The Bill seeks to provide for the limitation of deductions on petroleum operations.
The Minister of State for Finance, Henry Musasizi.
The Minister of State for Finance, Henry Musasizi has tabled
before Parliament the Income Tax (Amendment) (No.2) Bill, 2021. The Bill seeks to
provide for the limitation of deductions on petroleum operations.
Musasizi tabled the Bill during the plenary sitting on Tuesday 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,” reads part of the Bill.
The Bill also notes 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
“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.
This, according to the government 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,” further reads the Bill.
Oulanyah referred the Bill to Parliament’s Finance Committee for consideration
and report back to the House in the next 45 days.