Government through the Minister of State for Finance, Henry Musasizi has tabled before Parliament the Income Tax (Amendment) (No.2) Bill, 2021 that seeks to provide for the limitation of deductions on petroleum operations.
The Bill was tabled on Tuesday during the plenary sitting chaired by Speaker of Parliament Jacob Oulanyah.
“The purpose of the Bill is to amend the Income Tax Act. Cap 340 to provide for windfall tax and limitation of deductions on petroleum operations. The Income Tax Act is not specific on the cost recovery limit which a licensee can recover from petroleum operations in a given year. The Bill, therefore, seeks to cap the allowable deduction per year to the cost recovery limit stipulated in the Production Sharing Agreements -PSAs,” part of the Bill reads.
It also indicates that the current law does not cater for the volatility in oil prices and therefore a need to impose a windfall tax if the international oil price equals US Dollars 75 per barrel or more on any day of the year of income.
“All licensees shall each pay a windfall tax on their net income generated from petroleum operations after deduction of corporate income tax at a rate of 15%,” provides the Bill.
According to the government, the Bill is intended is to capture the additional revenues arising if the international oil prices increase.
“Where for any calendar day there is no international oil price quotation, the oil price of the last quotation before the respective calendar day shall apply to that day. The windfall tax shall be paid by the licensee on an annual basis, on the same date as the date of payment of corporate income tax due for the last quarter of the relevant year of income,” the Bill further reads.
The speaker referred the Bill to Parliament’s Finance Committee for consideration and report back to the House in the next 45 days.