TYCOON SUDHIR PETITIONS FINANCE MINISTER CHALLENGING PROPOSED TAX AMENDMENTS BILL

By our reporter
www.mknewslink.com
In Kampala –

The management of Meera Investments Limited has said some of clauses in the proposed Tax Amendments Bill, 2020 do not favour the growth of the Real Estate business in Uganda.
The Ministry of Finance, Planning and Economic Development has tabled before Parliament five bills, which include; Excise Duty Amendment bill 2020, Value Added Tax bill 2020, Income Tax Amendment bill 2020, Stamp Duty Amendment Bill 2020 and Appropriation Bill 2020.
But Meera Investments Ltd, of which property mogul Sudhir Ruparelia is a shareholder, has written to the Finance Minister, stating that some of the proposed taxes in the bills may lead to double taxation hence lead to the collapse of some of their businesses.
“During the current lockdown, we were made aware of the tabling of the 2020 Tax Amendments Bill. We have had consultations with our tax lawyer, Kampala Associated Advocates, and we write to inform you that some of the bills will have an adverse effect on many of our businesses and we seek your indulgence to prevent adversity,” the petition dated April 2 reads in part.
One of the bills which Meera Investments is contesting is the VAT Amendment Bill 2020, which has proposed some changes to the current section 28. The proposed amendment is that an “owner of more than one commercial building shall account for the tax on each building separately and shall not claim input of incomplete buildings on the tax collected from complete buildings.”
However, Meera Investments Ltd says many people in the real estate run their businesses through companies and “therefore, one company will have maybe five to fifty. Under the proposed amendment, it would mean that for each of the fifty buildings I must account for the tax separately.”
“It would mean that if I have ten acres on Plot 41 Kampala Road and on them I have ten buildings, I have to account for each building separately. This means that I must now demarcate between buildings one to ten and each must have its own tax identification number (TIN). The reason that each must have its own tax identification number (TIN) is that I must account for the tax separately. The effect of this is that at the end of the day, I shall have one company with ten to fifty TIN numbers. Worse still, this also means that I shall have one Company with ten to fifty different invoices for the same project. This makes accounting difficult and will create confusion among real estate companies. The company would also have to obtain various tax clearance certificates for each of the buildings. This would be outrageous because one company would have over 50 tax clearance certificates,” the petition states.
Meera Investments adds that the proposed amendment against claiming tax credits for an incomplete building is also disastrous for many of our companies.
“For instance, we all know that in construction, about 98% of the costs are expenses due to VAT. If I start the construction of a building and am not able to complete it, it would mean that for the time I can’t complete the building, my input is unfairly withheld (not forgetting when you refund it shall not come with interest). This in effect means that for a businessman, if a building is worth 1billion at incomplete stage, the real estate company cannot claim any input until the project is completed,” the company states.
The company states that this in effect means about 180 million of the investors’ money is tied up and cannot be used until the project is completed. If the property is sold in the incomplete state, the company would incur a loss since the input is not carried by the property, but the company.
“Practically, when constructing a property and don’t claim the VAT, it becomes a cost to the business. The net effect means that the cost of the property would have to increase by 18%. The cost would then be transferred to the tenants of the property. This would in turn increase the cost of renting by 18%. It also means that the cost of Investment in Uganda would go up by 18% since the money is not claimable until the property is complete,” the company states.
Meera Investments Ltd is also opposed to the clauses in the Income Tax Amendment Bill, particularly section 5(3) (a) of the Bill which proposes that ‘rental income is accounted for separately for each of the buildings.’

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