By Derrick Nahumuza

Kampala: Several professional bodies have been up in arms with the Uganda Revenue Authority (URA) over mandatory payment of stamp duty on licenses issued to professionals for their practice.

The Stamp Duty Act provides for a duty to be levied on all instruments that confer any rights or liability upon being created, recorded or transferred. URA seeks to categorize professional licenses and certificates as instruments to which stamp duty is payable.

As DERRICK NAHUMUZA writes, the law has created uncertainty and, therefore, payment of stamp duty on professional licenses should be revised in the coming financial year.

On June 15, 2023, the revenue body issued a public notice reminding all professional bodies to voluntarily declare all professional certificates and licences that have been executed or received in Uganda with effect from July 1, 2020.

This followed an amendment to the Stamp Duty Act that introduced stamp duty at a rate of UGX 100,000 for each professional license or certificate issued in 2020. The Act further prescribes an offense for the issuance of such instruments (mainly licenses and certificates) without payment of the requisite stamp duty.

Professional bodies that regulate provision of professional services have come out to contest the imposition of this stamp duty. These professional bodies include the Uganda Law Society, Uganda Medical Association and Uganda Institute of Professional Engineers, among others.

In fact, the Institute of Certified Public Accountants of Uganda (ICPAU) had, on December 17, 2020, recommended the scrapping of the said stamp duty to ministry of Finance on grounds that its imposition not only hampers the ease of doing business but also amounts to double taxation.

The Uganda Law Society had also joined the frenzy by instituting a constitutional petition challenging the legality and constitutionality of the imposition of this stamp duty.

The contention between the two bodies is largely about whether professionals should pay taxes on provision of their services or not. URA had intended to use this mandatory payment of stamp duty to obtain records of every individual providing professional services and to later find out the capacity in which these services were being provided.

Given that Uganda’s economy is largely an informal one, it is difficult for URA to get fast and accurate information on the revenues or incomes obtained by individuals or partnerships.

What URA seeks to create, is an updated database with all professionals in order to ease the monitoring of incomes obtained by these professionals and ensure compliance by professionals.

What URA sought to achieve was to restrict taxpayers from claiming expenses tagged to unregistered professional bodies while filing tax returns. These expenses include legal or accounting services obtained in the process of obtaining income.
Much as URA’s position is justifiable, levying stamp duty on professional services also comes with disadvantages that have made professionals cry foul.

In the first place, several professional bodies already levy professional license fees that are payable every year in addition to subscription fees and membership fees yet the premises in which they operate are subjected to trading license fees payable to local authorities like KCCA.

The same professionals pay taxes under the Pay As You Earn scheme for those that have employers. Adding stamp duty to these numerous payments may lead to double taxation that goes against the much-revered Adam Smith canons of taxation that every revenue body ought to take into consideration before imposing or collecting taxes.

Additionally, the payment of stamp duty might crack the spirit of professionalism. Professional bodies like the Uganda Law Society have different categories of professionals with like young lawyers and senior lawyers. It would be unfair to subject them to the same amount of levy when some have not even started benefiting from the fruits of their profession.

The levy of stamp duty will also halt the progress that has been made in ensuring the easement of cross-border practice. Professional bodies in Uganda have already joined forces with their sister bodies in different countries in the region to facilitate the provision of professional services across East African without restriction.

Some of these East African bodies issue practicing certificates allowing professionals to practice across the East African border. Subjecting these professionals to payment of stamp duty will impede the ability to practice across the border.

Certain professionals have also argued that imposition of stamp duty goes against the basic norms of constitutionality. The Ugandan constitution provides that every person in Uganda is guaranteed a right to practice his or her profession and carry on any lawful occupation, trade or business.

This right will certainly be curtailed once stamp duty is imposed on professional licenses. If URA was more inclined to just registering providers of professional services other than obtaining Non-Tax Revenue, the best mode would have been to obtain registers from the professional bodies themselves and subsequently making physical inspections of the providers of professional services in order to update the URA database.

As it stands now, the payment of stamp duty on professional licenses should be revised in the coming financial year to avoid the uncertainty it has already created.

The writer is an advocate of the High court and a tax specialist.