URA on the spot over taxation of entertainers 

Uganda’s longtime comedian, Patrick Salvado, recently released a video castigating the Uganda Revenue Authority over alleged stifling of the ‘comedy industry.’

The December 10, 2023 Video came out in defense of a fellow colleague, Alex Muhangi, who is the proprietor of the Comedy Store Uganda, a weekly live stand-up comedy show. Salvado’s complaints come in at a time when Uganda’s entertainment industry is at its peak. As opposed to previous years, lately, any musician, comedian or artist (local or international) can host an event and fill it to its brim without fear for its flopping.

Many a people have graced different kinds of shows and events like Nyege Nyege, Blankets & Wine, goat races et al., irrespective of the harshness of the weather or the timing of the event. A good example is the recent Blu*3 reunion that took place at Skyz hotel and had its tickets sold out days before the actual event.

Other events like the Cindy/Sheebah ‘battle’ had multitudes of people. One cannot be wrong to say that the entertainment is flourishing and, had it been properly regulated, it would bring in more returns than several sectors such as trade.

This would correspondingly lead to more taxes from the entertainment industry than those from other sectors. In his video, Salvado alleges that Alex Muhangi employs over 300 people per week. Accordingly, if these employees are paid over the annual threshold of Shs 2.8m, they would be liable to contribute Pay As You Earn to the national treasury.

In fact, URA has been insistent on entertainers heeding to their tax obligations as the industry grows bigger. In as much as Salvado’s concerns raised several questions relating to taxation of the entertainment industry, there is need to understand how and why the entertainment industry is taxed.

First, it is pertinent to note that the entertainers who obtain income from Uganda have an obligation to register for taxes, obtain Tax Identification Numbers, and withhold tax on gross payments to artists, charge VAT where applicable and remit the same to URA.

The main taxes under this industry include withholding tax which is withheld at source by the event holder upon making a gross payment to the entertainer. This withholding tax is dependent on the residence status of the individual.

Where the entertainer performing in Uganda is a resident person, the withholding tax rate is 6% on gross payments made to that person. This tax withheld is then remitted to URA within the first fifteen days of the month following the period in which the payment for that event was made.

In case of foreign entertainers performing in Uganda, the withholding tax rate is at 15% of the gross payments made to the non-resident entertainer. The event holder is under obligation to withhold this amount and remit the same to URA.

If, say, an American comedian like Dave Chappelle were to perform in Uganda and get paid Shs 100 million for his performance, the kivulu holder [event organizer] making this payment is mandated to deduct 15% of the gross payment and remit the same to URA. In the end, Chappelle would take home a clean 85% of that payment.

The differing rates between local and international artists is to mainly promote local artists and ensure that the taxation burden does not kick them out of business. Withholding tax on payment to entertainers, however, is not the only obligation incumbent on the events planner.

In case of any other payments made to local service providers that exceeds Shs 1m on aggregate or in singular payment, a 6% withholding tax rate would apply. This comes along with it an obligation to file VAT returns.

On the other hand, the supply of entertainment services is a taxable supply that also attracts VAT at a rate of 18%. The owner of an entertainment event whose annual turnover is Shs 150m and above is expected to register for VAT and charge VAT on ticket fees.

This VAT is born by the final consumer of the entertainment. In other words, it is the reveler (party goer) that pays the VAT. For example, where Blankets and Wine tickets cost Shs 150,000, in case the events planners exceed the annual threshold, they have an obligation to include 18% as VAT on ticket sales.

It goes without saying that the concerns raised by Salvado are valid. There needs for a symbiotic relationship between people in the entertainment industry and the revenue collection body if both ends of the spectrum are to be met.

This can be done by extending tax literacy to these entertainers and according them a platform to exploit their talents further in order to ensure further growth of the industry.

Parliament can also set up a threshold below which no tax is charged on entertainers to safeguard the mushrooming and amateurish performers from falling out of business due to exorbitant taxes.

Once such a platform is accorded to entertainers, it would increase entertainment tourism by encouraging foreign tourists to travel to Uganda to have fun as part of their destinations. Eventually, this would bring in foreign capital and improve Uganda’s balance of payment.

The writer is an advocate of the High court.