In an effort to raise more domestic revenue, the Government of Uganda is proposing amendments to the Stamp Duty Act, 2014. The amendments will provide for the imposition of stamp duty on instruments used in Islamic financial transactions.
The proposed Stamp Duty (Amendment) Bill 2018 also proposes stamp duty exemptions on instruments executed in land acquisitions for purposes of strategic investment projects and those for financing of strategic investment projects.
Stamp duty is a tax paid on documents such as marriage licenses, cheques, land and property transactions. It is payable on “every document that confers any right or liability upon being created, transferred, limited, extended, extinguished or recorded.”
Documents of no monetary value are currently charged Shs10,000 in stamp duty. This was increased from Shs5,000 in FY2016/17. While documents with monetary value are charged 1.5% of the value, up from 1%.
Before the increments in FY2016/17, there had been no charges since 2002.
The new amendments propose a further Shs5,000 increment on instruments that attract Shs10,000. But the committee worried that the increase to Shs15,000 might discourage people from registering and thus promote informal transactions. The government has been trying to find incentives for formalisation of business in the country in order to collect more revenue.
In the report of the parliament finance committee, committee members rejected the proposal to impose stamp duty on instruments used in Islamic financial transaction because “no information was provided to the Committee to support this proposal.”
The bill proposes to impose the tax by a statutory instrument issued by the minister stating which instruments will be liable to pay stamp duty.
The committee recommended that the instruments liable to pay the tax be passed by Parliament as a schedule to the Bill.
Another sticky issue was the exemption to strategic investment projects. The beneficiaries would include developers of industrial parks and free zones with investment capital of at least $100m; operators in the industrial parks and free zones with investment capital of $15m. But the committee pointed out the investors in the industrial parks and free zones already receive land as an investment incentive.
Other beneficiaries include investors putting up a hotel or tourist facility with investment capital of $5m and those putting up a hospital with the investment capital of $5m.
“This proposal is intended to encourage investment in capital intensive projects by exempting payment of stamp duty at the commencement of the project. This proposal will create a discrepancy between investors especially those investing in hospitals, hotels and tourist facilities,” the committee report notes.
The committee recommended that investment incentives be transferred to the investment code.
They also recommended that all investors in hospitals, hotel and tourism should not pay stamp duty on all their instruments.