Govt to collect VAT on goods and services donated to employees
Government had argued that employers had been abusing the provision by using it as an avenue to give free taxable goods to their employees, without consideration but claim input credit for the goods supplied.
Parliament has passed into law the Value Added Tax Amendment Bill 2024, giving government powers to collect VAT on donated goods or services, given by an employer to an employee.
Government had argued that employers had been abusing the provision by using it as an avenue to give free taxable goods to their employees, without consideration but claim input credit for the goods supplied.
According to the government this was an abuse of the law since URA on the other hand cannot recover output VAT.
The Opposition in the minority report had described such a move as inhumane, saying it would discourage companies from making donations.
MPs also approved the proposal to increase the threshold for claiming for refund of overpaid tax from Shs5M to Shs10M.
Government had proposed the threshold to be increased to Shs50M. However, Parliament rejected the Shs50M threshold noting that increasing the threshold to such an amount, will have the effect of incapacitating Small and Medium Enterprises (SME’s).
These will not be able to claim for the overpaid tax, which will negatively affect their business. According to the government, “In the proposal, refunds below Shs10m shall be automatically carried forward to offset the output for the next financial year.”
However, following the passing into law the Value Added Tax Amendment Bill 2024, Leader of Opposition, Joel Ssenyonyi asked government, “when it intends to address the concerns raised by traders on the need to lower the VAT rates from 18% to 16%, addressed given that this would have been the time for Government to remedy the situation, in order to avert future strikes within the business community.”
“When traders reached out to us as Government and as leaders, we understand there were meetings scheduled with Executive, and they had critical concerns and the assumption they have been having is that is that this Bill (Value Added Tax Amendment Bill) is remedy to their concerns, now, they are wondering the remedies that are exactly coming through because they had certain proposals like VAT lessened to 16%,” said Ssenyonyi.
