Blog

What to look for when buying a house in Uganda
Buying a home? You wouldn’t purchase a car without investigating what’s under the hood, or buy shares without deciphering the returns on your investment. So don’t cut corners when it comes to your biggest investment of all: Your family home.

If you’re about to jump into the market and invest in a property, consider these tips.

There’s no such thing as a perfect plan

Investing in property, or planning a refurbishment, requires a degree of compromise. It’s unlikely you’ll walk into a unit, townhouse or single dwelling that ticks all your boxes.

Determining what you can live without and what you can’t is super important. A floor plan that’s open and spacious might be appealing at first glance, but when your kids are watching TV in the living room, this layout could make it hard for you to concentrate in your adjacent home office.

Weigh up the pros and cons when looking for the right floor plan for you.

Get familiar with what you need Vs what you want

This kind of overlaps my first point. Everyone wants it all bigger and better. Ocean views, wine cellar, media room, play room, pool… the lot. But is bigger seriously better? Have you ever taken a moment to really ponder what you actually need?

How do you use your house? What makes you tick? What things make a space great? For some people, a sense of volume and height achieved through void space is more important than added floor space. Perhaps a green oasis makes your heart sing, but rather than a big backyard you’ll have to maintain, a courtyard with potted plants might suffice.

Good design doesn’t have to be ostentatious, in fact, the best design is often the most simple. Small is the new big.

Development Applications: Know your stuff

Your eyes may glaze over at the thought of reading local planning controls but there truly is value in knowing your stuff if you’re planning to renovate now or in the future.

Should you strike gold and chance upon a property with an already approved plans, consider yourself lucky. Obtaining planning approvals can be an onerous and costly process. So your plan might not look too fancy now, but imagine how much better that view will be when you build your second storey!

Budgets & what belies the facade

Foundations, footings, and skins may not sound as sexy as polished floorboards, appliances and abundance of natural light but let me tell you, these terms need to be on your radar.

The next time you see floor-to-ceiling windows in a property description, ask yourself this: Are they single or double glazed? Double glazing will significantly reduce transfer of noise and keep you warm in the winter, as will a double skin construction.

Also, steer clear of sweaty walls. Sweat means wet, and wet means damp. Last but not least, footing/foundation fundamentals are a must. Shallow and unstable foundations result in movement and cracking, and before you know it, what was once a mini refurbishment turns into a full blown new build.

Sexy or not, these big-ticket items require investigation before you can decide if this is the house for you.

Think long term

Don’t be blinded by bling. There isn’t great value in floor finishes, countertops and appliances. The real value is in spatial qualities like proportion, scale and flow.

So when investing in property, take your Critical Hat off and put your Potential Hat on – rather than seeing the peeling paint and the canary yellow kitchen, choose to see what a property may have to offer.

Ask yourself: Does it have room to grow? Is there a basement I could turn into a home office or rumpus room for the kids? Is there room in the garden for a granny flat or a pool? Instead of going straight for the palace, opt for the slightly less beautiful house with good bones and extra girth, and make it your own.

When weighing your options, look at every unit, house or dwelling with open eyes and register where the golden opportunities lie within each. Most importantly, don’t overextend yourself.

Consider how much upfront renovations will add to your mortgage and factor that in when considering how much your baseline truly is. In other words, pick a house that fits within your budget.

Don’t get sucked in by the fancy agent speeches or what your best friend just bought. This is yours, and yours for life, so take the time and do your research.

Your Essential Guide To Property Buying in Uganda
Some people are purchasing real estate to get started off as an investor, while others are just looking for a nice family home to move into. Where ever you fall on Nembabazi real estate, you need to be informed as a buyer before you put your money down and purchase property. These tips will help you.

To make sure you get a good home, you should pay attention to details such as appliances. Most people will sell their kitchen and bathroom appliances with their home. Make sure everything functions properly and does not look too old. Check the furnace too. If anything looks too old, do not forget to include it in your budget.

The advertised price of a home is just a starting point. Remember that it is not set in stone and is meant to only give you an idea about how much the seller is looking to get out of it. Negotiate until you find a price that you are both comfortable with.

Be open to new possibilities until you have made your final decision. Houses come on the market every day. If you’ve found a house that you like, keep your eyes open for a house you may love. Working with a realtor will come in handy for this aspect of home buying as they usually have access to new properties before the general public.

If you want to have a good experience buying a home you should find an agent who communicates on the same level as you. Some people will need more contact with their agent during the process, and can find it frustrating, if they are dealing with a very busy agent.

