Taxes are a cornerstone of our economic framework and play a key role in funding public services and development initiatives. In Uganda, as in many other countries, the taxation of Ugandan athletes is governed by the Income Tax Act, a comprehensive piece of legislation outlining how these athletes contribute to the advancement of the country.
Understanding the concept of residency and source rules is very important in determining whether one’s income is subject to tax in Uganda. Pursuant to Section 9(1) of the Income Tax Act, a person is a resident individual for a year of income if the person: (a) has a permanent residence in Uganda; (b) begins or ends the year of income 183 days or more in total in any 12-month period; or an average duration of more than 122 days in each of the income year and the two years preceding that income year; (c) Ugandan government employees or officials posted abroad.
In competitions, winners are rewarded in cash or in kind for their talent, skill and effort. As soon as you talk about income, rewards, incentives, benefits, gifts, etc., the taxman will come to claim his share. When it comes to taxes and income, not many of us have had luck with the taxman.
The tax code recognizes athletes like Joshua Cheputguey as professionals who pay taxes just like accountants, lawyers or any other profession. As a result, Ugandan athletes who pass the residency test are taxed on their worldwide income, which includes income earned both within Uganda and outside of Uganda.
Joshua Kiprui Cheptegei is a Ugandan distance runner. He is the reigning Olympic 5,000m champion and 10,000m silver medalist, three-time 10,000m world champion in 2019, 2022 and 2023, 2017 world silver medalist, and 2019 world cross country champion. Cheput Gai claimed his third consecutive 10,000m gold a few days ago.
Like other taxpayers, the income of Ugandan athletes is taxed at progressive rates according to the income level of the ITA.
Taxable income for Ugandan athletes comes from a variety of sources, including wages, bonuses, appearance fees, endorsements and other sports-related income. This income is considered any other income and is subject to the applicable tax rate.
However, Cheput Gai’s victory enjoys special treatment under the income tax law. Article 21 of the ITA states that awards received by athletes for winning or participating in sports competitions are exempt from taxation. The purpose of this is to allow Uganda to train more sports stars. All of Joshua’s proceeds from this fight are tax-free.
Likewise, medals won in 2021, cars queued at Kololo Airport and subsequently handed over to athletes, cash awards from various donors received by the three Olympic medalists Cheputgai, Chemutai and Kiplimo , they are treated without deduction of a shilling in tax.
Therefore, Section 21 of the Income Tax Act is a powerful facilitator for sports investment. When a patriotic athlete wins a big prize and invests in the sport, in the case of Cheput Gai, it not only benefits the economy but also local talent.
Companies wishing to donate to Cheput Gai should consider the tax implications as well as the company’s overall corporate social responsibility (CSR) budget for such causes. The tax code provides some opportunities for companies to save money in this regard, such as tax-exempt organizations.
For tax purposes, a tax-exempt organization does not necessarily mean an NGO. An NGO is simply a non-profit organization, but not necessarily an exempt organization. The Income Tax Exemption is conditional upon URA’s acceptance of your application to treat the organization as an approval letter from Income Tax Exemption, without which the donation/gift will be taxed at 30%.
Under income tax laws, future competitions will still favor the winning Ugandan athlete. I encourage more capable and talented young men and women to enter the field where the tax man is good for your income. These are green fields for clean money.
The author is a Chartered Tax Accountant and Consultant
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