Avoidable Tax Mistakes: Ensuring smooth business operations & positive URA relations

By being aware of these pitfalls and taking proactive measures to avoid them, businesses can safeguard their standing and foster a harmonious association with the tax authorities, thus promoting smoother operations and growth opportunities.

Inadequate Record-Keeping

Maintaining accurate and up-to-date financial records forms one of the primary foundations of proper tax compliance. Individuals and companies that fail to keep organised records always face challenges when preparing tax returns, or in providing evidence during tax audits. This is the biggest mistake that has ranked high in bringing discrepancies and disputes with the URA, damaging the company's reputation and hindering business operations.

2. Ignorance of changes in the Tax Laws

The Ugandan tax regulations have been always subjected to frequent changes in every fiscal year. Your company must stay abreast of these updates to remain compliant. Ignoring these new tax laws may result in unplanned violations and thereby exposing your company to penalties and audits. Regularly consult with your tax experts on how to navigate these changes effectively.

Ensure Tax Compliance to Avoid Penalties and Audits iStock

3. Non-Compliance with Tax Deadlines

Your obligation doesn’t only stop at filing returns and making payments thereof. It is extended to timely tax filings and payments. This is what demonstrates your company's commitment to fulfilling its civic duties responsibly.

Late or non-payment of taxes and failure to file on time are common mistakes that so many individuals and small companies do. Consistent non-compliance is a sign of negligence and leads to increased scrutiny from the URA and strained relations.

4. Misreporting Incomes and Expenses

Inflating expenses to reduce the chargeable income is a grave mistake as well as misreporting income. These when caught lead to severe consequences.

Excessive tax planning is tax evasion and does not only damage your relationship with the URA but also undermines your business trust of customers, suppliers, and investors. The URA has stringent measures to detect such discrepancies. Companies that have fallen into this trap have had heavy fines and other individuals have faced criminal charges. Be alert!

5. Improper treatment of VAT and Withholding taxes

VAT and withholding taxes are critical components of the tax system. Incorrect VAT calculations, failure to remit withheld taxes, or non-registration for VAT purposes can all result into disputes and investigations.

6. Inadequate Transfer Pricing Compliance

For MNEs or companies with cross-border transactions within a group, transfer pricing regulations are crucial and this is always a risk area that the URA targets to ensure and confirm whether transactions are in fulfillment of the Arm’s length principle.

The URA review the Transfer pricing policy in place and sees whether it is fairly organised. Failing to comply with these rules can attract URA audits and penalties, impacting both tax liabilities and international business relationships.

7. Ignoring Tax Incentives and Exemptions

Uganda, like any other country, offers tax incentives and exemptions to promote specific industries or investments. Find out what opportunities are available for your company so that you don’t miss out on potential cost savings and competitive advantages, while also risking non-compliance with specific regulatory requirements.

Fostering a conducive business environment relies heavily on your company's ability to adhere to tax regulations accurately and responsibly.