Effective use and enjoyment. To avoid instances of non-taxation or double taxation, jurisdictions can apply “use and enjoyment” rules that allow a service that is “used and enjoyed” in the jurisdiction to be taxed or prevent a service that is “used and enjoyed” outside the jurisdiction from being taxed. If a service is taxed in the jurisdiction under the “use and enjoyment” provisions, a non-established supplier of the service may be required to register for VAT in every jurisdiction where it has customers that are not taxable persons. In Uganda, no services are subject to the “use and enjoyment” provisions.
Transfer of a going concern. Normally the sale of the assets of a VAT-registered or VAT-registrable business will be subject to VAT at the appropriate rate. However, a transfer of a business as a going concern (TOGC) may be exempt from VAT under certain conditions. A TOGC is the sale of a business or part of a business capable of separate operation including assets. Where the sale meets the conditions, the supply is treated as exempt from VAT. In Uganda, a TOGC is treated as exempt from VAT where the following conditions are met:
• The supplier disposes of any part of a business that is capable of separate operation (for example a branch of a business).
• Both the seller and the buyer must be registered as taxable persons for VAT.
• The Agreement of Sale, which should be duly executed, must make it absolutely clear that the property is a whole or part of the seller’s business, which is being sold as a going concern.
• Activities of the business must continue after the business is transferred to the purchaser for at least two years.
• The supplier supplies to the recipient all of the facilities that are necessary for the continued operation of the enterprise being sold. This may include premises, plant and equipment, stock in trade, intangible assets such as goodwill, contacts and licenses, and all the operating structure and process of the enterprise.
• The supplier carries on or will carry on the business until the day of the supply (whether or not as a part of a larger business carried on by the supplier) and that the nature of the business will not change after the transaction.
• The transferor and transferee shall within 21 days of the transfer, notify the Commissioner General in writing of the details of the transfer in accordance with section 19 (2) of the VAT Act, Cap.349.
Note: a mere disposal of an asset used by the business is not a supply of a going concern.
Transactions between related parties. In Uganda, for a transaction between related parties, the value for VAT purposes is calculated at fair market value. The VAT law requires that supplies between associated parties should be made at their fair market value, which is the consideration in money that a similar supply would generally fetch if supplied in similar circumstances at that date in Uganda, being a supply freely offered and made between persons who are not associates.
C. Who is liable
The persons liable for VAT in Uganda vary according to the type of supply. The following persons are liable for VAT in Uganda:
• Taxable supply in Uganda: the taxable person making the supply
• Supply of goods through an auction: the recipient of the proceeds of the auction
• Import of taxable goods: the importer
• Import of taxable services: the recipient of the services
The annual registration threshold is UGX150 million (approx. USD40,500).
A “taxable person” is defined in the Uganda VAT law as someone that is registered or required to be registered for VAT in Uganda.
Exemption from registration. The VAT law in Uganda does not contain any provision for exemption from registration.
Voluntary registration and small businesses. The VAT law in Uganda contains a provision for application for voluntary registration of persons supplying goods or services for consideration. In exercising the discretion whether to grant the voluntary registration or not, the Commissioner General must be satisfied that the person has a fixed place of abode or business; will keep proper accounting records; will submit regular and reliable tax returns and that the person is a fit and proper person to be registered.
Group registration. Group VAT registration is not allowed in Uganda.
Fixed establishment. In Uganda there is no legal definition of a fixed establishment for VAT purposes.
Non-established businesses. A “non-established business” is a business that does not have a fixed place of abode or business in Uganda. Non-established businesses are not liable to charge and account for VAT except where they provide specified electronic services delivered remotely to persons who are not taxable persons in Uganda at the time of supply.
Tax representatives. A tax representative is responsible for performing any duty or obligation imposed by the tax law on a taxable person, including the submission of returns and payment of tax. A tax representative making a payment of tax on behalf of the taxable person is treated as acting under the authority of the taxable person. Examples include:
• For an individual under legal disability, the guardian or manager
• For a company, the chief executive officer, managing director
• For a partnership any partner
• For a trust, a trustee of the trust
Tax representatives are therefore required to assist taxable persons who are not able to meet their tax compliance personally.
Reverse charge. Generally, the reverse-charge mechanism is not applicable, except for services imported by a contractor or licensee in the petroleum or mining sector, or by a person providing business process outsourcing services. VAT on imported services does not apply to any exempt service.
