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URA

TAXATION OF INDIVIDUAL
RENTAL INCOME
Vol. 2 Issue 1 F/Y: 2012/13
DEFINITION
(A) Rental Income
Income earned by a person from letting out property on commercial
terms.

(B) Landlord or Landlady


This is the person who lets out property to another person (the Tenant)
for a consideration. A landlord may take the form of:
x An individual e.g Mathew Etima
x A corporate body e.g Properties (U) Ltd.
x Government e.g Luwero District Administration
x An institution e.g Makerere University, UWESO, etc

2 Taxation of Individual Rental Income


(C) Tenant
This is the person who occupies another person’s property on
commercial terms and pays a consideration.

INDIVIDUAL RENTAL INCOME


Taxation of individual rental income is separately provided for under
the Income Tax Act, 1997. This is rent earned by individuals. Company
rental income is taxed under the ordinary income tax system together
with other corporate income.

The law provides that individual rental income is segregated and taxed
separately as though it were the only source of income for the taxpayer.

Taxation of Individual Rental Income 3


HOW IS RENTAL INCOME COMPUTED

Important steps
Step I: Determine the total annual gross rents from all sources of the
individual; say R;
Step II: Deduct 20 percent allowance for costs i.e R – 20% R = 80%R
Step III: Deduct threshold (Shs.2, 820,000) i.e 80%R – 2,820,000
Step IV: Determine income tax at 20% i.e 20% (80%R – 2,820,000).

Illustrations: (3 scenarios)
Scenario 1: Gross rents not exceeding Shs. 2,820,000 per annum: Tax is
NIL since gross rent does not exceed threshold.

Scenario 2: Gross rents say, Shs. 3,000,000 per annum;


Allow 20% costs, therefore 3,000,000 – 600,000
Net Rents = 2,400,000 since net rent DOES NOT exceed threshold, tax
is NIL.

4 Taxation of Individual Rental Income


Scenario 3: Gross rents say, Shs.4, 000,000 per annum.
Step I:
Allow 20% Costs
4,000,000 – (20 x 4,000,000)
100
= 4,000,000 – 800,000
Net rents = 3,200,000.
Step II:
Allow Threshold:
3,200,000 – 2,820,000
Net chargeable rent = 380,000 (in excess of threshold)

Step III:
Calculate tax at 20%
20 x 380,000
100
Rental Income Tax = 76,000

Taxation of Individual Rental Income 5


NB: An individual whose Gross or Net
rent per annum Does Not Exceed the
threshold pays NIL Rental Income Tax.

TAXPAYER’S OBLIGATION
x Complete a return of Rental Income
for a year of income with supporting
agreements where available or rental
receipts issued to tenants(s) during
the year.

x Declare ALL your sources of rental


income in FULL for a given year of
income. The year of income is from
1st July to 30th June.

x File provisional returns of rental


income and pay in four installments
ie. September, December, March and
June ( Year of income for rental ends
on 30th June).

x Submit (furnish) final return to


Uganda Revenue Authority, within
six months after the end of the
relevant year of income. i.e not later
than 31st December.

x Pay the rental income tax by the


appropriate due date.

6 Taxation of Individual Rental Income


ENTITLEMENT TO TAX CREDIT
The taxpayer is entitled to a tax credit in respect of any rental tax paid
provisionally or in advance during the year of Income. This however
can only be offset against rental tax liability since the source is taxed
separately.

Taxation of Individual Rental Income 7


URA

A Publication
of
Uganda Revenue Authority

P.O. Box 7279 Kampala, Uganda


Telephone: (0417)442 054, 440 000, 443 150
Fax (0414)334 419 Email: info@ura.uo.ug

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URA TOLL FREE HELPLINE: 0800 117 000

DISCLAIMER:

This Information is strictly for purposes of guidance to our clientele and is subject to change on amendment
of tax legislations & any other regulations that govern tax administration.

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