LOCAL SERVICE TAX (LST)
(ASSESSMENT & PAYMENT) FEBURARY 2017
Governing law: (b) Self-employed and practicing professionals (medical
and veterinary doctors, engineers, accountants,
Local Service Tax is governed by the Local consultants, technicians, lawyers, dentists, pharmacists,
Government (Amendment) No.2 Act 2008-“An architects, scientists, surveyors, valuers, ICT specialists
act to amend the local Governments Act to and any other self-employed professionals not
provide for additional taxes to be levied, mentioned).
collected and charged by local governments in
order to provide new sources of revenue for (c) Self-employed artisans (craftsmen, plumbers, builders,
local Governments and for related purposes”. electricians, masons, carpenters, mechanics, blacksmiths,
Reference can also be made to practical guide painters, welders, bakers, furniture makers, florists, skilled
for implementation of Local Hotel and Local artisans and any other artisans not mentioned excluding
Service tax developed by Local Government sole petty artisans and “juakalis”, who are not fully
Finance Commission. established and not business entities).
What is Local Service Tax?
(e) Commercial farmers
This is a tax levied on salaries, wages and Who is exempted from paying Local Service Tax?
incomes of all persons in gainful employment Salaries of the following are exempted from the
and its purpose is to raise additional revenue payment of local service tax:
service delivery in the Capital City. (a) Members of the Uganda People’s Defense
Why should you pay? Force.
(b) Members of the Uganda Police Force.
It’s a Legal requirement for any person in gainful (c) Members of the Uganda Prisons Service.
employment/business to pay Local Service Tax (d) Members of the Local Defense forces
as provided for by the Act CAP 243. The sometimes referred to as LDU’s; and
proceeds are to enable and finance provision of (e) Members of the Diplomatic missions
services such as maintenance of roads and accredited to Uganda.
drainage channels, provision of primary health The following persons are also exempt from the
care, provision and maintenance of traffic lights payment of local service tax.
among others, to promote economic (a) Unemployed persons and peasants.
development in the Capital City (b) A person engaged in subsistence or
Who is eligible to pay? occasional economic activities.
(c) Petty food vendors.
CATEGORIES OF PERSONS ELIGIBLE TO PAY LST (d) Boarder-Boarder (BODA-BODA) cyclists.
(e) Sole petty artisans and juakalis, who are not
Categories of persons eligible to pay Local fully established and are not business entities;
Service Tax include the following: and
(f) People living in poverty who are unable to
(a)Person in gainful employment (with salaries earn a minimum income to access basic
and wages) necessities of life.
NB: For the purpose of this regulation, “peasants” include
people who produce for their own subsistence and have
nothing or very little to sell to the market.
Past Horrors of Graduated Tax
How is Local Service Tax computed?
Computation and Rates of local service tax in respect of persons in gainful employment and earning a monthly
take-home salary.
(1) The local service tax on persons in gainful employment and earning a monthly take-home salary shall be
levied as follows (See table 1) :-
Table 1
Amount of monthly income earned (in shs) Rate of local service tax (in
shs) per year
1 Exceeding 100,000/= but not exceeding 200,000/= 5,000
2 Exceeding 200,000/= but not exceeding 300,000/= 10,000
3 Exceeding 300,000/= but not exceeding 400,000/= 20,000
4 Exceeding 400,000/= but not exceeding 500,000/= 30,000
5 Exceeding 500,000/= but not exceeding 600,000/= 40,000
6 Exceeding 600,000/= but not exceeding 700,000/= 60,000
7 Exceeding 700,000/= but not exceeding 800,000/= 70,000
8 Exceeding 800,000/= but not exceeding 900,000/= 80,000
9 Exceeding 900,000/= but not exceeding 1,000,000/= 90,000
10 Exceeding 1,000,000/= 100,000
(2) In this regulation, “take-home salary” means gross.
(3) For the avoidance of doubt, all the professionals, technicians, consultants and artisans who are in gainful
employment and earn a monthly salary shall pay local service tax according to their monthly salary based
on prototype computation as elaborated below:
Assume that a worker earns UGX 420,000 per month: The LST computation according to the Local
Government (Amendment) Act would require that the Income earner be subjected to payment of PAYE
first, however, in matters of tax administration, the Income Tax Act supersedes the Local Government
Act. This means that LST is a deduction from the gross monthly income of taxpayer as tabulated in the
example below.
Table 2
(a) (b) (c)
Monthly Salary LST payable Available income for national taxation.(PAYE)
420,000 30,000 390,000
Computation of Local Service Tax for Professionals
The computation of LST for professional is based on 2 bands. The professional who gets monthly income
of UGX 1, 000,000 and above pays 100,000 as annual LST and those earning in between UGX 500,000 but
not exceeding UGX 1,000,000 pay UGX 50,000 annually as tax. The professionals referred to are Medical
and Veterinary Doctors, Engineers, Accountants, Consultants, Technicians, Lawyers, Dentists,
Pharmacists, Architects, Scientists, Surveyors, Valuers, ICT specialists and any
Other self-employed professionals not mentioned.