An import of a service is an exempt import if the service would be exempt had it been supplied in Uganda. Therefore, reverse charge would also not be applicable on the import of a service that is an exempt import. At the time of preparing this chapter, the Tax Appeals Tribunal had issued a ruling on the issue of reverse-charge VAT on imported services. This issue regarded whether the place of supply provision is applicable to the imported services provision. The Tribunal ruled that VAT is payable on imported services by all recipients, whether taxable or not, and this input tax is not claimable, unless the person is a licensee or a contractor in the petroleum or mining operations or is a person providing business process outsourcing services.
Domestic reverse charge. There are no domestic reverse charges in Uganda.
Digital economy. Nonresident providers of electronically supplied services for business-to-business (B2B) supplies are not required to account and register for VAT in Uganda. Instead, the customer is required to self-account for the output tax via the reverse-charge mechanism. However, the output tax declared cannot be claimed as an input credit except if the importer of the services is a contractor or licensee in the petroleum or mining sector, or a person providing business process outsourcing services.
Nonresidents providing electronically supplied services for business-to-consumer (B2C) supplies are required to account and register for VAT in Uganda. The supply is treated as a local service under the place of supply rules. The nonresident would be required to register and account for VAT on its B2C supplies if the electronic services provided are done so remotely (see definition below) and if its supplies exceed the registration threshold. The registration requirement only applies for these types of services.
Online marketplaces and platforms. Electronic services when provided or delivered remotely to a person in Uganda, where the recipient is a nontaxable person or a person whose supplies do not exceed UGX150 million (approx. USD40,500) or a government entity that is not registered for VAT, are deemed as supplied in Uganda and as such are taxable supplies in Uganda. Electronic services are defined to include websites, webhosting or remote maintenance of programs and equipment; software and updating of software; images, text and information; access to databases; music; films; games, including games of chance; political, cultural, artistic, sporting, scientific and other broadcasts and events including television; advertising platforms; streaming platforms and subscription-based services; cab-hailing services; cloud storage; and data warehousing. The Uganda Revenue Authority (URA) has issued a Public Notice that such a person providing these services ought to apply for registration, file a return and account for VAT in Uganda. The return shall be filed within 15 days after the end of three consecutive calendar months. A nonresident person may appoint a tax representative for effecting the registration and filing requirements. The Commissioner General may, at the cost of a nonresident, appoint another person to prepare and furnish the return on behalf of that person.
Registration procedures. A person that is not already a registered person must apply to be registered in accordance with the VAT Act by the following dates:
• Within 20 days after the end of any period of three calendar months during which the person made taxable supplies, the value of which exclusive of any tax exceeded UGX37.5 million (approx. USD10,150).
• At the beginning of any period of three calendar months if reasonable grounds exist to expect that the total value of taxable supplies, exclusive of any tax, to be made by the person during the period will exceed UGX37.5 million (approx. USD10,150).
VAT registration applications are submitted through the URA portal (https://www.ura.go.ug/) using a form/template specified by the Commissioner General. If the Commissioner General determines that the applicant is eligible for registration under the VAT Act and has a fixed place of residence or business, the applicant will be registered and issued a certificate of registration. The Commissioner General must also be satisfied that person:
• Will keep proper accounting records relating to any business activity.
• Will submit regular and reliable tax returns.
• Is a fit and proper person to be registered.
Upon submitting the application for registration online, the applicant is required to submit the following physical documents to the URA offices:
• Tenancy agreement; this is required to show fixed place of business.
• Invoices or contracts that show the applicant’s sales satisfy the VAT threshold of UGX37.5 million for three consecutive months or a contract whose stipulated value exceeds the annual or quarterly threshold.
Applicants are also currently required to mandatorily register for the Electronic Fiscal Receipting and Invoicing System (EFRIS).
An inspection of the premises will be done by an officer from the URA and thereafter the application is approved.
