Where do Local Governments draw the mandate to levy taxes?
In accordance with the Local Government Act, Chapter 243 (Part VIII Financial Provisions. Section 80), Local Governments are mandated to levy, charge and collect fees and taxes, including rates, rent, registration and licensing fees and the fees and taxes that are specified in the Fifth Schedule of the Act.
What is a tax?
A tax is a compulsory, contribution to state revenue, levied by the government on workers, income and business profits, or added to the cost of some goods, services, and transactions. Law abiding citizens should pay tax. Some taxes are non-quid-pro-quo meaning taxpayers shouldn’t expect anything in return for the money they pay, these taxes are used to pay salary and wages for government employees among others, while other taxes are quid- pro-quo like property rates 75% of money collected is supposed to provide services like garbage collection, streetlighting, opening roads, town beautification among others back to the community.
What is Trade License?
A trade license is a document /certificate that gives permission to the applicant (person seeking to open a business and renewing) to commence a particular trade or business in a particular area/location. It ensures that the business or trade is carried out by adhering to all standards of safety as issued by government. It protects the community from being affected by health hazards. However, the license does not allow the holder to carry out any other trade or business other than for it.
Legal Provision for Trade license
The Trade (Licensing) Act, 2000, regulates businesses such as retail, wholesale, hawkers, bar and restaurants in Uganda. Every business is issued with an annual license upon payment of a fee. The license is issued by the [District] Local Government, but most of them have privatized collection of license fees and private contractors issue license s on behalf of the respective [District] Local Government. The license is issued for a period of twelve months and the fee varies according to the different categories of business. Trade Licenses contribute substantially to locally generated revenue, especially in urban areas.
Why pay trading License?
It is a legal requirement for any person selling goods and services as provided for by the Trade (Licensing) Act, 2000 to enable the city, Municipality, district and Town council regulate trade and or order. Besides the said above regulatory role, payment of trade 2 licenses fees contributes towards financing of the Local governments service delivery to its communities, therefore two objectives (Regulatory and local revenue raising).
How is a Trading license acquired?
This is through a formal application to local governments for trading license to do business, conditions to satisfy before acquiring a trading license include;
• Appropriately located premises
• Appropriate hygiene and health standards of the premises
• Appropriate building standards of the premises
• A required personal specification e.g., medical fitness
• Payment of appropriate licenses fees.
What are the requirements for application of a license?
Nationals
• National Identification Number (NIN)/Registration number in case of a company
• Original Trading License for the previous year for already existing business
• Original certificate of incorporation of a company for the new company
• The client must be a least 18 years of age and if a minor should be in partner with a person above 18 years of age
• Tax identification number (TIN)
• Contact number
• Name of the business owner
Non-Nationals
Additional requirement for non-national
• Clearance from Ministry of Trade, industry and cooperatives (MTIC) for Nonnationals
Which businesses are issued trading license?
These are categorized under agency and representative business, financial institution Business, professional and consultancy business, health and medical business, education Institution Business, Printing or Publishing House Business, construction business, Security, Investment and guard business, garage and Workshops, Hotel, Lodges and Guesthouses, Recreation/ Entertainment. All these are contained in the Trade (Licensing) (Amendment of Schedule) Instrument, 2017, Statutory Instrument No.2.
Which business is exempted from paying Trading License?
Businesses exempted under section 8(2) includes;
• Any trading carried in a market
• The trade of a planter, farmer, gardener, daily person or agriculturist in respect of sale of his or her own dairy or agricultural product. 3
• The trade of a person in respect of goods bonafide made by him or her by his or her handicraft in or any premises where he or she normally resides or by handicraft of persons normal: residing with him or her or who are his or her employees or members of his or her family.
Who issues trading licenses?
All businesses are required by the Trade Licensing Act to purchase a twelve-month trade license from the city, Town, Municipal or District Council, and to comply with health and safety requirements during the conduct of their businesses.
Validity period for trading licenses.
The Trade (Licensing) Act indicates the period of 365 days from the date of issue, it is an annual based fee. A Trading licenses is valid for a period of twelve months from the date of issue.
How is trading license assessed and paid?
The assessment is done based on the fees schedules issued by Ministry of Trade Industry and Cooperatives under statutory instrument number 2 of 2017 and the Trading (Licensing) (Grade of Business Area. Trading license fees are paid onto local government bank account or through URA accounts for local governments activated on Integrated Revenue Administration System (IRAS)
What happens if a business fails to pay trading license?
Any person who fails to pay or obstructs or hinders an officer on duty, or knowingly makes a false declaration or gives any false information commits an offence and is liable on conviction to a fine or term of imprisonment not exceeding six months or both.
Trade licensing process
Trading process under goes a number of stages outlined below.
1. Tax payer education and Sensitization.
2. Registration.
3. Business Classification.
4. Assessment.
5. Demand/ advice Notice.
6. Collection and enforcement.
7. Administration.
8. Usage.
