JOSHUA KATO: Finish Strong: Tax Planning Essentials for Ugandan Business Owners

As the end of the year approaches, small business owners in Uganda should take the opportunity to review their tax situation and ensure they are well-prepared for the upcoming tax season. Proper tax planning can help businesses avoid penalties, reduce liabilities, and set the stage for financial success in 2025. Here are 10 essential tax tips to guide you as you wrap up 2024:

1. Organize Your Tax Documents Early
Getting your financial house in order is crucial as tax season approaches. Gather all your receipts, invoices, and bookkeeping files, and organize them neatly. By ensuring that all your financial records are complete and up to date, you’ll avoid the stress of scrambling for documents when it’s time to file taxes. You should also make sure that your accounting software is updated and reflects all transactions accurately.

2. Check Your Estimated Tax Payments
In Uganda, small business owners are often required to make quarterly tax payments. If you haven’t made any adjustments throughout the year, now is the time to review your total income and expenses. The last estimated payment for 2024 is due on January 15, 2025. Make sure your estimated payments are sufficient to avoid penalties, but also not overpaid to free up cash flow for other end-of-year needs.

3. Maximize Your Deductions
Before the end of the year, look for ways to maximize your tax deductions. Business expenses like equipment purchases, office supplies, and even travel expenses can often be deducted, lowering your taxable income. Keep in mind that these deductions must be well-documented and necessary for the operation of your business. Make strategic purchases before December 31 to take advantage of potential savings.

4. Review Your PAYE and NSSF Contributions
If your business employs workers, it’s essential to ensure compliance with Pay As You Earn (PAYE) tax obligations and National Social Security Fund (NSSF) contributions. Accurate and timely submissions are crucial to avoid penalties from the Uganda Revenue Authority (URA) and protect your employees’ benefits. Review your payroll records for any discrepancies and ensure all payments are up to date.

5. Clear Outstanding Debts
Settle any outstanding debts or liabilities your business may have. Paying off vendors, suppliers, and even loans helps maintain a clear financial record and improves your business’s creditworthiness. Additionally, cleared liabilities may impact your overall tax calculation, especially when it comes to interest payments and deductions.

6. Embrace the government’s 2024/2025 Tax Amnesty Opportunity
Under the Tax Procedures Code (Amendment) Act, 2024, Section 40E provides for the waiver of interest and penalties on tax liabilities outstanding as of 30 June 2023. To benefit from this amnesty, taxpayers must meet one of the following conditions:
Full Waiver: All interest and penalties will be waived if the taxpayer pays the entire principal tax outstanding by 31 December 2024.
Pro-rata Waiver: A portion of the interest and penalties will be waived proportionally if the taxpayer pays part of the principal tax by 31 December 2024.
This amnesty is designed to encourage taxpayers to settle their principal tax obligations by the end of 2024, providing them with financial relief while boosting compliance.

7. Prepare for the Holiday Rush
For businesses that experience increased demand during the holiday season, be prepared to manage additional income and expenses. You might need to hire temporary staff, increase your inventory, or invest in marketing. Proper accounting for these transactions is vital, as any additional revenue and expenses will impact your year-end tax liability.

8. Plan Ahead for Next Year
Tax planning isn’t just about looking back—it’s also about preparing for the future. Begin drafting your business plan for 2025, including expected income, expenses, and tax obligations. Accurate financial projections help you anticipate cash flow needs, equipment purchases, and potential tax liabilities for the next fiscal year. Preparing for potential tax increases or new obligations will give your business a strong start in 2025.

9. Utilize Tax Reliefs and Incentives
Uganda offers various tax reliefs and incentives for small businesses, particularly those involved in manufacturing, agriculture, and exports. Familiarize yourself with the current tax incentives available in your industry. Leveraging these tax breaks can reduce your tax burden significantly, allowing you to reinvest those savings back into your business.

10. Consult with a Tax Professional
Finally, if you’re unsure about any part of your tax planning, it’s always a good idea to consult a tax professional. They can help you identify any overlooked deductions or potential issues with your filings. A tax expert can also assist with preparing for potential audits and help you stay in compliance with Uganda’s tax laws. Professional advice can ensure that your business stays tax-efficient while minimizing risks.

By following these 10 tax tips, small business owners in Uganda can ensure that they are well-prepared for the upcoming tax season and positioned for financial success in 2025. Being proactive with your tax planning will not only save you money but also reduce stress and improve your business’s financial health as the new year approaches.

The writer is a Chartered Accountant and a certified Tax Advisor