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Medicated cotton wool
Mosquito nets, acaricides, insecticides and mosquito repellent devices
– Disposable medical face masks reusable face masks made of fabric
– Medical boots
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Medical impermeable aprons/coverall suits
Bouffant nonwoven surgical cap
Goggles, protective, indirect side ventilation
– Infrared thermometers
– Motorized fumigation pumps
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Oxygen cylinder or oxygen for medical use
– Body bags
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Biohazard bags, container, used sharps, leak proof
– Disinfectants
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Medical plastics or rubber gloves
Gas masks with mechanical parts
Disposable hair nets
– Paper bedsheets
– Raw materials and inputs for their manufacture
• Selected machinery, tools and implements suitable for use only in agriculture
• Crop extension services
• Irrigation works, sprinklers and ready-to-use drip lines
• Deep cycle batteries, composite lanterns and raw materials for the manufacture of deep cycle batteries and composite lanterns
• Agriculture insurance premium or policy
• Electric vehicles locally manufactured or the supply of the frame and body of an electric vehicle locally fabricated
• Electric vehicle charging equipment or supply of charging services of electric vehicles
• Cooking stoves that use fuel ethanol, assembled in Uganda up to 30th June 2028
• Photosensitive semiconductor devices, including photovoltaic devices, regardless of whether they are assembled in modules or made into panels, light-emitting diodes, solar water heaters, solar refrigerators and solar cookers
• Life jackets, life-saving gear, safety headgear and speed governors
• Any goods or services supplied to the contractors and subcontractors of hydroelectric power, solar power, geothermal power, or biogas and wind energy projects; and does not include goods and services used for personal and domestic use
• Movie production
• Bibles and Qur’ans and textbooks
• Construction materials for development of an industrial park or free zone to a developer or operator of an industrial park or free zone, the developer’s investment capital is at least USD50 million
• The supply of services to conduct a feasibility study, design and construction to a developer of an industrial park or free zone whose investment is at least USD50 million
• Services to conduct feasibility studies, design and construction; the supply of locally produced materials for the construction of a factory or a warehouse and the supply of locally produced raw materials and inputs or machinery or equipment to an operator within an industrial park, free zone or any other person carrying on business outside the industrial park or free zone; minimum investment capital is USD10 million in the case of a foreigner or USD300,000 in the case of a citizen; or USD150,000 for a citizen whose investment is placed upcountry who uses at least 70% of the raw materials that are locally sourced, subject to their availability and at least 70% of the employees are citizens earning an aggregate wage of at least 70% of the total wage bill; and who processes agricultural goods, manufactures or assembles medical appliances, medical sundries or pharmaceuticals, building materials, automobile, household appliances;
goods, including capital assets, made by the person before registration, if all the following conditions are satisfied:
• The supply or import was for use in the business of the taxable person.
• The goods are on hand at the date of registration.
• The supply or import occurred not more than six months prior to the date of registration or in the case of manufacturers, not more than 12 months before the date of registration.
The time limit for a taxable person to reclaim input tax in Uganda is six months.
Specifically in relation to Islamic financing, a credit is allowed to the taxable person for the tax payable in respect of:
• A taxable supply to the person offering Islamic financial business for purposes of sale-based financing to the taxable person.
• Import of goods by the person offering Islamic financial business for purposes of a sale-based financing to the taxable person if the supply or import is for use in the business of the taxable person.
Nondeductible input tax. VAT may not be recovered on purchases of goods and services that are not used for business purposes (for example, goods acquired for private use by an entrepreneur). VAT may also not be recoverable where the goods or services are not used in generating the specific taxable supply for which VAT is accrued. In addition, input tax may not be recovered for certain business expenses.
The following lists provide some examples of items of expenditure for which input tax is not deductible and examples of items for which input tax is deductible if the expenditure is for purposes of making a taxable supply.
Examples of items for which input tax is nondeductible
• Taxable supply or import of a passenger automobile and the repair and maintenance of the automobile, including spare parts
• Entertainment (provision of food, beverages, tobacco, accommodation, amusement, recreation or hospitality of any kind), unless person is in the business of providing entertainment or supplies meals or refreshments to its employees on premises operated by it, or on its behalf, solely for the benefit of its employees
• Payment for entertainment made by a taxable person for membership of a person in a club, association or society of a sporting, social or recreational nature
Examples of items for which input tax is deductible (only if related to a taxable business use)
• A supply or import of a passenger automobile and the repair and maintenance of the automobile, including spare parts, if the automobile is acquired by the taxable person exclusively for the purpose of making a taxable supply of that automobile in the ordinary course of a continuous and regular business of selling, dealing in or hiring of passenger automobiles
• Entertainment if the taxable person is in the business of providing entertainment
• Supplies of meals or refreshments by employers to their employees in premises operated by the employers or on the employers’ behalf, solely for the benefit of the employees
Partial exemption. If a taxable supply to, or an import of goods by, a taxable person is partly for a business use and partly for another use, the amount of the input tax allowed as a credit is the part of the input tax that relates to the business use.
