Statement on proposed taxation of collective investment schemes

Tuesday, 17th May 2022

The attention of the Capital Markets Authority (CMA) is drawn to a letter that is circulating on social media as regards proposed taxation of Collective Investment Schemes (CIS)/Unit Trust Schemes, particularly in regard to the interpretation of Section 21(1) (t) of the Income Tax Act (ITA) and whether Unit Trust Schemes are to be regarded and treated as incorporated companies. 

The classification of a Unit Trust Scheme as a company in the ITA appears to be in contradiction to the Companies Act and contrary to the intent of the tax exemption which is to encourage savings. 

It is our understanding that Section 21(1) (t) of the ITA exempts the income of a Collective Investment Scheme from tax to the extent of distribution of the income. 

The purpose of this exemption is to encourage savings which are still at a relatively low base in Uganda. The introduction of a withholding tax on income earned by investors in Unit Trusts to the contrary is a disincentive for savings.

It has further come to the CMA’s attention that there are differences in interpretation of the Income Tax Act within the CIS industry which has led to variances in treatment of Withholding Tax on payment of investors’ interest by the CIS operators. 

Engagements with the Ministry of Finance, Planning and Economic Development are underway for policy guidance to ensure that the tax policy related to the CIS industry is clarified and there is a consistent interpretation and application of the ITA by all industry practitioners. 


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