The Parliamentary Committee on Finance, Planning and Economic Development has dropped a proposal in which the Ministry of Finance had proposed new taxes on collective investments schemes such as unit trusts.
The proposal, which was contained in the Income Tax (Amendment) Bill, 2023, had proposed a 5 percent and 15 percent tax on profits, interest or dividends earned by members from their contributions to collective investment schemes, which would take effect on July 2023.
The Bill had proposed that the 5 percent tax would apply to members with a total contribution of less than Shs100m while 15 percent would apply to members with more than Shs100m in contributions.
The levy, the Bill had indicated would be considered as income tax, which would be withheld by a unit trust on the profits credited on a member’s account.
However, in its report the Committee on Finance, Planning and Economic Development, indicated that the proposed tax had been withdrawn from the Income Tax (Amendment) Bill, noting that income generated from such schemes would remain exempted.
“To maintain income for collective investment schemes as exempted from tax in order to encourage saving and investment culture,” the report reads in part.
Data from Capital Markets Authority indicates that Uganda has 32,998 investor accounts under collective investments schemes, which are managed by five licensed managers, among which include, UAP-Old Mutual, ICEA Lion, Britam, Xeno Technologies and Sanlam Investments.
The five hold north of Shs1.15 trillion in assets under management.
Collective investment schemes are part of a pool of saving measures that support members to benefit from having their savings managed by professionals, while diversifying risk, lowering transaction costs, and widening access to a variety of security investments at relatively manageable rates.
Dr Keefa Kiwanuka, the Finance, Planning and Economic Development Committee chairperson, Wednesday indicated that apart from levies on collective investment schemes, the committee had also withdrawn the capital gains tax, which had also been proposed under the same Bill.
The two taxes had been planned for the 2023/24 financial years due to start in July.
Capital gains tax is charged on profits generated from the sell or disposal of an asset that has increased in value.
Mr Nathan Nandala Mafabi, who was part of the three committee members that wrote a minority report, said Wednesday the proposal to introduce capital gains tax was going to restrict business income gains that arise from cancellation or satisfaction of business debt.
“Thus, capital gains derived from business assets would not be part of business income. Ideally, this was going to ring fence capital gains as a separate income that would be taxed separately,” he said.