One important tip when it comes to real estate, is to make sure that you keep a detailed journal of everything that you do throughout the process. This is important as either the buyer or the seller, because it will help to ensure that not only do you know how well you are accomplishing your goals, but will also be a good record in case you need proof, if an unforeseen circumstance arises.

One important tip when it comes to real estate is to check the history of the area to see if there have been any natural disasters in the past. This can hopefully save you from property damage or loss of life with your home choice. This mainly is a tactic to use when moving to a new and unfamiliar territory. Such occurrences as flooding, wildfires and earthquakes tend to repeat in the same geographical areas.

When buying or renting real estate try to find simple solidly built houses. High priced features may be flashy but are they really going to be useful to you? At some point in the future there will be a repair bill for it that matches the high price as well.

Purchasing to live or purchasing to sell, it doesn’t rightly matter what your intentions are. The important thing is that you always find the best property out there for the best price. Use the tips you’ve learned in the above article and you should have no trouble making a solid real estate deal.

TYPES OF PROPERTY TAXES IN UGANDA

• Property tax
• Rental income tax
• Capital Gains Tax
• Withholding tax
• Stamp duty

Property Tax (Rates)

Property rates in Uganda are levied by local government councils. Property tax is an old tax but almost died a natural death until the enactment of Local Government (Rating) Act in 2005, when it was revived and became active. The current rating is governed by the Local Government (Rating) Act of 2005, which came into effect on 1st November 2005 and replaced the Local Governments Rates Decree of 1979. This Act provides the mechanism for carrying out the valuation, assessment, billing and collection of rates; and applies to Kampala City Council, municipal councils, town councils and districts. This Act eliminates the monopoly of the Chief Government Valuer and allows local governments to appoint their own choice of qualified registered valuer. The Act is supplemented by the Local Governments (Rating) Regulations, 2005.

Rental income tax.

Rental income is the total amount derived from the lease of immovable property (land or buildings). Therefore anybody who earns rental income must therefore pay tax to Uganda Revenue Authority. It is filed separately.

Rental income tax policy that was revised and firstly amended in the financial year 2017/18 by Uganda Revenue Authority and has been successful. This tax is only associated with landlords and companies investing in rental investments. Every landlord is subjected to paying an annual rental income tax for his property and failure to pay may be forced or imprisoned for less than 6 months or fine of 2 million shillings.

NOTE:   Rental Income tax is different from Property tax. Rental income tax is paid to URA whereas Property tax is paid to the local government.

Rental income tax is only paid when a person is letting out their immovable property (land or building) to another person and is earning income from it, but property tax is paid by a landlord for a commercial building (excludes residential), as long as it is occupied, it does not matter even if it is the landlord occupying it.

Why do you need to submit a Tax Return

Timely submission of tax returns enables you to avoid penalties and other legal consequences.

Submission of accurate information improves your risk rating levels with URA.

Submission of VAT returns that require a refund from URA provides the basis for a refund if one wishes to have a cash refund of taxes paid in excess

Capital Gain Tax in Uganda 

Capital Gains Tax is the tax chargeable on the gains that accrue to an individual or a company on the transfer of property situated in Uganda. The rate of the tax is 30 per cent on the capital gains made on the sale of the property.

What exactly is the Capital Gains Tax?

The capital gains tax is the tax that is paid on the profits that you obtain once you sell any kind of asset like a property or land, or from an investment in the Ugandan territory. Whenever the sale value is greater than the price you paid for the investment/asset for its acquisition, capital gains tax will be paid on that difference, the profit.

What is Withholding Tax?

Withholding tax is a form of income tax deducted at source by one person upon effecting a payment to another.

The withholding agent (person effecting the payment) is supposed to make the payment of tax

Any person buying land, a house or any piece of property purchased primarily for business use is subject to the tax. Land for a Business Company and cooperation’s. This tax policy is spear headed by the buyer withholding tax, it should be withheld at the point of making the payment, whether cash or in any other form.

Individuals also incur WITHHOLDING TAX on payments of interest made to them. The WITHHOLDING TAX is at a rate of 15%. However, individuals are not obligated to withhold tax on payments made by them to taxable persons.

WITHHOLDING TAX is also incurred at a rate of 15% on dividends received by individuals. However, if the dividend is received from a listed company, the WITHHOLDING TAX incurred is 10%.

WITHHOLDING TAX is also charged on the importation of goods into the country. The tax charged is at a rate of 6% on the value of goods imported. Individuals are required to maintain records of the WITHHOLDING TAX paid on imported goods.

