In a move to enhance tax compliance among rental property owners, Uganda Revenue Authority (URA) has deployed the Rental Tax Compliance System (rTCS), a software application used to determine the highest priority individuals or corporations likely to be underpaying their rental income tax obligations.
Last year, government through the Ministry of Finance contracted RippleNami, an American technology company to develop the Rental Tax Compliance System that enables government integrate data to match real estate properties to their individual or corporate owners.
Through intricate data analysis and optimization, this technology integrates various data types from selected Ministries, Departments and Agencies (MDAs), matching properties in the Greater Kampala Metropolitan Area to their beneficial individual or corporate owners on the URA tax register.
According to URA, during the Rental Tax Compliance System pilot deployment period, the tax body identified 88 high-income, non-compliant landlords in Greater Kampala with 285 properties owned by them.
The non-compliant property owners included those with no tax identification numbers (TINs), those who claimed no rental income and also those who have not filed tax returns in the last five years. “
We estimate only 8% of landlords are in full tax compliance. This low level of compliance among landlords is unfair to other compliant taxpayers from other sectors of the economy. The trend also significantly reduces the much-needed revenue required to enable government services to the citizens. With the roll out of the Rental Tax Compliance System and this trend is set to change for the better,” said URA Commissioner General John Rujoki Musinguzi.
The tax body is also investigating each of the identified taxpayers by employing various analytics to prove occupancy for the last five years.
“URA also reminds other non-compliant landlords to take advantage of the Voluntary Disclosure programme before the Rental Tax Compliance System identifies them,” he said.
The Voluntary Disclosure programme provides an opportunity for taxpayers to voluntarily declare their outstanding tax obligations and pay the principle tax in exchange for a waiver of interest and penalties accruing thereto.
Officials from RippleNami, recently said government is capable of recouping $200million(approximately shs713billion) from rental income tax per year with the use of the new system.
“Right now, there is probably 10% of the rental income tax being collected. I would say it should be around $200milion(shs713billion)a year. That is a rough estimate from the 30million collected currently,” Connolly-LaBelle, the RippleNami Uganda chairperson said earlier this year.
“There has not been a lot of tax compliance because there has not been information. We are trying to make it simpler.”
Govt to get shs700bn from rental income tax every year- Experts