EAST AFRICAN SCHOOL OF

TAXATION

INCOME TAX LAW

IMPOSITION OF TAX

PREPARED BY:

AKUNOBERA FESTUS

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IMPOSITION OF TAX

Section 4(1) of the Act imposes a charge to tax for each year of income on every person who has
chargeable income for the year. This provision imposes income tax for the purpose of the act.

In addition, section 5(1) imposes a separate tax known as rental tax on every (resident) individual
who has rental income for a particular year of income. Both income tax and rental tax are imposed
annually, and, subject to the act, are based on the chargeable income of a person.

Chargeable income is defined in Section 15 to mean that gross income of the person for the year less
total deductions allowed under the Act for the year. Section 16 makes a special mention of
determining chargeable income arising from insurance business. In order to determine one’s
chargeable income, the first stem would be to establish the gross income, and this is done in Section
17.

Gross income is defined in Section 17(1) to be the sum of a person’s business income (as defined in
section 18), employment income (as in Section 19) and property income (as defined in section 20)
derived by a person during a year of income.

An item of say income which is not included in three categories above can not be subjected to tax
Sub-section (1) is subject to Act, indicating that some items of income which are subject to tax are not
included in gross income and these are:-

a) Income paid under deduction of tax, and where tax so withheld is a final (withholding) tax.

b) Income due to small business taxpayers as defined in Section 5(5). (See below).

c) Rental income due to an individual on which rental tax is imposed under Section 5.

The sub-section also excludes income exempt from tax from the gross income. Section 21 details
the tax exempt income, but not to the exclusion of other provisions in the Act. The different sources of
income – business, employment and property – produce income which is included in the gross
income of a person during the year of income in which it is derived by a person.

Determining the period when an individual drives an amount depends on the method of Accounting
used; and this could either be cash basis or accrual/earnings basis (see Section 40 – 42). This will
be considered in more detail later on in the course. Section 17(2) defines the scope or area of
Jurisdiction for the Uganda tax and this is dependent on a person’s residential status (the concept for
residence will be considered later on in this chapter):-

a) For a resident person, the gross income will include income from all geographical sources i.e
worldwide income.

b) For a non-resident person, it is only income derived from sources in Uganda that will be
included in gross income and therefore, subjected to tax in Uganda.

The deductions allowed under the Act are defined in Sections 22 – 38.

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For rental tax, the chargeable income is defined as gross rental income less deductions in lieu of
expenditures and losses determined in section 22(1) (c). Currently a uniform deduction of 20% of the
gross rental income is admitted as representing expenditures and losses.
Tax is imposed upon every person and a person is defined in Section 2 of the Act to include an
individual, partnership, Trust, company, a government, a political sub-division of a government and a
listed institution.

Partnership, trust, company and listed institution are also defined in Section 2. The term is defined
broadly to even include entities without a legal status, and this is necessary because the term is used
in different contexts in the Act.

Though income tax is imposed on every person, it is pertinent to realise that not every person
included in the definition of a person will have chargeable income attracting tax. For example a
government or its political sub-division, or more specifically a partnership (see Section 65(3) and a
listed institution (see Section 21(1) (a) are not obliged to pay tax on their income. We shall consider
persons assessable in the next chapter.

Chargeable income and gross income are defined in relation to a year of income. Section 2 defines a
year of income to mean the period of twelve months ending on 30 th June and it also includes a
substituted year of income, as defined in Section 39(1), and a transitional year of income, as defined
in Section 39(6) and Section 167(18).

The different sources of income and deduction will be considered in some detail later on in this
course.

Reading List
Section 2 – definition of person, year of income, partnership, trust, company and listed institution

Section 4(1) and 5(1) – imposition of charge to Tax

Section 15 – Chargeable income
Section17 – Gross income
Section 39 – year of income

Graduation of Tax

This principle of graduation is normally applied to individuals and all it does is that in determining a
person’s tax liability, it takes into account the taxpayer’s ability to pay the tax. This is reflected in the
structure of individual rates of tax at which a person’s chargeable income is charged to tax in two
respects:

a) Each individual is granted a threshold i.e. tax free income. The person can only pay tax if his
income exceeds the threshold.

b) Income beyond the threshold is charged to tax at graduated or progressive rates of tax. The
greater an individual’s income, the greater the proportion of his income and actually absolute
amount paid in tax.

The rates of tax will be dealt with in a later chapter on this course.