If the percentage of the total amount of taxable supplies to the total amount of all supplies made by the taxable person during the period (other than the supply of goods as part of the transfer of a business as a going concern) is less than 5%, the taxable person may not credit any input tax for the period.
If the percentage of the total amount of taxable supplies to the total amount of all supplies made by the taxable person during the period (other than the supply of goods as part of the transfer of a business as a going concern) is more than 95%, the taxable person may credit all input tax for the period.
When a taxable person, who deals in both exempt and taxable supplies, apportions its input tax using the fraction of taxable supplies to total supplies made in any tax period, the taxable person is required to make a calculation of input tax based on the annual value of taxable and exempt supplies within the period following the end of the year.
Approval from the tax authorities is required to use the partial exemption standard method in Uganda. Special methods are not allowed in Uganda.
Capital goods. The VAT law in Uganda does not define “capital goods.” In practice this means any goods other than finished consumer goods that may be used in the production process.
Tax incurred on capital goods is claimable where these capital goods are used in the carrying on of the taxable person’s business activities. Like with all other input tax incurred where the goods are used for both taxable and exempt supplies, the input tax will be apportioned using the Standard method in order to allow input tax credit in respect of taxable supplies.
The standard method is A*B/C where A is the total amount of input tax for the period, B is the total amount of taxable supplies made by the taxable person and C is the total amount of all supplies made by the taxable person during the period other than an exempt supply of goods as part of the transfer of a business as a going concern by one taxable person to another taxable person.
Where the standard method disadvantages the taxable person, the Commissioner General may approve an alternative method (standard alternative method) to calculate the input tax to be credited. Using this method, the taxable person may directly attribute input tax separately to the exempt and taxable supplies in so far as it is possible and may claim credit for all input tax related to taxable supplies and none of input tax related to exempt supplies.
Refunds. If, for a tax period, a taxable person’s input tax credit exceeds the person’s liability for tax for that period, the Commissioner General must refund the excess to the person within one month after the due date for the return for the tax period to which the excess relates, or within one month of the date when the return was filed if the return was not filed by the due date.
Notwithstanding the above, if the taxable person’s input credit exceeds its liability for tax for that period by less than UGX10 million (approx. USD2,700), the Commissioner General may offset the excess amount against the future liability of the taxable person, except in the case of a licensee or person providing mainly zero-rated supplies. In addition, with the consent of the taxable person, if the taxable person’s input credit exceeds its liability for tax for that period by UGX10 million (approx. USD2,700) or more, the Commissioner General may offset the excess amount against the future liability of the taxable person or apply the excess in reduction of any other tax not in dispute that is due from the taxable person.
A claim for a refund of input tax must be made in a return within three years after the end of the tax period in which tax was overpaid.
Pre-registration costs. A credit can be issued to a taxable person on becoming registered for input tax paid or payable in respect of:
• All taxable supplies of goods, including capital assets, made to the person prior to the person becoming registered.
• All imports of goods, including capital assets, made by the person prior to becoming registered.
Where the supply or import was for use in the business of the taxable person, the input tax paid for those supplies is creditable provided that the goods are on hand at the date of registration and
Foreign currency invoices. Foreign currency invoices are treated in the same manner as domestic currency invoices, which is the Ugandan shilling (UGX). However, the tax authorities require that for purposes of accounting for output tax and input tax, the exchange rate prescribed by the tax authorities for that tax period is used.
Supplies to nontaxable persons. Taxable persons (i.e., those registered for VAT or required to be registered for VAT in Uganda) making supplies to any person are required to issue all customers with a VAT invoice. Simplified tax invoices can only be issued by a registered person with a taxable turnover below UGX100 million (approx. USD28,000) per annum to another registered taxable person and in respect to individual items on the invoice that do not exceed UGX50,000 (approx. USD15) and the total invoice value does not exceed UGX100,000 (approx. USD30).
Records. In Uganda, examples of records to keep for VAT purposes include tax accounts and records, purchase records, sales records, export records, sales invoices, cash registers, credit and debit notes, computer records, bank deposit books and account statements, sales contracts, stock records, employment contracts and purchase receipts, among others. Any information relating to the business of the company.
Every taxable person is required for tax purposes to maintain in the English language records as may be required to determine or readily ascertain the taxable person’s tax liability under a tax law. The records kept shall contain sufficient transaction information, and the case of an electronic format shall be capable of being retrieved and converted to a standard record format equivalent to that contained in an acceptable paper record.