Table 3
Professionals Monthly Income Annual LST
Earned Payable
Doctors, Pharmacists, veterinary doctors, engineers, 1,000,000 onwards 100,000
Accountants, auditors, Consultants, lawyers, architects,
artists, journalists, writers, surveyors, planners,
scientists,
photographers, counselors, dramatists, actors, Exceeding 500,000 50,000
sportspersons, programmers and any other professional but not exceeding
not motioned 900,000
Computation of Local Service Tax for Artisans:
The computation of LST for artisans is based on 3 bands. The artisans who gets monthly income of UGX
100,000 and not exceeding 200,000 pays UGX 5,000 as annual LST and those earning in between UGX
200,000 but not exceeding UGX 300,000 pay UGX 10,000 annually as tax and those earning above UGX
300,000 pay UGX 20,000 annually as tax. The artisans referred to are Craftsmen, plumbers, builders,
electricians, masons, carpenters, mechanics, blacksmith, painters, welders, bakers, furniture makers, florist,
tailors, radio and TV repairers, hairs dressers, semi-skilled artisans and any other artisans not mentioned.
Table 4
Artisans Monthly Income Earned Annual LST Payable
Crafts persons, plumbers, builders, Exceeding UGX 100,000 but not 5,000
electricians, mechanics, black exceeding UGX 200,000
smith,
painters, welders, bakers, Exceeding UGX 200,000 but not 10,000
furniture makers, florists, tailors, exceeding UGX 300,000
radio & TV repairers
hair dressers, semi-skilled Exceeding UGX 300,000 on wards 20,000
artisans and any other not
mentioned
Computation of Local Service Tax for Businessmen/women:
The computation of Local Service Tax for Business proprietors is in respect of persons or entities who
include but may not be limited to the following: owners of shops , fuel stations, restaurants, bars ,furniture
workshops, printer workshops; Directors and shareholders of business companies, food vendors
,commission agents, insurance brokers, butchers ,real estate service providers; road construction firms,
outside catering service providers, coffee millers , maize millers , fish mongers , timber merchants, garage
owners and shoe makers and any other businessmen and women not mentioned, is based on the turnover
of the businesses and categorized in 10 (ten) bands as shown in the table 5.
Table 5
BUSINESS MONTHLY TURNOVER (IN SHS) RATE OF LOCAL SERVICE TAX
(IN SHS) PER YEAR.
500,000 but not exceeding 1,000,000/= 5,000/=
Exceeding 1,000,000/= but not exceeding 2,000,000/= 10,000/=
Exceeding 2,000,000/= but not exceeding 3,000,000/= 20,000/=
Exceeding 3,000,000/= but not exceeding 4,000,000/= 30,000/=
Exceeding 4,000,000/= but not exceeding 5,000,000/= 40,000/=
Exceeding 5,000,000/= but not exceeding 6,000,000/= 50,000/=
Exceeding 6,000,000/= but not exceeding 7,000,000/= 60,000/=
Exceeding 7,000,000/= but not exceeding 8,000,000/= 70,000/=
Exceeding 8,000,000/= but not exceeding 9,000,000/= 80,000/=
Exceeding 9,000,000/= but not exceeding 10,000,000/= 90,000/=
Exceeding 10,000,000/= 100,000/=
How is Local Service Tax Paid?
Employees earning a salary or wage- Under this category; the employer will submit a salary schedule with
the respective local service tax computation therein to KCCA for assessment. Employers may deduct in 4
equal instalments, the LST payable by an employee.
Professionals, Artisans, businessmen/women- Assessment is done alongside trading license or by
separate assessment by authorized KCCA Officials.
Payment can be made by way of Electronic Funds Transfer (EFT), through a Bank of one’s choice on
obtaining a Payment Advice Form (PAF) from the Authority Division or one of the established one stop
shops and through any of the affiliated mobile telecom pay platforms; Air Tel, MTN, Pay way, Ezzy Money
among others.
When is the effective date for payment of local service tax?
In the first four months of every financial year for employees earning a salary or wage.
Once in a financial year for Professionals, Artisans within the first four months.
Once every twelve months for Businessmen/women before being issued/together with a trading license.
Further justification of KCCA’s arguments on retention of a number of revenue Charges/ taxes particularly
Local Service Tax (LST) and Local Government Hotel Tax (LHT) lies in the following facts:
Explanation in the introduction of the LGs Act (Amendment) 2005 where it was expressly stated that
LST &LHT were being introduced to bridge the gap created when Graduated Tax (GT) payments had
been abolished.
The unwritten but the most commonly known fact that the new taxes (LST & LHT) are fair, progressive.
For more inquires on Trade Licensing, please visit any Division Urban Council Offices-Revenue, Large tax
Office at City Hall or any of the one stop shops at Diamond Trust Bank Kampala Road, URSB head office at
Georgina House or Tel. 020460000 , 0800990000 or eservices@kcca.go.ug
