Taxes matter a lot and you better plan for them. Understand the different between tax evasion and tax avoidance. Tax evasion is illegal failure to remit taxes while tax avoidance is legal. You need to plan your business and incomes to take advantage of tax avoidance schemes available.
For example, income from your property is subjected to lower taxes than income from your stocks or salary that is usually charged at 30%. So, investing your savings in real estate appreciation may be better strategy. But note that rich people invest in business assets where they claim high tax savings in put money in more savings. Whereas an average Ugandan will rush to own an expensive home (effectively tying over Ugx 500 million in a property), a rich fellow will rent an apartment and invest in a plant attracting over 70% tax savings. Even if you are renting out the houses (with a comparatively very low return on investment) it is difficult to get to the level of savings of the rich guy from tax incentives.
As with all investments, you need to gather enough information and evaluate the return on investments, risks and costs. Above all, ensure compliance in everything you do. You don’t want to see the tax man knocking on your door for outstanding taxes you did not remit three years ago. If you live in Uganda, consider the following examples carefully. Apply the following tax avoidance strategies and you will sure get yourself great savings.
Did you know anybody who places his assets for use outside the designated areas of Kampala, Entebbe, Jinja, Namanve and Njeru is entitled to a capital tax deduction of 75%? This means that even placing the assets as close as Kasangati would earn you a whopping 75% capital allowance deduction. That is a huge savings on your personal taxes.
Use of personal property to perform official work
Did you know that the use of personal car to run office errands is fully tax deductible? All you will be required to do is to work out an approved mileage scheme and the payments made out to you won’t be taxable and neither will the company expense incurred.
Value Added Tax (VAT)
Did you that you are entitled to VAT cash refund when your input amount reaches Ugx. 5 million, instead of carrying forward as an offset? This should avail you with the needed cash to inject in your business.
Unfortunately, many business people short of cash flow, resort to obtaining bank loans at the expense of utilizing such tax advantages to free their cash.
With Holding Tax (WHT)
WHT is always a nightmare from an administration perspective. However, if you have been compliant with your tax affairs and have been in existence for 3 years, you can seek for 6% WHT exemption from URA. This exemption is reviewed bi-annually.
As a business person, it is important to find a brilliant tax or financial advisor to ensure you take advantage of the available tax avoidance strategies. Having brilliant people as your consultants might be expensive in the short term, but is the best strategy for your long term success. The basic test is always: is my financial advisor successful or still struggling. Surely, you don’t want someone who cannot find their way to making a decent living for themselves as your advisor.