Tax obligations: Does SACCOs pay value-added tax?

Savings and Credit Cooperative Organizations (SACCOs) are integral to Kenya’s financial sector, offering vital services and empowerment to their members. However, navigating tax obligations is crucial for SACCOs to ensure compliance with Ugandan tax laws.
Tax Classification and Income Tax Obligations
SACCOs fall under the classification of cooperative societies and are thus subject to distinct tax regulations. Cooperative societies operate with the aim of mutual benefit for their members, fostering thrift, and providing financial services.
While SACCOs enjoy certain tax exemptions and incentives under this classification, they are still required to pay income tax on their net surplus or profits. The applicable income tax rate for SACCOs can be found in the Income Tax Act.
Nevertheless, SACCOs registered as cooperative societies may qualify for tax exemptions on non-commercial income, including interest on member deposits, dividends from investments, and grants received for cooperative development purposes.
Withholding Tax Requirements
In addition to income tax obligations, SACCOs may also have withholding tax duties. This entails deducting tax at the source from specific payments made to suppliers, contractors, or professionals. The rates for withholding tax vary based on the nature of the payment and the tax status of the recipient.
Value-Added Tax (VAT)
SACCOs engaged in commercial activities or providing taxable services must register for Value-Added Tax (VAT) purposes.
They are required to charge VAT on taxable supplies and remit the collected VAT to the URA periodically. However, it is essential for SACCOs to ascertain that they meet the VAT registration threshold and adhere to relevant VAT regulations.
Compliance and Record-Keeping
Maintaining compliance with tax regulations necessitates meticulous record-keeping by SACCOs. Accurate financial records and proper bookkeeping are indispensable, encompassing income and expenditure statements, balance sheets, invoices, receipts, and other pertinent documents.
Leveraging SACCO management software can streamline record-keeping processes and minimize accounting errors.