East Africa's third largest economy is poised to become a top-50 oil producer with Tullow Oil expected to begin commercial production in the final quarter of next year. It aims to produce 200,000 barrels per day by 2015.
"We recognize that we're soon advancing to the production phase in our petroleum sector and the amendments we've proposed to our income tax law are necessary to maintain an effective and progressive fiscal regime," Fred Omach, state minister for finance, told Reuters.
Uganda is embroiled in a tax dispute with British oil explorer Heritage Oil over the payment of capital gains tax after it said it sold its Uganda assets to Tullow Oil.
Uganda says the deal is incomplete until tax on all capital gains is paid. Omach said the tax law amendment would not be implemented retrospectively.
Bill Page, a Partner at Deloitte & Touche, said the changes followed concerns that firms might make windfall gains which go untaxed. He added the penalties proposed for violation of the amendments were pretty tough.
"Companies will be penalized for a whole range of violations including filing inaccurate information, failure to report in time... some of the penalties go up to $500,000.," he said.
Tullow did not wish to comment on the tax proposals.
Frank Tumwebaze, chairperson of parliament's finance committee, said the proposed changes could be too demanding for firms, especially the one requiring them to file their numbers every quarter.
"I would think the government should only require companies to file their annual financial reports and even then they should be given three months after the end of the calendar year,"
The amendments, the minister said, will seek to empower the commissioner general of the Uganda Revenue Authority (URA) to conduct audits of petroleum companies for purposes of verifying tax compliance.
"The new amendments will also provide penalties for any violations of tax obligations by petroleum companies and will also require the companies to file petroleum revenue returns on a quarterly and annual basis," Omach said.
Transfer of interest, Omach said, will also attract a tax under the new law and will be paid by the company transferring the interest.