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WITHHOLDING TAX OR TAXATION OF SOURCE SYSTEM

The Act provides that certain items of income shall be paid to the recipient after deduction of the due
withholding tax. The system of taxation which is a notable feature of income tax in many countries is
also applied, though to a limited scale, in Uganda.

It was originally introduced as a counter-evasion measure i.e. to provide information about a given
taxpayer’s transaction and also to bring into the tax net income which would otherwise escape
taxation. Its other merits are;

a) It is convenient as it cause less resentment that direct collection of tax.

b) The ease of collection in terms of time, effort and costs. A person withholding tax would have
saved the tax collector the bother of looking for so many taxpayers of varying addresses and
sometime for amount of tax which on their own economic sense would have dictated to ignore.

One reason why the system is applied to a limited scale is the possible costs that may arise due to
repayments of tax to persons whose total tax liability may end up being less than the amount of
(withholding) tax suffered by deduction.

The main features of the system are as follows:

a) The payer, referred to as a Withholding Agent, deducts on payment, tax at the rates as
prescribed in the Act.

b) The withholding agent must remit to the Commissioner General, the tax so withheld or deducted
within fifteen days following the expiry of the month in which the payment subject to withholding
tax was made.

c) The recipient referred to as a payee, is, subject to the Act, assessed on such gross income
before deduction of tax, in the ordinary way, but the amount of tax he has suffered by deduction
is credited against the total tax which he is liable to pay. As noted earlier, in some cases, the tax
withheld is a final tax and no further assessment will occur against a sum on which the tax so
withheld is the final liability.

Details of the withholding tax system as it applied to different types of income is given later on in the
course.

Reading list

Section 115, 123, 128.

DETERMINING TAX PAYABLE

Section 4(2) provides for the calculation of the amount of income tax payable by a taxpayer for a year
of income.

In order to determine the tax payable by a given taxpayer, one needs to:-
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a) Determine the tax (liability) by applying the relevant rate(s) of tax applicable to the taxpayer
against the taxpayer’s chargeable income. The rates of tax are provided for in Section 6, 7 and
8 and these sections make reference to the Third Schedule for definition of the rates.

b) Secondly, reduce the amount resulting from the computation in (a) above with tax credit(s) to
establish the (net) tax payable.

The three types of tax credits allowed under section 4(3) are to be applied in the following order;

a. a foreign tax credit due to a resident taxpayer who has derived foreign sourced income (see
Section 81)

b. a credit for withholding tax (see Section 128)

c. a credit for provision tax paid (see Section 111(8)

The order of tax credits is defined depending on the different consequences which may arise in case
of an excess credit. A foreign tax credit is neither refundable nor can it be carried forward (to the next
year of income). It must be used in the year of income in which it arises or else it is lost. This
explains why it must be used before other credits. The credits for withholding tax and provisional tax
are refunded to the extent that the amount of the credit exceeds the tax payable by the taxpayer. The
order of using the credits therefore ensures that any excess credit is likely to wholly or largely
comprise refundable withholding or provisional tax credits.

More co mplicated aspects, especially on foreign tax credit will be handled later on in the course.

Reading List

 Section 4(2) – (3)

 Section 81
 Section 128, Section 111(8), Section 6 -

SMALL BUSINESS TAXPAYERS’ INCOME TAX

Every person carrying on a business is ordinarily obliged to declare his liability to tax through
submission of a return of income which is accompanied by a set of accounts or financial statements.
Preparation of accounts would for most taxpayers demand hiring professional services of a qualified
accountant. The process and cost of preparing and submitting a return of income (and accounts)
would be very expensive and deter his willingness to voluntarily comply with the statutory requirement
to declare his liability. It is in regard of the unique difficulties experienced by small taxpayers that
provisions in Section 4(5) – (7) were included in the Act.

Section 4(5) defines a simplified and easy method of computing tax payable by a resident taxpayer
carrying on a small business. If for any year of income, a resident taxpayer derives gross turnover
from carrying a business or businesses which in less than fifty million shillings, then such taxpayer’s
income tax payable would be determined in accordance with the rates of tax defined in the Second
Schedule.

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Section 4(2) which provides for rules for determining income tax payable is expressed to be a subject
to sub-section (5), and this implies that the sub-section applied automatically. In other words, any
person with income below the defined threshold of fifty million shillings as gross turn over from his
business will automatically be assessed to tax under Section 4(5) unless the taxpayer specifically
elects to pay tax on chargeable income in the ordinary way.

