VAT, GST and Sales Tax in Uganda

Summary

Name of the tax Value-added tax (VAT)
Date introduced 1-Jul-96
Trading bloc membership Common Market for Eastern and Southern Africa (COMESA); East African Community
Administered by Uganda Revenue Authority (https://www.ura.go.ug/)
VAT rates
Standard rate 18%
Others Zero-rated (0%) and exempt
VAT number format 10-digit numeric tax identification number in the form of 1234567890
VAT return periods Monthly, with return due by the 15th day of the month following the month covered by the return
Thresholds
Registration Annual amount of UGX150 million (approximately USD44,000)
Recovery of VAT by non-established businesses Not unless through a local, VAT-registered representative who is appointed upon request of the tax authority

Scope of the tax

VAT applies to the following transactions:

  • Taxable supplies of goods and services made in Uganda by tax­able persons
  • Imports of goods other than exempt imports
  • Supplies of imported services other than exempt services

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
  • Import of taxable goods: the importer
  • Import of taxable services: the recipient of the services

The annual registration threshold is UGX150 million.

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 3 calendar months if during that period the person made taxable supplies, the value of which exclusive of any tax exceeded UGX37.5 million (approximately USD11,000)
  • 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 (approximately USD11,000)

Group registration. The Uganda VAT Act does not allow group registration.

Non-established businesses. A “non-established business” is a business that does not have a fixed place of abode or business in Uganda.

Tax representative of a nonresident. Any individual controlling the nonresident person’s affairs in Uganda, such as a manager of a business belonging to the nonresident person or any representa­tive appointed by the nonresident person in Uganda, is referred to as the nonresident person’s tax representative. The tax repre­sentative is responsible for performing any duty or obligation imposed by the tax law on a taxpayer, including the submission of returns and payment of tax.

Registration procedures. Applications for VAT registration are done online (https://www.ura.go.ug/) using a form/template pre­scribed by the Commissioner General. A person who applies for registration is registered and issued a certificate of registration if the Commissioner General is satisfied that the person is eligible for registration under the VAT Act and has a fixed place of abode or business. The Commissioner General must also be satisfied that that person:

  • Will keep proper accounting records relating to any business activity
  • Will submit regular and reliable tax returns as required by Section 31
  • Is a fit and proper person to be registered

Registration for VAT takes an average of two days from the date a complete application is submitted.

Late-registration penalties. A person who fails to apply for regis­tration as required by the VAT law is liable to pay a penalty equal to 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.

Reverse charge Generally, not applicable except for the import of services made by a contractor or licensee in the petroleum or mining sector, or a person providing business process outsourc­ing services.

Specifically, reverse charge does not apply in the following cases:

  • In cases where the importer of the service is a taxable person, the business of the supplier from which the services are sup­plied is in Uganda
  • In cases where the importer of the service is a nontaxable person, the services are performed in Uganda by a person who is in Uganda at the time of the supply or the services are in connection with immovable property in Uganda or the services are radio or television broadcasting services received in Uganda or the services are electronic services delivered to a person in Uganda or the supply of intellectual property rights in Uganda or the supply of telecommunication ser­vices

Digital economy. There are no special rules for the taxation of the digital economy. The general VAT Act applies.

Deregistration. In the following circumstances, the VAT-registered person should submit an application for VAT deregistration online by amending the taxable person’s TIN:

  • If the taxable person has ceased to make supplies of goods or services for consideration as part of their business activities
  • If, with respect to the most recent period of three calendar months, the value of taxable supplies exclusive of tax does not exceed one-quarter of the annual registration threshold and if the value of taxable supplies exclusive of tax for the previous 12 calendar months does not exceed 75 percent of the annual registration threshold

However, the Commissioner General may also initiate the cancel­lation of a person’s VAT registration if the Commissioner General is satisfied that any one of the following circumstances exist:

  • The taxable person is neither required nor entitled to apply for VAT registration
  • The taxable person has no fixed place of abode or business
  • The taxable person has not kept proper accounting records relating to its business activity
  • The taxable person has not submitted regular and reliable tax returns as required by Section 31
  • The taxable person is not, in the opinion of the Commissioner General, a fit and proper person to be registered

The Commissioner General is required to serve notice in writing on a taxable person of a decision to cancel or refuse to cancel registration within fourteen days of making the decision. The cancellation of registration takes effect from the end of the tax period in which the registration is cancelled.

Deregistration does not affect the person’s obligations and liabil­ities while the person was still a taxable person under the VAT Act, including the lodging of VAT returns and payments of any taxes due.