In Uganda, VAT books and records can be kept outside of the country. However, a taxable person is required to readily avail information as and when it is requested by the URA.
Record retention period. The record retention period is a minimum of five years.
Electronic archiving. Electronic archiving is allowed in Uganda. The Tax Procedure Code Act requires every taxable person to maintain records including in electronic format, for a period of five years. Records (including invoices) kept in electronic format should be capable of being retrieved and converted to a standard record format equivalent to that contained in an acceptable paper record.
I. Returns and payment
Periodic returns. The VAT tax period is one month. Returns must be filed by the 15th day after the end of the tax period. A “nil” return must be filed if no VAT is payable (either because the taxable person does not make any supplies or input tax exceeds output tax in the period).
If the normal filing date falls on a public holiday or on a weekend, the VAT return must be submitted on the last working day before that day.
A manager of a takaful business is required to file by the 15th day after the end of the tax period on behalf of the participants in each group in the takaful business. “Takaful” means insurance business conducted in accordance with Shari’ah principles.
Periodic payments. Payment must be made in full by the 15th day after the end of the tax period. Payment is made by generating a payment registration number (PRN) on the URA web portal, selecting preferred mode of payment, i.e., cash, check, EFT, as well as preferred bank. Upon generation of the PRN, payment will be made by the taxable person in the bank or any other preferred mode of payment and URA will acknowledge receipt of payment in the taxable person’s account.
Digital tax administration. Electronic Fiscal Receipting and Invoicing System (EFRIS). The EFRIS is an automated compliance system that was implemented 1 January 2021 by the URA. It manages the issuance and centralized tracking of all invoices and receipts by taxable persons in Uganda.
Initiated transactions by the taxable person are transmitted to the URA’s bank end system in real time for fiscalization to produce electronic fiscal documents. The use of this system is mandatory for all VAT-registered persons in Uganda to issue e-invoices and e-receipts through EFRIS.
Registration is done on the URA web portal account and completing the e-invoicing section. The channels available are:
• System to system, applicable to taxable persons who use robust accounting systems.
• URA web portal that requires manual configuration of the product listings, pricing and inventory details.
• Client application that can be downloaded from the URA portal and installed on the taxable person’s computer to enable issuance of e-invoices and e-receipts.
• The use of an electronic fiscal device attached to the taxable person’s point of sale.
• Electronic dispenser controller used in the fuel retail sector.
• Use of a USSD quick code issued by URA.
J. Penalties
Penalties for late registration. A person who fails to apply for registration as required by the VAT law is liable to pay a penalty equal to the higher of double the amount of the tax payable during the period commencing on the last day of the period when the obligation to register arises until either the person files an application for registration or the tax authority registers the person forcefully or UGX1 million.
Penalties for late payment and filings. The late submission of a return is subject to a penalty of UGX200,000 (approx. USD55) per month or an interest charge at 2% compounded for the period the return is outstanding, whichever is higher. A person who fails to pay tax imposed before the due date is liable for a penal tax on the unpaid tax at 2% compounded. The interest due and payable on unpaid tax shall not exceed the aggregate of the principal tax and penal tax. For the avoidance of doubt, where the interest due and payable as at 30 June 2017 exceeds the aggregate referred to above, the interest in excess of the aggregate shall be waived.
Penalties for errors. Where a person makes a statement to an officer of URA that is false and misleading in a material particular or omits any matter or thing without which the statement is misleading and the tax properly payable exceeds the tax assessed based on the false or misleading information is liable to penal tax equal to double the amount of the excess.
The late notification or failure to notify the tax authorities of changes to a taxable person’s VAT registration details is a tax offense that attracts upon conviction a fine not exceeding UGX1 million or imprisonment not exceeding two years or both. If it was done knowingly or recklessly, a person is liable on conviction to a fine not exceeding of UGX3 million or imprisonment not exceeding six years or both. For further details, see the subsection Changes to VAT registration details above.
Penalties for fraud. Fraud is a criminal offense and will be triable in criminal courts. Fraud varies, and each case will be determined on its own set of facts.
Personal liability for company officers. Where an offense under the tax law is committed by a company, the offense is treated as having been committed by a person who, at the time the offense was committed is the chief executive officer, managing director, company secretary, treasurer or other similar officer of the company or acting or purporting to act in that capacity.
If the offense is committed by a partnership, every partner at the time of commission of the offense is treated as having committed the offense.