Banks, URA disagree over VAT

By Christine Kasemiire


Commercial banks are in discussions with Uganda Revenue Authority (URA) over particular tax pardons that financial institutions deem unnecessary.
The revelation was made during a tax awareness breakfast organised by Ligormarc Advocates in Kampala last week.
Mr Steven Mugisha, the firm’s director tax services, told Daily Monitor that at the moment, Value Added Tax on disposal of property by banks when recovering money from bad loans is controversial and unnecessary.
“There is a controversy and URA is saying this is disposal of property and since it is sale of commercial property, you must pay Value Added Tax while banks differ saying the sale of commercial property is incidental to what we do, that is to say financial services, which is exempt from VAT,” he said.
According to Mr Mugisha, banks argue that they have already made a loss and are selling off the property to regain their money from a bad loan, making the sale incidental. Charging tax on such a transaction, he said, is misplaced and ineligible.
However, according to the VAT Law, any commercial sale of a property is taxable and urges the banks to sell at market value if they are not willing to make a loss.
Mr Wilbrod Owor, the executive director Uganda Bankers Association told Daily Monitor, they were engaging URA on various issues. However, he did not specify which issues in particular.
“Matters will be discussed at our legal committee meeting next month where we can take a position and next course of engagement,” he said.
On the other hand, the manager public and corporate affairs at URA, Mr Ian Rumanyika acknowledged talks with banks, saying the financial institutions are currently compliant but want URA to consider whether or not they should be paying the VAT.
He said this question is currently being discussed and URA shall, for the time being, stick to the VAT Law.

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