CTA 6 – INDIRECT TAXES

Solution 1
(a) (i)
Establish the period in which TL was required to register for VAT and state the
effective date of registration:
− Sec 7 gives guidance on persons required or permitted to register.
− A person who is not already a registered person shall apply to be registered in
accordance with section 8;
Within twenty days of the end of any period of three calendar months if
during that period the person made taxable supplies, the value of which
exclusive of any tax exceeded one-quarter of the annual registration
threshold of one hundred fifty million shillings as set out in subsection (2).
Therefore, below is the computation for establishing the period in which TL was
required to register for VAT, and Effective date:
Turnover Amount Exempt Standard Standard Zero Total Cumulative
Shs supplies rated rated rated taxable amount
‘000’ supplies supplies supplies supplies
(VAT
exclusive)
January 9,000 9,000 7,627 7,627
February 6,000 6,000 5,085 5,085
March 17,000 17,000 14,407 14,407 27,119
April 12,000 2,000 10,000 8,475 8,475 27,966
May 16,500 3,000 13,500 11,441 6,000 17,441 40,322
June 15,500 15,500 13,136 13,136 39,051
July 21,000 21,000 17,797 17,797 48,373
August 15,000 15,000 12,712 2,000 14,712 45,644
September 13,000 13,000 11,017 11,017 43,525
October 25,000 25,000 21,186 21,186 46,915
November 18,000 18,000 15,254 15,254 47,458
December 20,000 6,000 14,000 11,864 1,000 12,864 49,304
From the above, TL ought to have applied to register by 20th June and the effective
date of registration was 1st July

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(ii) Advise the management of TL on the amount of output VAT payable for the
period:

Standard
Amount Standard Rated Zero Total Output
Exempt Rate VAT
Turnover Shs Rated Supplies rated taxable
Supplie (%)
‘000’ Supplies (VAT supplies supplies
s
excl) 0%
July 21,000 21,000 17,797 17,797 18 3,203
August 15,000 15,000 12,712 12,712 18 2,228
August 2,000 2,000 2,000 0 0
September 13,000 13,000 11,017 11,017 18 1,983
October 25,000 25,000 21,186 21,186 18 3,814
October 10,000 10,000 10,000 10,000 18 1,800
November 18,000 18,000 15,254 15,254 18 2,746
December 13,000 13,000 11,017 11,017 18 1,983
December 0 0 1,000 1000 0 0
December 6,000 6,000 0 Exempt
(b) With relevant provisions in the VAT act compute input VAT Claimable for the
period under review:
Taxable
Gross amount Rate Input VAT
Period amount Shs ‘000’ claimable
(%)
Shs ‘000’ Shs ‘000’

July 18% 0
August 3,000 2,542 18% 458
August 11,000 9,322 18% 1,678
September 18% 0
October 73,750 62,500 18% 11,250
November 2,000 1,695 18% 275
December 5,000 4,237 18% 519
CIF 50,000,000
Import duty 12,500,000
Taxable value 62,500,000
VAT 11,250,000
(c) Compute VAT payable or claimable for the period under review:
Output VAT Input VAT Payable / (Claimable) Apply for Refund
Period (Shs ‘000’) (Shs ‘000’) Shs ‘000’ Shs ‘000’
July 3,203 - 3,203
August 2,288 2,136 152
September 1,983 - 1,983
October 5,614 11,250 (5636) (5636)
November 2,746 275 2,471 0
December 1,983 519 1,464 0

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(d) Advise management on how the value of exercisable goods and services is
determined:
− The value of an excisable good shall be the normal ex-factory price of
the good exclusive of any tax on that good.
− The normal ex-factory price of the good shall include raw material
costs, manufacturing costs, labor costs, profit margin, bank charges
and interest and all other costs, charges and expenses incidental to the
factory, production and sale.
− The value of an excisable service shall be the price paid or payable by
the consumer of that service excluding value added tax chargeable
under the value added tax act and excise duty chargeable under this
Act.
− In the case of non-arm’s length transactions, the normal ex-factory
price shall be the price at which the transaction would have occurred in
the ordinary course of business between the person liable to excise
duty and an independent person dealing at arm’s length, and in cases
where the price can’t be determined, the price shall, subject to this
Act, be decided by the Commissioner.
− A sale in the open market between a manufacturer and a buyer
independent of each other’s presupposes that;
− the price is the sole consideration.
− the price isn’t influenced by any commercial, financial or other
relationship whether by contract or otherwise, between the
manufacturer or any person associated in business with him or
the buyer and
− no part of the proceeds of the subsequent resale, use or
disposal of the goods or services will accrue either directly or
indirectly to the manufacturer or any person associated with
him.
− Notwithstanding this Act where the Commissioner is satisfied that an
arrangement has been entered into or carried out where;
− a person has obtained an excise duty benefit in connection with
the arrangement and,
− having regard to the substance of the arrangement, it is
concluded that the person, or one of the persons, who entered
into or carried out the arrangement did so for the sole or
dominant purpose of enabling the person to obtain the excise
duty benefit
− the Commissioner may determine the liability of the person who has
obtained the excise duty benefit as if the arrangement had not been
entered into or carried out, or in a manner as in the circumstances the
Commissioner considers appropriate for the prevention or reduction of
the excise duty benefit.