The election is done by a notice in writing to the Commissioner General which must be lodged by the
due date for the filing of a return for the relevant year of income.

A taxpayer for this purpose may be an individual, trustee or company. However, Section 4(7)
excludes any resident taxpayer who is in the business of providing medical, dental, architectural,
engineering, accounting, legal or other professional services, public entertainments services, public
utility services and construction services.

Gross Turnover, is defined in Section 2 to mean the gross proceeds from carrying on a business or
businesses during a year of income (without taking account of the deduction for expenditures and
losses) plus the net gain, (if any) for the year from the disposal of business assets by the taxpayer for
the year.

Business Assets is defined in Section 2. Where a taxpayer carries on more than one business
during a year of income, the gross turnover from all the businesses is aggregated to determine
whether the taxpayer is under the threshold.

Some other fundamental issues raised in Section 4(5) about small business income tax are:-

a) The income tax payable under this provision is a final tax on the business income of the
taxpayer. This actually explains the exclusion of this income from gross income.

b) No deductions are allowed under the Act for any expenditures or losses incurred in the
production of the taxpayer’s business income. The only exception is in respect to determining
the net gain from disposal of a business asset, which is included in the definition of gross
turnover.

c) No tax credits are allowed to reduce the income tax payable by the small business taxpayer
under the sub-section (5) provision, except as specified in the second schedule.

The only tax credits that can reduce the tax payable are detailed in par. 2 of the Second
Schedule, and they are respect of the following tax on amounts included in the gross turnover of
the taxpayer:-

i) Withholding tax {see section 128(3)

ii) Provisional tax {see Section 111(8)

The resident individual taxpayers covered by Section 4(5) are not obliged to submit a (final) return of
income (see Section 93(b)(i). However, every taxpayer covered by Section 4(5) should under section
111(3) furnish an estimate of the gross turnover for the year of income by the relevant due date and
this shall include a statement for actual turnover for the previous year of income. For an individual
the due date will be the last day of the third month in a year of income, and in any other case, it will
be the last day of the sixth month of the year of income.

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Reading List

 Section 4(5)
 Section 93(b)(i)
 Section 111(3)
 Section 2 – definition of gross turnover; business asset
 Second schedule.

EXEMPTION FROM TAX

Section 17(1) provides that amounts that are exempt from tax are not included in gross income since
they are not chargeable to tax. Waiving the obligation to pay tax for certain persons arises from the
realisation that for various economic and social reasons it is not expedient to tax all sources of
income. This may be to encourage new industries, foreign investment, certain charities, or to cater
for some special circumstances or hardships or to reciprocate with other countries in exempting
certain classes of income i.e. under Double Taxation Agreements.

As already noted, the main section dealing with exemption of income from tax is Section 21. The
specific items exempted from tax are:-

a) Income of a listed institution; The listed Institution, is defined in Section 2 and the institutions
are enumerated in the First Schedule.

b) Income of an organisation or person entitled to privileges under the Diplomatic Privileges

Act.

c) Income of a person in employment of the public service of the government of a foreign

country. This exemption is subject to the conditions detailed in Section 21(i) (c).

d) Allowances to Ugandan working in Uganda’s foreign missions.

e) Income of a local authority

f) Income of an exempt organisation, as defined in Section 2, but this does not include income
derived from commercial activities i.e. business income. If however, the business activity is
ancillary to the exempt organisation’s charitable or non-profit function, like say sale of
religious literature by a church, the income will be exempted from tax (see Section 21(1)(f)
(ii). If the church had a general bookshop or a printing press operated in a commercial
manner, then this will not be treated as ancillary to the church’s exempt function.

g) Any (bonafide) education grant.

h) Any amount derived by a person by way of alimony or allowance under any judicial order or
written agreement of separate. It should be noted that payments of alimony and allowances
are effectively on the payer rather than the recipient. This is achieved by Section 22(2) (I)
which denies the payer a deduction for the payment; and this Section 21(1)(h) provision
which treats the receipt as an exempt income of the payee.
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 i) Repealed (Interest on Treasury Bills)

j) The value of any gift, bequest, devise or inheritance derived by a person and which is not
included in the business, employment and property income of a person. A review of Section
18(i)(e); 19(i)(b) show that a gift can only be included in business, employment or property
income if there is a sufficient nexus to the relevant earning activity. A purely windfall gain
would therefore be excluded and treated as tax exempt income.

k) Any capital gain derived by a person which is not included in business income e.g. gain on
disposal of investment assets such as shares of an individual in a case where the individual
was not a share trader.

