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LOCAL SERVICE TAX IN UGANDA;

What you need to know

A. Background self-employed artisans, businessmen and

businesswomen, and the assessment is to be fair,
The Local Service Tax was introduced by the Local equitable, and non-regressive:
Governments (Amendment) (No.2) ACT, of 2008
which allowed local governments to levy, collect However, the salaries of the following categories
and charge additional taxes in order to provide new of people are exempted from LST; Members of the
sources of revenue for local governments, and for Uganda Police Force, Members of the Uganda Prisons
related purposes. Service, Members of the Uganda People’s Defense
Forces, unemployed persons, and people unable to
The Local Service Tax (LST) is to be levied on the earn a minimum income to access basic necessities
wealth and income of the following categories of life), and Members of the Diplomatic Missions
of people; persons in gainful employment, Accredited to Uganda.
self‐employed and practicing professionals,
B. Where and how should one pay The businessmen and businesswomen shall pay the
tax at the time of paying for their annual trading
Local Service Taxes
and operational licenses at their respective local
Local service tax is to be levied on all persons governments
in gainful employment or on people who are
A person liable to pay local service tax shall register
practicing any profession or on business persons and
with the nearest tax office of a local government in
commercial farmers producing on a large scale.
the area where he or she resides. Local service tax
Every district or urban local council shall levy local shall be paid on the basis of an assessment and each
service tax on every person in gainful employment, local service taxpayer shall keep evidence of his or
practicing professionals, businesspersons, and her assessment.
commercial farmers
The threshold used to determine the amount of Local
The salaried employees shall pay the tax in four Service Tax payable will be the gross salary after
equal installments during the financial year while all deducting income tax in the form of Pay as You Earn
the other taxpayers will pay the tax at once. Salaried (PAYE).
employees can however choose to pay for the Local
According to the act residence” means
Service Tax at once.
continuous residence for at least six months in
The payment of the tax shall be completed within a city, municipality, town, district or other local
the first four months of the financial year for which it government, and continuity of residence which shall
was assessed. The financial year of income is from 1st be deemed not to have been broken by reason of
July to 30th June. absence of less than five weeks
This tax on salaried employees is collected by Note; According to the Local Service Act, and
the employer and remitted to the respective local guidelines for the implementation of the Local
governments and it is payable to the district, Service Tax, local service taxes should have been
municipality, or town council where the employee paid by the 15th day of November of each financial
liable to pay the tax resides during the period of year.
employment.

C. Please find below the rates in respect to the different tax payers;
i. Professionals

Professionals Monthly Income Earned Annual LST Payable

Doctors, Pharmacists, veterinary doctors, 1,000,000 onward 100,000
engineers, Accountants, auditors, Consultants,
lawyers, architects, artists, journalists, writers,
surveyors, planners, scientists, etc.
photographers, counselors, dramatists, actors, Exceeding 500,000 but not 50,000
sportspersons, programmers and any other exceeding 900,000
professional not motioned
ii. Persons in Gainful employment earning a salary and earning a monthly take-home

Amount of monthly income earned (in Shs) Rate of LST (in Shs) per year
Exceeding 100,000/= but not exceeding 200,000/= 5,000
Exceeding 200,000/= but not exceeding 300,000/= 10,000
Exceeding 300,000/= but not exceeding 400,000/= 20,000
Exceeding 400,000/= but not exceeding 500,000/= 30,000
Exceeding 500,000/= but not exceeding 600,000/= 40,000
Exceeding 600,000/= but not exceeding 700,000/= 60,000
Exceeding 700,000/= but not exceeding 800,000/= 70,000
Exceeding 800,000/= but not exceeding 900,000/= 80,000
Exceeding 900,000/= but not exceeding 1,000,000/= 90,000
Exceeding 1,000,000/= 100,000

iii. Businessmen/ Women

BUSINESS MONTHLY TURNOVER (IN SH) LST PER YEAR

500,000 but not exceeding 1,000,000/= 5,000/=
Exceeding 1,000,000/= but not exceeding 2,000,000/= 10.000/=
Exceeding 2,000,000/= but not exceeding 3,000,000/= 20,000/=
Exceeding 3,000,000/= but not exceeding 4,000,000/= 30,000/=
Exceeding 4,000,000/= but not exceeding 5,000,000/= 40,000/=
Exceeding 5,000,000/= but not exceeding 6,000,000/= 50,000/=
Exceeding 6,000,000/= but not exceeding 7,000,000/= 60,000/=
Exceeding 7,000,000/= but not exceeding 8,000,000/= 70,000/=
Exceeding 8,000,000/= but not exceeding 9,000,000/= 80,000/=
Exceeding 9,000,000/= but not exceeding 10,000,000/= 90,000/=
Exceeding 10,000,000/= 100,000/=

D. What are the consequences of late payment?

Where the local service tax payable or any part of it remains unpaid at the end of the first four months of the
financial year, there shall be a surcharge of 50 percent of the amount remaining unpaid OR
Subject to the law governing local service taxes, any person who without lawful excuse, the proof of which
shall lie on him or her, refuses, neglects, or fails to pay the tax to which he or she is liable, four months
from the date the tax is due, commits an offense and is liable on conviction to imprisonment for a term not
exceeding one month and a fine not exceeding double the amount of the tax due.
Please follow this link https://ecitie2.kcca.go.ug/portal/revenue-sources-local-service-tax/ and the thresholds
on which LST is taxable,
Should you need further guidance, please do not hesitate to contact us
Our Legal/Tax and Regulatory Compliance Team:

Stephen Tumwesigye Lynne Wells

Managing Partner Special Counsel
M: +256 (0) 774 334 908 M: +256 (0) 774 643 240
E: [email protected] E: [email protected]

Priscilla Busulwa Juliet Namirembe

Consultant – Senior Legal Associate Senior Tax Associate
M: +256 (0) 786 031 346 E: [email protected]
E: [email protected] M: +256 703 392 531

Elizabeth Akoth Rushongoza Begumya

Tax & Accounts Associate Legal Associate
M: +256 703 956 794 M: +256 (0) 751 848 903
E: [email protected] E: [email protected]

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