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− In this section;
− arrangement includes an agreement, promise or undertaking
whether express or implied or whether or not enforceable or
intended to be enforceable, by legal proceedings, and a plan,
proposal, course of action and course of conduct and
− Excise duty benefit includes;
− A reduction in the liability of a person to pay excise duty
− An increase in entitlement of a person or to a credit or
refund or
− Any other avoidance or postponement of liability for the
payment of excise duty
− The value of an imported excisable good is the sum of the value of the
good ascertained for the purposes of import of duty under the laws
relating to customs and the amount of import duty payable on that
good.
− The value of an excisable service is the amount exclusive of any tax
and duty, paid or payable by the final consumer in consideration for
the service
− Where no amount is paid in consideration for the excisable service
under subsection (9) or where there is an application of the excisable
service to own use by the person providing the service, the value of
the excisable service shall be the market value of the excisable service.
− The taxable value of money transfer services by cellular service
providers, money transfer agencies and other financial services
providers shall be the fees charged for a particular money transfer
service transaction.

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Solution 2
(a) (i)
To : The manager C&C
From : Tax consultant
Date : 22/05/2023
Subject: Report on refund for man hour cost of staff.
Brief facts:
C&C is a consultancy firm based In Denmark and registered as a foreign company
Branch had not charged and / or paid VAT on the man hour cost of staff at the head
office (offshore services) whose cost was allocated to the branch
An assessment of Ushs.300M was issued.
Case: URA Vs. COWI A/S
A tax refund is a reimbursement to a taxpayer of any excess amount paid to
government.
Under section 42 (1) of The Value Added Tax Act, a taxable person is entitled to a
refund where the taxable person’s input credit exceeds his or her liability for tax, for
the tax period in issue.
Tax refund arises in case of a mismatch between the tax amount paid and the actual
payable amount. It is therefore claimed upon proof of overpayment.
In the case of C&C, it’s important to establish whether there was any tax liability due
arising from its arrangement with the head office.
Whereas sec 11(2) of the VAT Act holds that a supply of services made by an
employee to an employer by reason of employment is not a supply made by an
employee, Regulation 13 (3) (a) of the VAT Regulations on imported services takes
the entity as a person and is deemed separate.
Imported services in essence involve a supply of services that is made by a supplier
who is resident or carries on business outside Uganda to a recipient who is a
resident of or carries on business in Uganda to the extent that such services are
utilized or consumed in Uganda.
Any transaction involving supply of goods or services without consideration is not a
supply, barring a few exceptions, in which a transaction is deemed to be a supply
even without consideration. However, in the case of C&C, these services were
charged to the branch as a cost. This therefore was not a mere arrangement of
allocating costs to the branch as part of an arm’s length share of profits and losses
within the entire group, but rather a supply of services from overseas
For these reasons, the imported services rendered in the present case were
assessed correctly by URA as charged to VAT and the tax consequently paid against
the assessment made was correct
In conclusion, C&C would have applied for objection in case it was dissatisfied by the
assessment if there were grounds for it. But since the assessment was correctly
raised for unpaid VAT on imported services, C&C cannot object to the assessment or
does not qualify for any refund on the tax paid.

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 (ii) Vat refunds arise under the following circumstances
− Bad debts- sec 43
− Over paid tax sec 42
− Refund for tax for use of EFRIS to non-registered VAT persons –
sec 45 A.
− Refund of tax to diplomats and diplomatic and consular missions
and international organizations-Sec 45
− Interest on over payments and late refunds

(b) Memo to management advising on the imposition, liability and payment of

excise duty:
To: GM
From: Tax Manager
Date: 22/05/2023
Subject: Imposition, liability and payment of excise duty in Uganda
Excise duty is an indirect tax on consumption of specified goods and services
either locally manufactured or imported. Such goods or services are referred
to as excisable goods and services as specified in schedule 2 of the Excise
Duty Act.
It can either be levied as an ad valorem or specific tax. It is either a
percentage of the value determined as the base or per unit of output, as
specified in schedule 2 of the excise Duty Act.
\

The persons liable to pay excise duty;