Currently, there is controversy on the issue of reverse-charge VAT on imported services regarding whether the place of supply provision is applicable to the imported services provision. The matter is before the courts of law and a deci­sion is yet to be delivered.

VAT rates

The term “taxable supply” refers to a supply of goods or services, other than an exempt supply, made by a taxable person for con­sideration in the course of his or her business activities.

The following are the VAT rates in Uganda:

  • Standard rate: 18%
  • Zero rate (0%)
  • Exempt (not in the VAT regime)

The standard rate of VAT generally applies to taxable supplies of goods or services. The zero rate applies to exports plus other sup­plies, examples of which are listed below.

Examples of supplies of goods and services taxable at 0%

  • Exports of goods or services from Uganda
  • International transport of goods or passengers and tickets for their transport
  • Drugs and medicines
  • Educational materials
  • Seeds, fertilizers, pesticides, and hoes
  • Sanitary towels and tampons and inputs for their manufacture
  • Leased aircraft, aircraft engines, spare engines, spare parts for aircraft and aircraft maintenance equipment
  • The supply of cereals grown and milled in Uganda
  • The supply of handling services provided by the National Medical Stores in respect of medical supplies, funded by donors

Exempt supplies generally do not give rise to a right to deduct input tax.

Examples of exempt supplies of goods and services

  • Livestock, unprocessed foodstuffs and unprocessed agricultural products except wheat grain
  • Postage stamps
  • Financial services
  • Services related to health insurance, life insurance, micro insur­ance and reinsurance services
  • Unimproved land
  • Sale, letting or leasing immovable property, other than:
    • Sale, lease or letting of commercial premises
    • Sale, lease or letting for parking or storing cars or other vehicles
    • Sale, lease or letting of hotel or holiday accommodation
    • Sale, lease or letting for periods not exceeding three months — Sale, lease or letting of service apartments
  • Education services
  • Veterinary, medical, dental, and nursing services
  • Social welfare services
  • Betting, lotteries and games of chance
  • Goods as part of a transfer of a business as a going concern by one taxable person to another taxable person
  • Burial and cremation services
  • Precious metals and other valuables to the Bank of Uganda for the State Treasury
  • Passenger transportation services (other than tour and travel operators)
  • Petroleum fuels subject to excise duty (motor spirit, kerosene and gas oil), spirit-type jet fuel, kerosene-type jet fuel and residual oils for use in thermal power generation to the national grid
  • Dental, medical and veterinary goods, including:
    • Dental, medical and veterinary equipment
    • Ambulances
    • Contraceptives of all forms
    • Maternity kits (mama kits)
    • Medical examination gloves
    • Medicated cotton wool
    • Mosquito nets, acaricides, insecticides and mosquito repellent devices
    • Diapers
  • Machinery, tools and implements suitable for use only in agri­culture
  • 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
  • Solar power
  • Life jackets, life-saving gear, headgear and speed governors
  • Any goods or services supplied to the contractors and subcon­tractors of hydroelectric power projects

Time of supply

The time when VAT becomes due is called the “time of supply.” The following are the rules for the time of supply:

  • If goods are applied for a person’s own use, the time of supply is the date on which the goods or services are first applied to the person’s own use.
  • If the goods or services are supplied as a gift, the time of supply is the date on which ownership in the goods passes or the per­formance of the service is completed.
  • In all other cases, the time of supply is the earliest of the fol­lowing dates:
    • The goods are delivered or made available, or the perfor­mance of the service is completed.
    • The payment for the goods or services is made.
    • A tax invoice is issued.

If goods are supplied under a rental agreement or if goods or services are supplied under an agreement or law that provides for periodic payments, the goods or services are treated as succes­sively supplied for successive parts of the period of the agree­ment or supplied as determined by that law, and each successive supply occurs on the earlier of the date on which payment is due or received.

Imported goods. VAT on imported goods is due at the time of import.

Recovery of VAT by taxable persons

A credit is allowed to the taxable person for the tax payable with respect to taxable supplies made to that person during the tax period and all imports of goods made by that person during the tax period, if the supply or import is for use in the business of the taxable person.

On registration, a credit is allowed to a taxable person for input tax paid or payable with respect to taxable supplies of goods, including capital assets, made to the person, and imports of goods, including capital assets, made by the person before regis­tration, if all of 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 for capital goods and four months for other supplies before the registration date.

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). 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 the person is in the business of providing entertainment or supplies meals or refreshments to his or her employees in premises operated by him or her, or on his or her behalf solely for the benefit of his or her employees

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.

