The Value Added Tax Amendment Bill 2024 does not impose VAT on employees earning more than 10m shillings in Uganda

Over taxation in Uganda

Media houses have raised a storm of criticism and uproar amongst Ugandans by interpreting a provision in the Value Added Tax Amendment Bill of 2024 to mean that employees earning more than ten million shillings will be charged VAT of 18 percent in addition to Paye of 40 percent. The provision at the centre of the controversy provides that Section 18 of the principal Act is amended by inserting immediately
after subsection (9) the following—

“(10) The supply of goods or services by an employer who is a taxable person to an employee, for no consideration shall be regarded as the supply of goods or services for consideration as part of the person’s business activities.”

The journalists might be forgiven for being ill prepared to interpret statutes but leading with a headline that falsely distorts the truth and causes such public outcry is at best irresponsible. The new section applies to a supply of goods or services to an employee for no consideration and therefore can not refer to salary or wages of an employee because firstly salary or wages are not goods or services and even if it were it is provided in consideration for the work and services provided by the employee to the employer. Therefore, the salary or wages is not paid for no consideration and is incapable of being covered by the proposed section.

The new section targets situations where an employer supplies goods or services to the employee without charging for the goods or services. For example a manufacturer of tiles might supply tiles to its employees at zero cost or MTN Uganda give float or airtime or data to it’s employees at zero cost or a bank might offer loans to its employees at zero interest. All these are supplies of goods or services without consideration and the new section imposes VAT on them as if they were provided at the market price.

Taxation statutes are interpreted strictly and any ambiguity must be resolved in favour of the tax payer. There is no reasonable interpretation of the proposed amendment that imposes VAT on the salary of employees. New vision and the Daily monitor should apologize to the nation for even suggesting such a result to Parliament or URA. Maybe in future they could be crazy enough to actually legislate such a misguided outcome.

Read More


Every action you take against corruption however small is a big step towards eradicating corruption in Uganda. So do something today to show that you are against corruption and impunity in your community

You may also like...