to deduct and remit the 6% WHT.
According to URA, Withholding Tax (WHT) is a form of income tax that is withheld at source by one person (the ‘withholding agent’) upon making payment to another person (the ‘payee’). This tax is deducted at source and remitted to the URA in advance by the withholding agent.
The tax laws stipulate which persons are required to withhold the tax and from whom the tax is withheld, depending on the nature and circumstances of the transaction. WHT serves as an advance payment toward the payee’s final income tax liability and helps in the early collection of tax revenue.
The URA’s renewed communication suggests a continued need for clarity within the business community, particularly among suppliers and buyers in the agricultural value chain, regarding the critical distinction between raw and processed agricultural products for tax purposes.
Businesses engaged in the trade of agricultural goods are urged to carefully review their transactions to ensure compliance with these WHT regulations. Failure to correctly apply the tax can lead to penalties. The URA advises any parties requiring further clarification to consult its official guidelines or seek direct assistance from their tax advisors.
