Most salons in Uganda fall under what URA calls the small business or presumptive tax regime. The rules are simpler than ordinary income tax, but the detail that most owners miss is that the bill depends on whether you keep records. This post explains the bands from URA's own technical note and sets out where VAT begins.
Who is a small business for tax purposes
URA's technical note on presumptive tax data describes the regime as applying to "businesses, which can be individuals, sole proprietors, and companies, with turnover less or equal to UGX150 million". The note adds that "the presumptive tax regime excludes professionals", giving dental, medical, engineering, accounting and architectural practices as examples. A salon is not a professional practice in that sense, so a salon with annual sales up to UGX 150 million is in the regime.
Turnover means sales, not profit. If your chairs take UGX 8 million a month, your turnover is UGX 96 million a year, whatever the rent and products cost.
The bands since July 2020
The note explains that before July 2020 the rate depended on turnover, location and business type, and that after July 2020 it is based on turnover alone, with two columns: a flat amount for taxpayers without records, and a lower calculation for those with records. The table URA gives for 2020/21 onwards, in UGX, is:
| Annual turnover | Without records | With records |
|---|---|---|
| 0 to 10 million | 0 | 0% |
| 10 to 30 million | 80,000 | 0.4% of turnover above 10 million |
| 30 to 50 million | 200,000 | 80,000 plus 0.5% of turnover above 30 million |
| 50 to 80 million | 400,000 | 180,000 plus 0.6% of turnover above 50 million |
| 80 to 150 million | 900,000 | 360,000 plus 0.7% of turnover above 80 million |
The note says "the upper value of a tax bracket is included in the given bracket", so a salon turning over exactly UGX 50 million is in the 30 to 50 million band.
Why records cut the bill
Take the salon above at UGX 96 million a year. Without records, the tax is the flat UGX 900,000. With records, it is 360,000 plus 0.7% of 16 million, which is 112,000, for a total of UGX 472,000. The difference is UGX 428,000 for the year, and the only thing earned it was a sales record URA will accept.
The pattern holds in every band: the "with records" figure is lower unless you sit right at the top of a band. Records here means a reliable daily record of sales, kept through the year, not a figure reconstructed in June.
A final tax, with two credits
URA's note states that "the presumptive tax is a final tax, and there are no deductions or tax credits allowed, except the withholding tax credit and provisional tax paid." That cuts both ways. You cannot deduct rent, products or wages, which is why the rates are so low; but if a corporate client withheld tax when paying you for an event, that credit still counts.
When VAT enters the picture
VAT is separate from presumptive tax and starts at a higher level. URA's VAT page says registration is required where turnover from taxable supplies "exceeds, or is expected to exceed UGX 75,000,000 in any period of three consecutive calendar months", which it describes as one quarter of "the annual registration threshold of UGX 300,000,000". Taxable supplies include services, and the standard rate is 18%. Once registered, a business must "charge and collect VAT on taxable supplies (sales) by issuing a tax invoice for goods and services sold", register and use EFRIS to issue e-invoices, and "file a VAT return within 15 days after the end of the month".
A salon growing past UGX 150 million a year therefore leaves the presumptive regime first, and would hit the VAT threshold later at UGX 300 million. Watch the quarterly figure too: a strong wedding season can push three months past UGX 75 million even when the year is below the annual line.
Filing dates and penalties
URA's returns page lists monthly returns such as VAT and PAYE as due on "the 15th day of the month following the return period", and annual income tax returns as due "within six (6) months from the end of the financial period", which for a June year end is 31 December. The late filing penalty it gives is "Ugx. 200,000 or 2% of the tax liability for the period whichever is higher", and the page warns that not filing lets URA "estimate the tax liability for the period through an administrative assessment".
What to do this quarter
- Write down every service sold, every day, in one place, with the payment method.
- Total the year to date each month so you know which band you are heading for.
- Keep withholding tax certificates from corporate clients; they are a credit.
- If three months of sales approach UGX 75 million, talk to URA about VAT before the quarter closes.
- Put the 15th of each month and 31 December in the diary.
A salon that can show its sales pays less and argues less.
Sources
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