The Commissioner General may approve a proposal by a taxable person for the apportionment of input tax credit when the taxable person makes both taxable and 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 his or her liability for tax for that period by less than UGX5 million, the Commissioner General may offset the excess amount against the future liability of the taxable person, except in the case of an investment trader or person providing mainly zero-rated supplies. In addition, with the consent of the taxable person, if the taxable person’s input credit exceeds his or her liability for tax for that period by UGX5 million 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 taxpayer.

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.

Preregistration costs. A credit is allowed 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 that the supply or import occurred not more than six months prior to the date of registration.

Recovery of VAT by nonresidents

Uganda does not refund VAT incurred by a foreign business, unless the foreign business has a permanent establishment in Uganda and is registered for VAT in Uganda. However, the Commissioner General may appoint a tax representative for a nonresident who should file and account for VAT on the nonresi­dent’s behalf.

Invoicing

VAT invoices and credit notes. A tax invoice must contain the fol­lowing particulars:

  • The words “tax invoice” written in a prominent place
  • The commercial name, address, place of business, and the tax identification number of the taxable person making the supply
  • The commercial name, address, place of business, and the tax identification number of the recipient of the taxable supply
  • The individualized serial number and the date on which the tax invoice is issued
  • A description of the goods or services supplied and the date on which the supply is made
  • The quantity or volume of the goods or services supplied
  • The tax rate for each category of goods and services described in the invoice
  • The total amount of tax charged, the consideration for the sup­ply exclusive of tax and the consideration inclusive of tax

A credit note must contain the following particulars:

  • The words “credit note” in a prominent place
  • The commercial name, address, place of business, and the tax identification and VAT registration numbers of the taxable per­son making the supply
  • The commercial name, address, place of business, and the tax identification and VAT registration numbers of the recipient of the taxable supply
  • The date on which the credit note was issued
  • Tax rate
  • Taxable value of the supply shown on the tax invoice, the cor­rect amount of the taxable value of the supply, the difference between those two amounts, and the tax charged that relates to that difference
  • A brief explanation of the circumstances resulting in the issu­ance of the credit note
  • Sufficient information to identify the taxable supply to which the credit note relates

Proof of exports. Goods that are supplied by a registered taxpayer to a person in another country that are delivered by a registered taxpayer to a port of exit for export may be invoiced at the zero rate if the registered taxpayer obtains documentary proof and if the goods are removed from Uganda within 30 days of delivery to a port of exit.

The Commissioner General may require that goods for export specified in a notice in the Uganda Gazette be distinctively labeled by the registered taxpayer. The Commissioner General will issue guidelines to specify the color, size, and type of labels.

For an export transaction to qualify for the zero rate, a registered taxpayer must show as proof of export the following:

  • A copy of the bill of entry or export certified by the customs authorities
  • A copy of the invoice issued to the foreign purchaser with tax shown at the zero rate
  • Evidence sufficient to satisfy the Commissioner General that the goods have been exported, in the form of an order from, or signed contract with, a foreign purchaser, or transport docu­mentation that identifies the goods such as transit order or consignment note, copy of bill of lading, copy of airway bill or copy of transit document

If services are supplied by a registered taxpayer to a person out­side Uganda, the services qualify for a zero rate only if the tax­payer can provide evidence that the services are used or consumed outside Uganda. This evidence can be in the form of a contract with a foreign purchaser and must clearly indicate that the place of use or consumption of the service is outside Uganda or that the service is provided for a building or premises outside Uganda.

Foreign-currency invoices. Foreign-currency invoices are treated in the same manner as local-currency invoices. However, the tax authorities require that for purposes of accounting for output VAT and input VAT, the exchange rate prescribed by the tax authorities for that tax period is used.

VAT returns and payment

VAT returns. The VAT tax period is one month. Returns must be filed by the 15th day after the end of the tax period. Payment is due in full by the same date. 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.

Special schemes. Not applicable.

Electronic filing and archiving. All VAT returns are now being submitted online following the introduction of the e-tax system. The returns are populated and uploaded using return templates designed by the tax authorities. Similarly, amendments to VAT returns are also done online.

Annual returns. Where 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.

Penalties

The late submission of a return is subject to a penalty of UGX200,000 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.

A person is liable to pay penal tax equal to double the amount of tax due, refund or an offset claim if the person knowingly or reck­lessly makes a statement or declaration to an official that is false or misleading regarding a material item or omits from a state­ment made to an officer any matter or item without which the statement is materially misleading and if the tax properly payable by the person exceeds the tax that was assessed based on the false or misleading information, the amount of the refund claimed is false or the person submitted a return with an incorrect offset claim.