Kampala, Uganda: Uganda’s tax-collecting body, Uganda Revenue Authority -URA, has intensified efforts to curb rampant tax evasion in the lucrative real estate sector, where developers and landlords are accused of deploying elaborate schemes to conceal billions in taxable income.
Investigations by the authority have revealed that many developers deliberately under-declare property sale values to reduce their Capital Gains Tax obligations.
In some transactions seen by DailyExpress, properties sold for as much as UGX 500 million are reported at only UGX 300 million in the URA system, with buyers and sellers colluding to hide the true figures from tax authorities.
Other developers avoid being taxed altogether by conducting property sales off the books, particularly in rapidly growing peri-urban areas like Wakiso and Mukono, where cash and mobile money transactions leave little trace.
Authorities have also flagged the widespread use of shell companies that rotate property ownership among subsidiaries at manipulated prices, creating false expenses to shrink declared profits, while multinational firms operating in Uganda’s real estate market exploit transfer pricing loopholes to channel profits abroad by declaring exaggerated management and consultancy fees.
In the rental sector, many landlords only declare a fraction of their occupied units, banking on URA’s limited ability to cross-check declarations against actual occupancy.
Where are the loopholes?
According to tax experts, structural gaps within government systems continue to make enforcement difficult. URA lacks a reliable, comprehensive property valuation registry and relies heavily on self-declaration by developers and landlords.
“The absence of a central real-time database means developers can build multi-unit complexes without ever being flagged,” a compliance consultant observed.
Additionally, experts say integration between URA, the Ministry of Lands, the Uganda Land Commission, and KCCA remains weak, enabling manipulation of property titles and avoidance of tax registration.
How URA is tackling the problem
To address these challenges, URA is stepping up enforcement measures and preparing a range of reforms aimed at closing loopholes and increasing transparency in the sector.
This publication has established that revenue officials are looking to integrate tax systems with land registries and municipal records so that discrepancies between declared and market property values can be detected automatically.
Plans are also underway to expand the Electronic Fiscal Receipting and Invoicing Solution to cover all property sales and rental income, enabling real-time monitoring of transactions.
URA is also considering measures to limit the use of cash in property transactions and require that all significant payments be routed through traceable bank transfers.
In an effort to improve compliance, tax clearance certificates may soon become mandatory before banks approve loans for real estate purchases and development. Enforcement will target not only developers but also professionals such as lawyers, valuers, and accountants found facilitating tax fraud.
Authorities believe that combining stricter regulation with taxpayer education will help curb evasion in a sector that has consistently outpaced enforcement capacity. URA has pledged to invest in public awareness campaigns to ensure small-scale landlords and developers understand their obligations.
Meanwhile, DailyExpress understands that local leaders at the village and parish level have been charged with a greater role in reporting unregistered developments, and plans are also to publish periodic blacklists of non-compliant developers to deter malpractice.
As Uganda’s property market continues to grow, URA says robust reforms and a stronger compliance culture are necessary to safeguard public revenue and create a level playing field for honest investors.
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