l) Employment income derived by an individual to the extent it is provided for in the technical
assistance agreement. The definition of a technical assistance agreement in Section 21(2)
shows that such an agreement can only be entered into with a foreign Government or a
public international organisation listed in the first schedule. The exemption will be granted if
the two conditions, the individual is a non-resident or resident solely for the purpose of
performing the duties under the agreement; and the Minister of Finance formally and in
writing accepts the tax provisions in the agreement, are satisfied.

m) The foreign source income derived by the following person;

n) Some items excluded from employment income under Section 19(7). These, for example
include passage moneys, medical expenses, subsistence allowance, etc.

o) A dividend paid by a resident company to another resident company (section 74(2).

p) Foreign source employment income derived by a resident individual, and on which the
individual has paid foreign income tax (section 80).

Reading List
 Section 2 – definition of listed institution exempt organisation
 Section 17(1) – exclusion of exempt income
 Section 21
 Section 19(7), Section 74(2), Section 80

RESIDENT

The residential status of a taxpayer plays an important role in application of the rate structure; the
withholding tax and tax exemption.

A resident person is defined in Section 2 to mean a resident individual, resident company, resident
partnership, resident trust, resident retirement fund, the Government of Uganda, or a political sub-
division of Government of Uganda.

The residential status of the Government of Uganda or any of its political sub-division is certainly
beyond question. The other persons included in the definition of a resident person would however

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need further comment. The rules for determining whether a particular person is a resident or
otherwise is detailed in Sections 9 -14

The term residence is defined in Section 9(1) in relation to an individual, and for a year of income an
individual is treated as a resident individual if such person:-

a) has a permanent home in Uganda

b) is present in Uganda

c) for a period of, or periods amounting in aggregate to, 183 days or more in any twelve-month
period that commences or ends during the year of income; or

d) during the year of income and in each of the two preceding years of income for periods averaging
more than 122 days in each such year of income; or

e) Is an employee or official of the Government of Uganda posted abroad during the year of income.

It should be noted that if an individual has a permanent home in Uganda, then he or she would be
treated as a resident for tax purposes for a year of income, notwithstanding that such individual may
not have been physically present in Uganda during the year of income. This ensures that individuals
posted overseas for 1-2 years remain (Uganda) residents (for tax purposes) during the period of the
posting.

Whether an individual has a permanent home in Uganda is a question of fact. The expression
permanent home is not defined nor has it got a particular technical meaning, and must therefore be
construed in its ordinary sense. The normal connotation is that of a place of residence where a
person lives habitually though not necessarily at all times or even constantly. A person may certainly
have more than one home. Actually a home does not necessarily mean a house, bungalow or flat, it
may even be that a man’s home is in a hotel.

The courts considered the word home before the introduction of permanent in the legislation. In the
case of CIT V. Nuraddin Hassanali Noorani, the court found the following points important in
interpreting whether an individual has a home in (Uganda):-

a) The individual could have more than one home and one could be outside (Uganda) without
offending the definition.

b) The home must be a dwelling house or a flat whole or part, and could be a single room.

c) May be owned or rented by the individual

d) Must be available for at least part of the year

e) The individual must have full control of the home.

f) One would expect to find there the family and personal belongings.

g) There would have to be a substantial degree of occupation by the person or his family.

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h) The individual would be entitled to enter the home in his own right.

In addition the court took the following points into account, none of which of course was individually
conclusive:-

a) Place or birth
b) Citizenship
c) Business interests
d) Investments (where held)

In a later case, however, the court took an opposing view and did not consider itself called upon to
deal with the last mentioned four points.
Whilst agreeing generally with the indicia of determining what a home is as enunciated the Noorani
case, Justice Miller went on to state in the case of R.B Jessop V. The C.I.T.:

“I do not consider I am called upon to deal with such items of counsel for the Respondent’s
submissions as (1) the appellant’s citizenship (2) his bank account or financial interests
abroad and (3) the whereabouts of his children and the citizenship of all or any of them for
Taxing Statutes are to be construed strictly”.

The effect that the inclusion of the word permanent before the word home will have especially on the
definition has not as yet been a subject of judicial interpretation and it therefore remains to be seen.

It should also be realised that the phrasing of Section 9(1) (a) renders some of the indicia especially
those alluding to physical presence in Uganda of the individual in the course of the year of income to
be irrelevant.