Tax at 6% is also deducted on receipt of payment from the government of Uganda, a government institution, a local government, or designated withholding agents for supplies exceeding UGX 1 million.

How is withholding tax calculated when paying?

6 percent on the gross payment is the amount of money to be paid as tax for your transaction and 15% to on a payment or transaction with a nonresident of Uganda This return must be filed by the fifteenth day of the month following the purchase. Should the purchaser fail to file the return by the due date, he or she is liable to pay a penalty for late filing.

A purchaser or buyer of property who fails to remit this tax by the fifteenth day of the month following the month in which the payment subject to withholding tax is made could face fines or prison.

What is Stamp Duty tax?

Stamp duty is a tax that is levied on single property purchases or documents. Stamp duty fees are paid to the Government to authenticate documents and make them legally binding in courts of law. This tax is paid at the point of transfer of title of the said land from the seller to the buyer, based on the value of the land as assessed by the Chief Government Value.

What is the stamp duty tax rate?

Stamp duty of 1.5% applies on all transfers, including transfer of shares and property. Stamp duty of 2% applies on exchange of property. The value of the property is determined by the government chief valuer.

Who pays for stamp duty?

The buyer of land or any property which needs stamp duty for accessing is required to pay the stamp duty. In case it is a lease, the sublease tenant to pay the tax.

How Landlord, Tenant Act will reform tenancy in Uganda.

Purpose:

President Museveni on June 10th, 2022 assented to the Landlord and Tenants Bill. The purpose of the Bill is to regulate the relationship between the landlord and the tenant, to reform and consolidate the law relating to letting of premises, to provide for the responsibilities of landlords and tenants in respect to the letting of premises and related matters.

Highlights of the Act 

Rent Increment

The Bill prohibits the Landlord from increasing rent at a rate more than 10% annually or such percentage as may be prescribed by the Minister in a Statutory Instrument. The landlord is required to give 90 days’ notice in a prescribed form in case of any proposed rent increment. Furthermore a landlord under a fixed term tenancy is prohibited from increasing the rent before the fixed term expires unless the agreement provides for a rent increase before the term expires.

Termination of the tenancy

The notice period for termination of business tenancies is not more than 12 months nor less than 6 months.

For residential purposes, the tenancy may be terminated after 60 days’ notice for a year to year tenancy, 30 days’ notice for a monthly tenancy and 7 days’ notice for a weekly tenancy.  This will reduce on the random terminations by landlords once they have obtained better offers from highly paying tenants. However it would appear to restrict commercial landlord’s ability to remove a problematic tenant.

Remedies for failure to pay rent

The Bill abolishes the remedy for distress for rent. A landlord may apply to court to recover unpaid rent and reasonable costs. This will reduce the cruel evictions of tenants by landlords, however the same subjects landlords to losses and extra expense incurred in obtaining vacant possession.

Security for costs

The Bill expressly empowers the landlord to charge security deposit also referred to as security for costs provided the same does not exceed one month’s rent. This is a protection to the landlords who have had to incur extra expenses on repairs at the end of the tenancy which would have otherwise been met by the tenants.

Denominations 

All rent obligations and transactions should be made in Uganda Shillings unless otherwise provided under any enactment or is lawfully agreed to between the parties. Whereas this provision may cripple the real estate investment business especially for commercial tenancies, it is seen as a drive to cubing the continued weakness of the Uganda currency to the dollar.

Nature of the Tenancy Agreements

A tenancy agreement may be in writing, by word of mouth, by a data message or implied from the conduct of the parties. Under the new regime, it is prudent that where there is a consideration in excess of Shs 500,000 (shillings five hundred thousand only) the tenancy agreement must be in writing or in the form of a data message to be enforceable.

Significance of the Landlord-Tenancy Act 2022 to Ugandans

The Bill seeks to promote stability in the rental sector by consolidating laws governing the relationship between landlords and tenants.

The Act has stablished tribunals to handle disputes between landlords and tenants.

Parties to a tenancy agreement are free to negotiate the agreement and mutually agree the terms. However, the Act sets out terms that shall be implied in every tenancy.

Tenants will no longer have to worry about arbitrary evictions as the Act proposes clear procedures on how tenancies can be terminated by either party. Where a landlord seeks to terminate the tenancy, they are required to give the tenant a notice in the prescribed form stating when the tenancy terminates and the reason for the termination.

The parties to a tenancy will be free to mutually agree on the applicable rent. Where a landlord seeks to increase rent, they must give the tenant at least a ninety days’ notice.