The Stamp Duty Act often lingers in the shadows of more prominent tax laws like income tax, customs duties, and VAT, rendering it one of the lesser-known tax statutes.
Convenings of international tax experts to discuss stamp duty are infrequent. Nonetheless, the time has come to illuminate this underestimated tax category.
Stamp duty encompasses a diverse spectrum of products and services, some easily comprehensible while others remain intricate. The Act enumerates 53 instruments subject to duty, with charges varying from specific rates of UGX 15,000 per instrument to more substantial amounts such as UGX 100,000 for bank guarantees, insurance performance bonds, and indemnity bonds. Additionally, insurance policies bear a duty of UGX 35,000, while certain other items are subject to an ad-valorem rate of 1% of their total value.
Appearing as the fifth item in the Second Schedule is an instrument known as an "Agreement" or "Memorandum of an Agreement," attracting a duty of UGX 15,000. However, Section 2 of the Act, the interpretation section, omits to define either "Agreement" or "Memorandum of an Agreement." In cases where specific definitions are absent, the ordinary meaning of the words (dictionary meaning) is taken as a guiding principle. The Act does not specify whether the instrument should be in written form or require witnesses.
Section 14 of the Act stipulates that a duty-liable instrument must be stamped within 45 days of execution. This gives rise to intriguing considerations. Take an example, each time an individual makes a purchase at a supermarket or any store, an agreement is effectively executed under the law of contract, as payment for goods signifies acceptance of the seller’s offer. In such cases, could the Uganda Revenue Authority (URA) rightfully pursue and demand a stamp duty payment of UGX 15,000?
Although the notion of requiring registration and payment of stamp duty for all transactions might appear absurd, the law indeed suggests such a scenario. Presenting the law’s apparent absurdity as a defense would be futile.
Furthermore, the inclusion of the term "Memorandum" does not necessarily simplify matters regarding "Agreement." A memorandum is defined as a record of a legal agreement that has not yet been formally prepared and signed. This distinction implies a clear difference between a "Memorandum of an Agreement" and an "Agreement."
The challenge arises in interpreting the conjunction "OR." Does it signify an alternative, a noun, or a conjunction? Clarity on this matter is essential for accurate navigation of the Act's nuances and implications.
In a nutshell, this earnestly calls for a thorough review of this seemingly straight forward provision by Parliament, the Attorney General and the URA.
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