The second part of the definition, in Section 9(1)(b)(i), consider an individual without a permanent
home in Uganda during a year of income but who has substantial physical presence in Uganda
during a twelve month period that begins or ends during the year of income to be resident for the
year.

The implication is that an individual whose 183 day presence straddles the end of a year of income is
still a resident. For example, if an individual is present in Uganda for the period 1 May – 31 October
1998, then such individual is present in Uganda for 184 days, but the presence straddles the end of
the year of income so that 61 days are in the year 1997/98 and 123 days are in the year 1998/99.

under Section 10(1)(b) (ii), the individual will be a resident for both years of income, yet if the 183
days was tested by reference to a year of income, then this individual would not be a resident for
either the 1997/98 and 1998/99 as there is not an 183 day presence in either year.

The third part of the definition of a resident individual in Section 9(1)(b)(i) considers presence in the
year of income under consideration, and two preceding years of income. It also considers an
individual without a permanent home but who enjoys a substantial presence over a three year period.

This phrase which does not seem to be clearly worded was adopted from the earlier legislation
verbatim, and it has been a subject of judicial consideration in the East African case of CIT V. Sir
George Arnantoglu where it was construed not to mean an average annual period in excess of 122
days, but an aggregated over the three years in excess of twelve months combined with physical
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presence in Uganda in each of those years i.e. the aggregate number of days present in Uganda in
the year of income and in the two previous years divided by three.

The fourth part of the definition of the resident individual is necessary because income of employees
or official of the Government of Uganda posted abroad is often exempt in the country of service on
the assumption that such person will be taxed with his or her home country. Therefore during period
of service out of Uganda, such person is treated as a resident for tax purposes.

Some other issue that may be of interest is the residential status of a husband and wife – this is to be
determined separately by reference to the (particular) circumstances of each spouse.

Any one of the parts of the definition or tests of residence detailed above is sufficient in its own right
to have an individual treated as a resident for the whole of the year of income unless sub-section (2)
and (3) of Section 9 applies. The two sub-sections provide for part year residence rules for the first
and last year of residence in Uganda and must be read in conjunction with Section 14(2). Sub-
section (2) provide that an individual who is resident for a year of income but who was not a resident
the previous year of income is only treated as a resident individual from the day of his or her first
presence in Uganda. Sub-section (3) considers the case of an individual who is resident for a year of
income but is not to be resident for the following year of income to be treated as a resident individual
only up to last day of his or her presence in Uganda.

Section 10 considers the rules for determining whether a company is resident for a year of income. A
company is defined in Section 2 and it also includes unincorporated organisations. A company is a
resident company for a year of income if such company:-

a) Is incorporated or formed under the laws of Uganda.

b) Has its management and control exercised in Uganda at any time during the year of income.

c) Undertakes the majority of its operations in Uganda during the year of income

Part (a) of the definition is straightforward, but what maybe of interest is the use of the expression the
company being formed – thus applied to unincorporated organisations included in the definition of a
company in Section 2.

The determination of the place where management and control of a company is exercised is a
question of fact. Since management and control of a company is rested in the directors, then the
normal test would be to consider the place where the meetings of the board of directors are normally
held i.e. the place where the directors exercise their powers of management.

Two important issues should be noted:-

a) The focus of management and control is on the location of the superior and directing authority of
the company and not the place of day-to-day operations.
b) Control and management are not normally separated, and in this context control is not interpreted
as meaning the ultimate control which lies in the hands of the shareholders.

The above interpretation of residence is supported by UK Case Law (see suggested reading list), and
what is clear in that the place of residence is where; defacto, the control ad management is exercised
even though the constitution of the company may require that it be exercise elsewhere. It should also
be noted that a company may claim double residence. A claim that a company is resident outside
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Uganda even if such other country has admitted the claim, does not by itself preclude the
Commissioner General from contending that it is resident here, as apart from other considerations,
the law relating to residence in that country may be different from the law in Uganda.

The country of registration or where the directors reside or where the company’s business or trading
activities are carried on, may not be factors to be taken into account in determining the residential
status of a company in relation to Section 10(b).

Section 10(c), of the definition that considers proportion of the company’s operations in Uganda in
intended to overcome tax avoidance practices whereby it is ensured that the place of incorporation,
and management and control of a company’s located outside Uganda even though the majority of the
company’s operations occur in Uganda.

A company would ordinarily be a resident company for a whole year of income.

