Section 17 of the income tax act cap
340 defines the gross income of a person for a year of income as the total
amount of – Business income; Employment income; and Property income,
- Included, means they are part of the
gross income and are hence taxable:
Excluded, means they are not part of the
gross income therefore not taxable
Included items;
(1) Compensation for services in whatever
form paid, including, but not limited to
fees, salaries, wages, commissions, and similar items; the designation
of this income item is immaterial, the employer and employee may call this item
salary or wage or field costs etc but is not significant. The item will remain
classified as compensation.
(2) Gross income derived from the conduct
of trade or business or the exercise of a profession; Gross income under this
item means Gross Sales less Cost of Sales (for seller of goods) or Gross
Receipts less Cost of Service (for seller of service). Of course, after
considering the discounts, allowances or returns.
(3) Gains derived from dealings in
property; the gains that form part of the gross income are those earned from
the sale or disposition of assets.
(4) Interests; section 18
(1)(f) those interests that were
derived by a person in respect of trade receivables or by a person engaged in
the business of banking or money lending
(5) Rents; - Of course, the
rents form part of the gross income. In this case, it should be gross rentals
less cost, e.g. depreciation, salaries, maintenance, etc. derived by a person whose business
is wholly or mainly the holding or letting of property.
(6) Royalties; (7) Dividends; (8)
Annuities; (9) Prizes and winnings; (10) Pensions;
The above five items are tricky
though and you should be analytical and very careful. The status of the
taxpayer should be taken into consideration. Section 17 (2) (1) the gross income of a resident
person includes income derived from all geographical sources; and the gross
income of a non-resident person includes only income derived from sources in
Uganda. “Short-term resident” means a resident individual, other than a citizen
of Uganda, present in Uganda for a period or periods not exceeding two years.
(11) Partner's distributive share from the
net income of the general professional partnership. Since the general
professional partnership (GPP) as a rule is exempt, the income of the GPP
distributed to the partners will be reported by such partners in their separate
and distinct capacity. The share therefore of the partners is the Item 11 to be
reported in the gross income of each partner. Thus, the pertinent items of
gross income when earned by an individual shall be reported and shall form part of their
income.
The income tax act cap 340 distinguishes
the source of the income. The definition did simply provide for Business income, Employment income; and Property income,
So this means that the income proceeding
from illegal sources like illegal gambling, bribes, etc is not taxable and thus
if you are one earning through illegal means, you do not need to report your
income in any Income Tax Return. There are better ways you will be dealt with.
Excluded items;
SECTION 21 (1) of the income tax act cap
340- excluded items from gross income
(1) The income of any organization or person entitled to
privileges under the Diplomatic Privileges Act [Act No.2 of 1965] to the extent
provided in the regulations and orders made under that Act;
(2) the income of a listed institution; “listed institution”
means an institution listed in the First Schedule to the income tax act cap 340
(3) the official employment income derived by a person in the
public service of the government of a foreign country provided – the person is either a non-resident person or
is a resident individual solely by reason of performing such service; the income is payable from the public funds of
that country; and the income is subject
to tax in that country;
(4) any allowance
payable outside Uganda to a person working in a Ugandan foreign mission;
(5) the income of any
local authority;
(6) the income of an
exempt organization, other than – property income, except rent received by an
exempt organization in respect of immovable property and the rent is used by
the lesser exclusively for the activities of the organization and business
income that is not related to the function constituting the basis for the organization’s
existence;
(7) any education grant which the Commissioner is satisfied
has been made bona fide to enable or assist the recipient to study at a recognized
educational or research institution;
(8) any amount derived by way of alimony or
allowance under any judicial order or written agreement of separation;
(9) interest payable on
Treasury Bills or Bank of Uganda Bills;
(10)
the value of any property acquired by
gift, bequest, devise, or inheritance that is not included in business,
employment, or property income;
(11)
any capital gain that is not included in
business income;
(12)
employment income derived by an
individual to the extent provided for in a technical assistance agreement where
– the individual is a non-resident or a resident solely for the purpose of
performing duties under the agreement; and the Minister has concurred in
writing with the tax provisions in the agreement;
(13)
foreign-source income derived by – a
short-term resident of Uganda
(14)
a pension;
(15)
a lump sum payment made by a resident
retirement fund to a member of the fund or a dependant of a member of the fund;
(16)
the proceeds of a life insurance
policy paid by a person carrying on a life insurance business; or
(17)
The official employment income of a person
employed in the armed forces of Uganda, the Uganda Police Force, or the Uganda
Prisons Service, other than a person employed in a civil capacity.
(18)
The
income of the Government of the Republic of Uganda and the Government of any
other country.
(19)
The income of the Bank of Uganda.
(20)
income of a collective investment scheme to
the extent of which the income is distributed to participants in the collective
investment scheme;
(21)
Interest earned by a financial institution on
a loan granted to any person for the purpose of farming, forestry, fish
farming, bee keeping, animal and poultry husbandry or similar operations.
(22)
Emoluments payable to employees of the East
African Development Bank
(23)
The income of an Investor Compensation Fund
established under section 81 of the Capital Markets Act.
(24)
Miscellaneous Items.
(a) Gains from the Sale of Bonds,
Debentures or other Certificate of Indebtedness. - Gains realized from the same
or exchange or retirement of bonds, debentures or other certificate of
indebtedness with a maturity of more than five (5) years.
(b) Gains from Redemption of Shares in
Mutual Fund. - Gains realized by the investor upon redemption of shares of
stock in a mutual fund company
