Uganda Budget

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PwC Budget Bulletin

We share insights of Uganda's FY 16/17 National Budget in the PwC Budget analysis bulletin. This analyses the performance of Uganda's economy in the FY15/16, economic outlook for FY16/17 and beyond. We also highlight the other EAC countries'...

MPs allowances are tax exempt

As an employee you are entitled to tax-free reimbursement for business travel costs that you incur in the course of performing your job.  

Business travel includes journeys you have to make to carry out your work. These include trips such as travel from your office or place of work to visit your customers using your own car. Business journeys also include travel directly to or from your home to visit a client or customer.

Most employers whose staff use their cars on company business, have a policy of reimbursing their staff for the costs they incur in using their private vehicles on the firm’s business. This reimbursement is usually in form of either a business mileage allowance or travel allowance. I have seen this policy being applied by all employers such as professional services firms like ourselves, private companies, state corporations, non-government organizations as well as government institutions. 

According to the tax laws of Uganda, any allowance given by the employer to his or her employee, for a cost which the employee has actually incurred, or is likely to incur on travel in the course of performing his or her duties of employment, is exempt from income tax.

Likewise any allowance given by an employer to his or her employees for costs the employee has incurred or is likely to incur in respect of accommodation, meals and refreshments while undertaking travel in the course of performing his or her employment is also exempt from income tax.

In order for these allowances or reimbursements to be exempt from tax, they must not exceed the actual cost incurred or likely to be incurred by the employee on travel, accommodation, meals and refreshments while travelling on the company’s business. For those of you who are interested in the exact provisions of the law relating to this exemption, look at Section 19, subsection 2 (d) of the Income Tax Act of Uganda.

It is very important to understand this concept and principle of the tax law, when debating the merits and de merits of Parliament’s proposed amendment to the Income Tax Act to exempt honorable members from paying tax on their emoluments. My understanding is that a Member of Parliament’s consolidated salary is about Shs 20 million a month. This is made up of a basic salary of Shs 2.6 million a month, and the balance of the Shs 17.4 million comprises of different kinds of allowances that MPs are entitled to. These allowances include subsistence allowance, town running allowance, medical allowance, and committee sitting allowances, plenary sitting allowances, constituency facilitation allowances and gratuity.

According to the tax law, as long as the mileage, subsistence and town running allowances paid to the MPs are for the purpose of compensating them for using their own private vehicles on Parliamentary business, these allowances are not supposed to be taxed. Likewise, if the subsistence allowances paid to the MPs are aimed at reimbursing them for the accommodation costs they incur when travelling on Parliamentary business, then these allowances are also exempt from tax. I know this may not seem fair, but that is the law.