Section 11 details the provisions for establishing the residential status of a trust. A trust is defined in
Section 2 to mean any arrangement affecting property in relation to which there is a trustee. A trust is
a resident trust for a year of income if:

a) The trust was established in Uganda

b) At any time during the year of income, a trustee of the trust was a resident person.
c) The trust has its management and control exercised in Uganda at any time during the year of
income.

The place at which the trust was established may, for example, refer to the place at which the deed of
settlement was executed. If this was done in Uganda, the trust will be a resident trust.

Part (B) of the definition refers to a resident person, and this is defined in section to include as we
have already noted, a resident individual and a resident company. If there is more than one trustee of
the trust for the year of income, then this requirement is satisfied if at least one of the trustees is a
resident person at any time during the year. The phrasing of section 11(b) shows that a trustee need
not be resident for a whole year of income, and as noted in section 9(2) – (3), this is only relevant to
individuals who can be resident for a part of the year of income.

Part (c) of the definition requirement mirrors the test in Section 10(b) applicable to companies. The
same broad principles for determining the place where the management and control of a company is
carried out are applied for the purpose of determining the location of the management and control of
a trust.

A trust will be a resident trust for the whole year of income.

Section 12 provides the rules for determining whether a partnership is a resident partnership for a
year of income. A partnership is a resident partnership for a year of income if, at any time, during the
year of income a partner is the partnership was a resident person. A resident person is defined in
Section 2 to include a resident individual and a resident company.

As noted already, the only requirement to determine residential status of a partnership is having one
partner as a resident person and the concerned partners level of interest in the partnership is not
material.

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It is also not necessary for the partner to be a resident person for the whole year of income, and this
as we have observed earlier is only pertinent to resident individuals. A partnership is treated as a
resident partnersip0 for the whole year of income.

Section 13 considers the determination of whether a retirement fund of a resident retirement fund for
a year of income. A retirement fund is defined in Section 2. Retirement funds are taxed as separate
entities in Section 8(4).

A retirement fund is a resident fund for a year of income if it is:-

a) organised under the laws of Uganda

b) is operated for the principal purpose of providing retirement benefits of resident individuals,
or

c) Has its management and control exercised in Uganda at any time during the year of income.

A retirement fund is organised under the laws in Uganda if the trust deed is executed and registered
in Uganda.

The implication of paragraph (b) is that a small number of non-resident members of a fund will not
necessarily preclude the funds from being a resident fund. Paragraph (c) over management and
control of a retirement fund, will be interpreted using the broad principles used over companies in
Section 10. For a retirement fund, the management and control of a fund is the place where the
superior and directing authority is located. This would therefore involve seeing where decisions as to
the overall investment policy, rather than day-to-day portfolio management decisions, are taken.

A retirement fund is treated as a resident retirement fund for the whole year of income.

Section 14 provides a definition of a non-resident person for the purpose of the act. Following section
14(1) a person who is not a resident person for a year of income is a non-resident person for that
year. Section 14(2) considers the implications of section 9(2) –(3) and provides that an individual
who is a resident for only part of a year of income will be treated as a Non-resident person for the rest
of the year of income.

Effects of Residence on Liability

1. Scope
As already noted under imposition of tax, the residential status of a person defines the jurisdiction
of Ugandan tax over his income. A resident person’s world-wide income is charged to tax as if all
of it is sourced from Uganda, while for the non-resident person, it is only Ugandan sourced that is
charged to tax under Uganda.

Dividends received by a resident company from another resident company are excluded from
income chargeable to tax (Section 74(2).
Employment income from foreign sources earned by a resident individual on which such person
has already paid foreign income tax is excluded from assessable income.

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 Part IX (Section 78 -89) considers international taxation, and details the implications of non-
residence of one’s tax liability, including methods of collection especially the operation of
withholding tax on the income for non-resident person.

2. Graduation and Rates of Tax

As already highlighted, the rates of tax detailed in Part 1 of the Third Schedule clearly indicate
that resident individuals enjoy a threshold, and progressive rates of tax which non-resident
individuals are taxed using progressive rates but with no tax free allowance.

3. where there is an operation of a Double Taxation Relief, the term resident has the same meaning
as for the purpose of the act except that a person must not also be resident in the country with
which the Double Taxation Agreement has been concluded.

Reading List

 Section 2 – definition of resident person; company; trust; retirement fund; partnership.

 Sections 9, 10, 11, 12, 13 and 14
 Bullock V Unit Construction Co. Ltd 38 TC 712 (House of Lords pp. 734-745)

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