By Ben Musanje
The Uganda Revenue Authority (URA) has clarified how withholding tax should be calculated on transactions where the invoice amount includes Value Added Tax (VAT), saying the tax should be deducted from the amount exclusive of VAT.
The clarification was issued by URA Commissioner General John Musinguzi Rujoki in the latest “Ask URA Commissioner General” column published by New Vision on Thursday, September 3, 2026.
The guidance responds to a taxpayer who asked how withholding tax (WHT) should be calculated on a VAT-inclusive transaction where the total invoice amount is Sh26 million.
URA explained that WHT is not calculated on the entire VAT-inclusive invoice. Instead, the VAT component is first removed, after which the applicable WHT is calculated on the VAT-exclusive amount.
For an invoice of Sh26m, the VAT-exclusive amount is approximately Sh22.034m, with the VAT component accounting for approximately Sh3.966m.
Using the applicable withholding tax rate, the amount to be withheld is then calculated on the VAT-exclusive figure rather than the full Sh26m invoice.
The clarification is aimed at helping taxpayers and businesses correctly account for withholding tax and avoid errors arising from applying WHT to the VAT component of a transaction.
URA explains PAYE changes
The tax authority also addressed questions on the implementation of new Pay As You Earn (PAYE) rates and bands.
URA said the revised PAYE rates took effect on July 1 and are applicable from the effective date prescribed under the relevant tax changes.
The authority also addressed concerns over situations where revised PAYE rates may be implemented late on the URA system, potentially causing employers to calculate and pay the wrong amount of tax.
According to URA, taxpayers will be guided through official public notices and other communication channels on the application of revised rates and any transitional arrangements.
Employers and taxpayers have been encouraged to follow official URA guidance to ensure compliance whenever tax rates or systems are changed.
URA said where system changes affect tax computation, the authority will communicate the appropriate course of action and any resulting implications.
Taxpayers warned against errors in tax returns
The Commissioner General also cautioned taxpayers against common mistakes when filing tax returns.
Among the errors highlighted is declaring income inaccurately, including failing to declare all income received.
Taxpayers were also warned against claiming business expenses without supporting documentation.
URA said taxpayers should maintain the necessary documents to substantiate expenses claimed for tax purposes.
Another common error identified is treating personal expenses as business expenses.
The authority advised taxpayers to distinguish between legitimate business expenditure and personal spending when preparing their tax declarations.
Taxpayers were further urged to ensure that their tax returns contain accurate information and that transactions are assigned to the correct tax categories.
New procedure for vehicle ownership transfers
URA also provided guidance on the procedure for transferring ownership of motor vehicles.
According to the authority, both the seller and buyer are required to log into their respective tax identification numbers (TINs) on the URA portal and select the motor vehicle registration option.
The parties are then required to select the change-of-ownership option, enter the vehicle registration number and the TIN of the transferee, and generate a Payment Registration Number (PRN) for the applicable payment.
The relevant transfer documents, signed by both parties and endorsed by the Chief Licensing Officer (CLO), are then submitted to the Motor Vehicle Registration (MVR) offices for processing.
URA said that, once approved, the change of ownership can be completed within 24 hours, subject to the requirements being met.
The authority also highlighted the applicable stamp duty on private vehicle transfers, which it said is Sh50,000, effective July 1.
URA clarified that motor vehicle registration and ownership transfer functions are handled under the relevant government motor vehicle registration framework, with taxpayers advised to contact the appropriate Chief Licensing Officer for further assistance.
URA expands taxpayer support channels
The tax authority also reminded taxpayers that it has several channels through which they can seek assistance with registration, filing, payment and other compliance matters.
Taxpayers can seek help at URA offices, through the authority’s official email and toll-free telephone and WhatsApp support channels.
URA said it continues to improve its taxpayer services and encouraged taxpayers to use the available support channels whenever they face difficulties with registration, filing, payment or compliance.
The Commissioner General’s weekly “Ask URA Commissioner General” column provides taxpayers with guidance on practical tax administration issues, including tax calculations, filing requirements, payments and other compliance matters. (For comments on this story, get back to us on 0705579994 [WhatsApp line], 0779411734 & 041 4674611 or email us at mulengeranews@gmail.com).
