WITHHOLDING TAX ON BUSINESS ASSETS
Buying land, or a business in Uganda? You May Have to Withhold 6% Tax
If you have bought land, a building, or a business in Uganda, you may owe URA a tax you didn’t know about. URA has started writing to buyers about it, so it’s worth understanding before it reaches you.
What is the rule?
Section 130(2) of the Income Tax Act (Cap 338) says that a resident person who buys a business or a business asset must withhold 6% of the gross payment and pay it to URA. This is called withholding tax (WHT).
In practice, the buyer pays the seller the purchase price minus 6% and sends that 6% to URA on the seller’s behalf. It works as an advance payment of the seller’s tax on the sale.
Example: You buy an asset for UGX 50,000,000. You must withhold UGX 3,000,000 and pay it to URA. The seller receives UGX 47,000,000.
What counts as a “business asset”?
The Act defines a business asset as one that is used or held ready for use in a business. This includes assets held for sale in a business and assets of a partnership or company.
This is where many buyers get caught. Land is a business asset if the seller was using it in a business, such as commercial farming, rental property, or property development, even if you plan to use it privately. Land that was a family home or not used in any business may fall outside the rule, but the question depends on the facts, and URA will look at them closely.
When must you pay?
The tax is due within 15 days after the end of the month in which the payment was made. If you pay for a property in September, the deadline is 15 October.
How does URA find out?
URA gets information from stamp duty records. If you register a property transfer and no matching WHT payment appears, you may receive a compliance letter. These letters can also question whether your declared income supports the purchase and invite you to a review meeting with documents such as:
the signed sale agreement
bank statements
proof of WHT payment
Under the Tax Procedures Code Act, documents you fail to provide when requested may not be accepted later at objection or dispute resolution. If you don’t respond, URA can raise an assessment and enforce recovery.
What should buyers do?
Before you buy, ask whether the seller was using the property in a business, and get this in writing if you can.
Put tax in the sale agreement. Say who bears the WHT, and deduct it from the price at the time of payment.
Pay and file on time. Late payment can bring interest and penalties.
Keep your records. Keep the agreement, proof of payment, and evidence of where your money came from.
Respond to URA letters promptly, and bring all the documents they ask for.
Get advice from a tax practitioner if you’re unsure whether the rule applies to your purchase.
The bottom line
A land or business purchase involves more than the price and the stamp duty. Check whether withholding tax applies, deduct and pay it on time, and keep your paperwork in order.
This article is general information, not legal or tax advice. Tax rules change, so confirm the current position with URA or a qualified adviser.
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