Ugandan firms face tax penalties due to poor record-keeping, advisors say

Tax advisors in Uganda have cautioned that companies failing to keep accurate financial records and submit returns on schedule face significant financial exposure. Nile Post reported that these firms risk facing large tax bills, accumulating fines, and liquidity issues that can hinder operations and contract acquisition. The warnings focus on the challenges of navigating the country's complex tax environment.

Daisy Namayanjja Sanyu, head of Bennett Advisory, explained that Uganda’s self-assessment framework requires taxpayers to declare their own income and liabilities. She noted that firms unable to substantiate their earnings and deductions may struggle to prove their true profit levels during audits by the Uganda Revenue Authority. Namayanjja used a hypothetical example of a company earning one billion shillings but lacking expense documentation. At the standard 30 percent corporate rate, treating the full amount as taxable income would create a 300 million shilling liability, potentially higher than the actual obligation if deductions were properly evidenced.

AllAfrica noted that Namayanjja stressed the need for rigorous bookkeeping, including invoices and payment logs, to contest inaccurate assessments. She warned that delaying filings for years can create severe strain, as firms must settle old debts alongside current obligations. Confusion often arises because different authority units manage assessments, objections, and debt collection, leading some owners to view multiple notices as excessive taxation.

A second practitioner, cited in the reports, pointed to a lack of taxpayer knowledge as a primary obstacle, especially in the informal sector. This expert urged the authority to enhance educational efforts and suggested owners consult professionals. Namayanjja suggested that over 90 percent of local firms are not fully compliant, a figure she did not link to a specific study. She noted that some entrepreneurs wrongly believe small firms are exempt or that hiring accountants is too costly.

To address these gaps, Namayanjja mentioned a workshop planned for November 19 at the Sheraton Hotel in Kampala. The session aims to help owners understand their duties and spot compliance risks. Advisors generally recommend maintaining precise records and meeting deadlines to prevent avoidable disputes and financial instability.