Finance minister explains strict criteria for tax liability remission under Ugandan law
The clarification comes amid the Government's continued efforts to strengthen domestic revenue mobilisation while ensuring that tax administration remains fair and consistent.
Finance Minister Henry Musasizi has outlined the stringent criteria and procedure taxpayers must meet to qualify for remission of tax liabilities under Section 43 of the Tax Procedures Code Act, Cap. 343.
Appearing before Parliament, Musasizi said tax administration is primarily intended to ensure that lawfully assessed taxes are collected efficiently, fairly, equitably and consistently.
He said remission is not a routine mechanism for taxpayers struggling to meet their obligations, but an exceptional measure considered only where a tax liability cannot be effectively recovered.
“Tax remission is an important instrument of revenue administration rather than an exception to the tax laws,” Musasizi said, stressing that the measure must be applied objectively and transparently.
URA must exhaust recovery options
According to the Minister, the Uganda Revenue Authority (URA) is required to pursue lawful recovery measures before a liability can be considered for remission.
These measures include early intervention with taxpayers, negotiating instalment arrangements, enforcement action, recovery from non-essential assets, offsetting liabilities against tax credits, deferred payment arrangements and temporary suspension of recovery where appropriate.
Musasizi said Section 43 provides that the URA Commissioner General may refer a tax liability to the Minister responsible for Finance where the liability cannot be effectively recovered because of hardship, impossibility, undue difficulty or excessive recovery costs.
If satisfied that the circumstances meet the legal threshold, the Minister submits the proposed remission to Parliament for approval.
Parliament then determines whether all or part of the outstanding liability should be remitted.
How taxpayers can apply
Musasizi said the process starts with an application by the taxpayer to the URA Commissioner General.
The application must provide details of the outstanding tax liability, the grounds on which remission is being sought, the amount proposed for remission and supporting evidence.
Depending on the circumstances, taxpayers may be required to provide financial records, insolvency documentation, information on assets and other evidence demonstrating why recovery of the liability would be difficult or impossible.
The Commissioner General evaluates the application and, where satisfied that the case meets the requirements, refers it to the Finance Minister.
The referral must include the supporting evidence, proposed amount for remission, reasons for the recommendation, fiscal implications and any available alternatives.
The Minister then reviews the case before submitting the proposal to Parliament for consideration.
Once Parliament approves a remission, the decision is subsequently gazetted and implemented by URA.
Hardship must be genuine and demonstrable
The Minister said the law sets a high threshold for taxpayers seeking remission on grounds of financial hardship.
Genuine hardship must involve serious and demonstrable financial distress, where continued recovery would cause disproportionate hardship compared with the revenue likely to be realised.
Other qualifying circumstances include impossibility of recovery, undue difficulty in recovering the liability or situations where the cost of recovery would be excessive.
However, Musasizi cautioned taxpayers against treating ordinary business challenges as grounds for tax remission.
He said temporary cash-flow difficulties, reduced profitability, commercial inconvenience, a decision to use available funds for business expansion or investment, dissatisfaction with a tax assessment, or simple unwillingness to pay do not constitute hardship for purposes of remission.
The clarification comes amid the Government’s continued efforts to strengthen domestic revenue mobilisation while ensuring that tax administration remains fair and consistent.
Musasizi said the remission mechanism is intended to balance the Government’s responsibility to collect public revenue with the need to avoid pursuing liabilities where recovery is no longer economically or practically viable.
He emphasised that remission would therefore remain limited to exceptional cases in which continued recovery does not serve the interests of sound tax administration.