− In case of an excisable service, is to be paid by the person providing
the service.
− In case of a manufactured excisable good, is to be paid by the person
manufacturing the excisable good.
− In case of an imported excisable good, it is to be paid by the person
importing the excisable good.
A manufacturer of an excisable good becomes liable to pay tax on excise duty
on that manufactured good when the manufactured good is removed from
the manufacturer’s premises.
According to Sec 4 (3) of the Excise Duty Act, a person providing excisable
services becomes liable to pay excise duty on that service on the earlier of
the following;
− The date on which the performance of the service is completed;
− The date on which payment for the service is made; or,
− The date on which an invoice is issued.
An importer of excisable goods shall pay excise duty at the time of import.
A telecommunications service operator providing data used for accessing over
the top services is liable to account for and pay excise duty on the access to
the over-the-top services.

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Solution 3
(a) (i) Key issues at WIL, quoting the relevant areas of the TPCA:
Date: 22/05/2024
To: Management
From: Tax Manager
Subject: Issues at WIL.
The TPCA gives guidance on offences as seen at WIL:
No filling returns – WIL did not file some returns. A person who doesn’t
furnish a tax return by the due date or within such further time as the
Commissioner may allow, commits an offence and is liable on
conviction to a fine not exceeding fifty currency points TPCA 54(1)
Where a person convicted of an offense fails to furnish the return to
which the offence relates within the period specified by the court, the
person commits another offence and is liable on conviction to a fine
not exceeding one hundred currency points. TPCA 54(2)
No proper records – A tax payer who knowingly or recklessly doesn’t
maintain records as required under a tax law commits an offence and
is liable on conviction to a fine not exceeding one hundred and fifty
currency points or imprisonment for a term not exceeding six years or
both TPCA 56
Making false statements to URA officials – A person who knowingly or
recklessly makes a statement to a tax officer that is false or misleading
in a material particular; or
Omits from a statement made to a tax officer any matter or thing
without which the statement is false or misleading in a material
particular, commits an offence and is liable on conviction to a fine not
exceeding five thousand five hundred currency points or imprisonment
for a term not exceeding ten years or both TPCA 58.

(ii) Record keeping requirements.

Section 15 of the Tax Procedure code Act provides that Every tax payer
shall, for the purposes of a tax obligation:
− Maintain, in the English language, records including in electronic
format, as may be required to determine the tax payer’ tax
liability under tax law;
− Maintain the record so as to enable the tax payers tax liability
under the tax law to be readily ascertained and
− Retain the record for five years after the end of the tax period
to which it relates or the other period as specified in the tax law.

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 Where at the end of the time specified in subsection (1) (c) a record is
necessary for a proceeding commenced before the end of the five-year
period, the person shall retain the document until all proceedings have
been completed.
A mode of record keeping shall contain sufficient transaction
information and in the case of a record in electronic format shall be
capable of being retrieved and converted to a standard record format
equivalent to that contained in an acceptable paper record
The Commissioner may on the application of a tax payer who wishes to
keep records in a language other than English or in a currency other
than Uganda shillings, allow the tax payer to keep records in a
different language or currency
Where records referred to in subsection (1) is not in English, the
Commissioner may by notice in writing, require the person keeping the
record to provide, at the person’s expense, a translation into English by
a translator approved by the Commissioner.
A tax payer granted permission to keep records in a language other
than English shall file a tax return or provide other correspondence
with the Commissioner in English

(b) Penalties URA is likely to enforce against WIL as provided for by the VAT Act
Cap 349
A person who fails to apply for registration as is required by section 7(1) or
(5) is liable to pay a penal tax equal to double the amount of tax payable
during the period commencing on the last day of the application period
in section 7(1) until either the person files an application for registration with
the Commissioner General or the Commissioner General registers the person
under section 8(6).
Section 65 of the VAT Act Cap 349 provides that a person who fails to lodge a
return within the required time under this Act is liable to pay a
penal tax amounting to whichever is the greater of the following:
− two hundred thousand shillings; or
− an interest charge for the period the return is outstanding calculated
according to the formula specified in the Fifth Schedule.
A person who fails to pay tax imposed under this Act on or before the due
date is liable to pay a penal tax on the unpaid tax at a rate specified in the
Fifth Schedule for the tax which is outstanding.
If a person pays a penal tax under subsection (3) and the tax to which it
relates is found not to have been due and payable by the person and is
refunded, then the penal tax, or so much of the penal tax as relates to the
amount of the refund, shall also be refunded to that person.
A person who fails to maintain proper records in a tax period in accordance
with the requirements of this Act is liable to pay a penal tax equal to double
the amount of tax payable by the person for the tax period.

