Countries are continually strengthening their joint efforts globally to combat money laundering, tax evasion and illicit monetary flows by promoting transparency and exchange of financial information between each other through their respective tax authorities. Uganda is part of this initiative and has introduced specific legislation and policies that further enable the operationalisation and implementation of these objectives within Uganda.
From 1 July 2023, the Convention on Mutual Administrative Assistance in Tax Matters (Implementation) Act, Cap. 335 (the Act) came into effect in Uganda. The Act operationalises two treaties to which Uganda is a signatory, the Convention on Mutual Administrative Assistance on Tax Matters (CMAA) and the Multilateral Competent Authority Agreement on Automatic Exchange of Information (MCAA).
We have summarised below what the law means to Financial Institutions and how it affects your operations in the global fight against money laundering and tax evasion.
Who does this law apply to and what does it mean?
The law applies to Reporting Financial Institutions (RFIs) such as banks, MDI (Tier IV &III) and insurance companies (excluding providers of non-life insurance). However, it does not apply to companies listed on the stock exchange, governments, central banks and some international organisations and financial institutions.
The law creates a reporting obligation for the RFIs to submit financial information of non-residents (both individuals and entities) to URA. URA is then required to submit this information to the tax Authorities of their respective countries of residence. Consequently, URA is also expected to receive similar financial information of Ugandan residents from tax Authorities of other countries, wherever applicable.
What are the key requirements under the Act
To ensure compliance, the Act adopted the Common Reporting Standard (CRS) to provide guidance on several aspects regarding the automatic exchange of information including which information is to be shared with the URA, the required due diligence processes, among others.
RFIs are firstly required to carry out specified due diligence processes on new, existing and closed customer accounts held between 1 January 2024 to 31 December 2024 to determine which accounts are held by qualifying non-residents (reportable accounts) and their respective details.
Thereafter, RFIs must file annual returns with the URA by 31 May of every year commencing this year (2025) disclosing the reportable accounts identified during that period and their corresponding details. Where no reportable accounts are held by the RFI in a given year, then a NIL return will be filed.
Accordingly, there is a need for banks/MDIs/insurance companies to promptly review their customer bank and custodial accounts to determine whether these are reportable accounts as defined in the law, to ensure compliance with their reporting obligations under the Act.
RFIs must also continuously update customers’ information and ensure that accurate information is obtained for existing, new and exiting customers through the required KYC procedures and to continuously track transactions across reportable accounts.
Our experts are available to discuss further. Kindly let us know your availability for a meeting to discuss the above with you in more detail and the recent developments by the URA ahead of the filing deadline.
