Business

Banks ask URA to stop taxing the property they sell in recovery of bad debts.

Commercial banks have asked Uganda Revenue Authority (URA) to stop taxing tax the properties that are being sold in recovery of bad debts.

During a tax awareness breakfast organised by Ligormarc Advocates in Kampala last week, Steven Mugisha, the firm’s director  tax services said that  Value Added Tax on disposal of property by banks when recovering money from bad loans is not necessary and should be removed.

“There is a controversy and URA is saying this is disposal of property and since it is sale of commercial property, you must pay Value Added Tax while banks differ saying the sale of commercial property is incidental to what we do, that is to say financial services, which is exempt from VAT,” he said.

Mr Mugisha also adds that by selling properties, they are trying to recover lost money and therefore charging tax on the property being sold to recover a bad loan is ineligible.

However, according to the VAT Law, any commercial sale of a property is taxable and urges the banks to sell at market value if they are not willing to make a loss.

Mr Wilbrod Owor, the executive director Uganda Bankers Association however said that they are currently handling very many issues and will son solve the issue with URA.

“Matters will be discussed at our legal committee meeting next month where we can take a position and next course of engagement,” he said.

However, the manager public and corporate affairs at URA, Mr Ian Rumanyika informed the audience that this question is currently being discussed and URA shall, for the time being, stick to the VAT Law.

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