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 Where a person;
− Makes a statement to an official of the Uganda Revenue Authority that
is false or misleading in a material particular; or

− Omits from a statement made to an official of the Uganda Revenue

Authority any matter or thing without which the statement is
misleading in a material particular and;
− The tax properly payable by the person exceeds the tax that was
assessed as payable based on the false or misleading information;
− The amount of refund claimed was false;
− The person submitted a return with an incorrect offset claim:
− that person is liable to pay a penal tax equal to double the
amount of the excess tax, refund or claim.
Section 50 of the TPCA applies in determining whether a person has made a
statement to an official of the Uganda Revenue Authority.

Solution 4
(a) Admission of not dully stamped instruments as evidence.
Sec 32 provides that an instrument chargeable with duty shall not;
Be admitted in evidence for any purpose by any person who has by law or consent
of the party’s authority to receive evidence or,
Be acted upon, registered or authenticated by a person or a public officer unless the
instrument is duly stamped
An instrument other than a cheque, a bill of exchange, presented for acceptance,
acceptable or payable outside Uganda, or in a promissory note, shall subject to all
just exceptions be admitted in evidence on payment of the duty with which the
instrument is chargeable, or in the case of an instrument insufficiently stamped, of
the amount required to make up the duty together with the penalty but;
Where a person from whom a stamped receipt could have been demanded has
given an unstamped receipt, and that receipt if stamped would be admissible in
evidence against him or her, then the receipt shall be admitted in evidence against
him or her on payment of the prescribed penalty by the person tendering it.,
Where a contract or agreement of any kind is affected by the correspondence
consisting of two or more letters and any of the letters bears the proper stamp, the
contract or agreement shall be taken to be dully stamped.
This section shall not prevent the admission of an instrument in evidence in any
proceeding in a criminal court.
This section shall not prevent the admission of an instrument in any court when the
instrument has been executed by or any behalf of the government, or where it bears
the authentic certificate of the Uganda Revenue Authority as provided by this Act.

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(b) Endorsement of instruments on which duty has been paid - Sec 37
Where the duty and penalty if any, leviable in respect of an instrument has been
paid under this Act, the person admitting the instrument in evidence or the
Commissioner;
− Shall certify by endorsement on the instrument that the proper duty or, as the
case maybe the penalty, stating the amount of each has or have been levied
in respect of the instrument and;
− The name and residence of the person making payment
An instrument endorsed under sec 37 (1);
− Shall be admissible in evidence and may be registered and acted upon and
authenticated as if it had been duly stamped and,
− Shall be delivered on his or her application to the person from whose
possession it came into the hands of the officer impounding it, or as that
person may direct.
Not with standing anything within section 37, an instrument which has not been
admitted in evidence shall not be upon payment of duty shall be delivered before
expiration of one month from the date of its impounding, or if the Uganda revenue
authority has certified that its further detention is necessary and has not cancelled
the certificate.

(c) Penalty for executing an instrument not duly stamped.

Sec 57 of the Stamp Duty Act provides that a person who,
Draws, makes, issues, endorses or transfers or signs otherwise than as a witness, or
presents for acceptance or payment or accepts, pays or receives payment of, or in
any manner negotiates a bill of exchange, cheque or promissory note without it
being duly stamped
Executes or signs otherwise than as a witness, any other instruments chargeable
with duty without it being duly stamped or;
Votes or attempts to vote under a proxy not duly stamped
Commits an offense and is liable to a fine not exceeding one hundred currency
points or imprisonment not exceeding six months or both.
Where a share warrant 37 (2) is issued without being duly stamped, the company
issuing it and also every person who, at the time it was issued, is the managing
director or secretary or other principal officer of the company, commits an offense
and is liable on conviction to a fine not exceeding one hundred currency points.

(d) Lotteries and gaming tax assessments.

Sec 51 of the lotteries and gaming Act provides for assessments as below:
A tax return submitted by a promoter, a principle or a person licensed under this Act
shall be treated as a self-assessment issued by the Commissioner
The Commissioner may make an assessment of the tax payable, where;

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− A tax payer defaults in furnishing a return under this Act
− The Commissioner is not satisfied by a return made by a promoter or principal
or a person licensed under this Act.
Where the Commissioner makes an assessment under subsection (2)(b), the
Commissioner shall state the reasons why the Commissioner is not satisfied.
(e) Objection to assessment under Lotteries and gaming
According to section 52, a person may object to an assessment within forty-five days
from the date the assessment is served on that person.
The objection shall be addressed to the Commissioner and shall state the grounds
on which the objection is based.
The Commissioner shall consider the objection and may;
− Allow the objection and amend the assessment
− Reject the objection and maintain the assessment
Where a person objects an assessment in part, the person shall pay the tax which is
not in dispute or a lesser amount determined by the Commissioner, until the
objection is determined.

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