Value Added Tax in Uganda Highlights

Updated on May 27, 2022

The Value Added Tax Act, Cap 349 (VATA), has undergone significant changes in the recent six months. Due to substantial VAT theft exposed in the press, we’ve noticed minor changes in how the Uganda Revenue Authority is implementing the VATA.

 Registration

In Uganda, the usual rate of tax on taxable supplies is 18%. A company must have a quarterly or annual turnover of UShs 37.5 million or UShs 150 million to be eligible for VAT registration in Uganda, according to Section 7 of the VAT Act Cap 349 (the “VATA”).

At the time of registration, the applicant will be needed to show that he is creating taxable goods. Forecasts may or may not be relied upon by the tax authority, depending on the situation.

Export of service

Only if the provider can prove that the service is used outside of Uganda can it be considered an export.

In practise, the contract with the foreign buyer must clearly state that the service will be used or consumed outside of Uganda.

Refund of overpaid tax 

For any tax period in which a taxpayer’s input tax exceeds his or her taxable income, the Commissioner General is required by section 42 (1) to reimburse the taxpayer for any overpayment of tax due within a month of filing a return for that period, or within one month of the date on which a return was filed if one was not filed by the due date.

An audit is carried out on a taxpayer’s records prior to a refund being issued. Prior to the audit, the tax payer’s records must be organised to facilitate a seamless audit.

Deemed VAT

There are aid-financed projects and aid-funded programmes, which are those funded by foreign governments or development agencies such as DANIDA and USAID.

In the case of aid-funded projects, a supplier’s tax obligation to a contractor is assumed to have been paid by the contractor if the tax is used by the contractor solely to carry out the aid-funded project.

According to Section 24(7) of the VATA, tax is presumed to be paid by the government ministry, department, or agency receiving the taxable supply, as long as the supply is made primarily and exclusively for use in carrying out the government ministry, department, or agency receiving the taxable supply.

Private rulings or advance tax rulings should be sought by contractors to guarantee that the transactions they enter into are done so with confidence regarding the VAT implications.

Increasing the period prior to date of registration for which input tax can be claimed

In Section 28(3) (b), the words “or in the case of manufacturers, not more than twelve months prior to the date of registration” were added.

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 a taxable person, as long as they are on hand at the date of registration and that the supply or import occurred not more than six months prior to that date.

This means that firms have been given an additional six months to claim input tax before their VAT registration date.

Input tax credit claimable in relation to a commercial building

After subsection (4), the following has been added to Section 28:

It is unlawful for the owner of more than one business to claim tax credits related to inputs used in the construction of a partially completed building against tax received on a fully built business.

Taxpayers will have to account for the input tax they pay on each of their buildings in this way.

Fiscal receipts

The URA will begin using electronic invoices on January 1, 2021.

Only expenses supported by electronic invoices or receipts can be claimed as a tax credit for purchases made through an e-invoicing supplier. (4b)”

It is imperative that all taxpayers check to see if the URA online portal’s e-invoice feature is currently active and configured correctly. The suppliers should also send them e-invoices via the URA online interface.

Our email address is [email protected], and our phone number is +256 414342780/9 if you have any questions.