By Sarah Chelangat, URA Commissioner Domestic Taxes
Over the last two weeks, there has been an interesting debate surrounding the taxation of the creatives industry. This followed an article that run in one of the leading dailies titled “URA directs entertainers, artists to get TINs”. URA considers this a healthy and welcome debate because the opinions of Ugandans help to shape and improve tax administration. To set the record straight, taxation of the creatives industry and the players therein hasn’t just started and has always been part of the tax law. URA’s directive is only part of its normal operational mandate of ensuring tax compliance of all eligible taxpayers whose income is gainfully earned in Uganda.
As of December 31, 2022, our half year collections indicate that the creative industry had contributed UGX 579 million only. The face value analysis of this contribution, in comparison to the enormous potential the industry shows that not everyone in the creatives arts value chain is making their rightful tax contribution. Taxation is an obligation that every eligible Ugandan must undertake. Every person who earns income is required to register for taxes in accordance with the law and the Tax Identification Number (TIN) is the indicator that one has registered as required.
Creatives earn income from offering entertainment related services and are therefore required to register for taxes such as income tax, value added tax, Pay As You Earn (PAYE) and withholding tax. This income is derived from offering services like live performances, emceeing, writing, advertising, recording of caller tunes, and use of image rights provided publicly and privately during live shows, concerts, comedy shows, parties and weddings among others. The industry comprises of persons in business, employment and others earning property income from intellectual property. These persons include artists, writers, performers, producers, promoters and event managers to mention but a few.
The tax payable by a person will depend on their residence status and whether they are in the industry in their own right as a business person, employee or employer. Where the person is an employee, the employer is required to withhold tax on salary paid to the person and remit it monthly as PAYE. An example of this may be artists, writers, performers and producers who are signed to record labels.
Where the artist is a freelancer and is hired by a promoter, events manager, another artist or any other person e.g. for a wedding, the person who hired their services is required to withhold 6% of the amount paid to the artist if the artist is Ugandan based and 15% if the artist is a non-resident.
Agents, promoters and events managers may also be required to account for Value Added Tax (VAT) on vatable services. For example, when a concert has been organized, every ticket sold attracts 18% VAT which the agent, promoter or events manager is required to remit to URA. In this case the VAT is borne by the person who bought the ticket and the agent, promoter or events manager only acts as a collecting agent for government. However, in remitting the VAT to URA, the agent, promoter or events manager is allowed to deduct any VAT incurred in organizing the concert.
The taxation of the creatives industry is a crucial part of the economy and it is important that all persons in this industry pay their fair share of tax like those in other industries do. URA will continue to educate all in the industry about their rights and obligations and facilitate them to meet these obligations with ease.