Parliament imposed a tax on companies reporting losses for more than seven years with 50% of the losses carried forward now being subject to tax in new amendments to the Income Tax Act.
During the House sitting on Tuesday, 11 July 2023, Members of Parliament created a middle ground of seven years abandoning the government’s earlier suggestion to tax losses carried forward in five years.
MPs added to section 38(5) (a) of the Income Tax Act which imposed the tax.
“Notwithstanding the provisions of this section, a taxpayer who after a period of seven years of income carries forward assessed losses shall only be allowed a deduction of 50 per cent of the loss carried forward at the beginning of the following year of income in determining the taxpayer’s chargeable income in the subsequent years of income,” it reads.
The Chairperson of the Committee on Finance, Hon. Amos Kankunda said the move will capture potential taxpayers who use losses as a getaway from taxation, cheating the country.
“…the amendment is intended to limit the avoidance of payment of corporation tax by taking advantage of the current provision of the law which allows businesses to carry forward all tax losses indefinitely and without any restriction,” he said.
