1. TAXABLE SUPPLIES

A taxable supply is a supply of goods or services, other than an exempt supply, made in Uganda by a taxable person for consideration as part of his or her business activities. Taxable supplies are either standard rated or zero rated.

1. Standard rated supplies: These are supplies on which VAT is charged at a rate of 18%. These include all supplies excluding supplies that are included under the second and third schedules of the VAT law.

Examples of taxable supplies liable to VAT

• Sales of business assets (e.g. equipment, furniture, commercial vehicles);
• Hire or leasing/letting of goods to someone else at a cost;
• Goods which you or your families have taken from the business for own use;
• Commission received in return for selling something on behalf of someone else.
• Sales to your staff or relatives (e.g. your products supplied free of charge, or at reduced prices);
• Sales from vending machines;

1. Zero rated supplies: These are supplies on which VAT is charged at a rate of 0%. Zero rated supplies are listed under the third schedule of the VAT law and include; all exports, drugs and medicines manufactured in Uganda, and cereals where such cereals are grown and milled in Uganda.

2. EXEMPT SUPPLIES

These are supplies of goods and services on which VAT is not charged. Exempt supplies are listed under the second schedule to the VAT law and include;

• Health insurance and life insurance services
• Petroleum fuels
• Social welfare services
• Educational services
• Financial Services
• Passenger transportation services

NOTE: A person dealing only in exempt supplies is not required to register for VAT while one dealing in zero rated and standard rated supplies is required to register in case they meet the registration requirements.

3. CONSIDERATION

This is payment that may be received in form of money or in kind, wholly or partly when a person makes a taxable supply.

4. A PERSON

A person includes an individual, a partnership, a trust, a company, a retirement fund, a Government, a political subdivision of government and a listed institution.

5. A TAXABLE PERSON

A taxable person is:

1. A person who is registered for VAT.
2. A person who is not registered but is required to be registered for VAT.

6. INPUT TAX

Input tax means the tax paid or payable in respect of purchases of taxable supplies or on imports made by a taxable person for example if one is manufacturing water and buys packaging material, the VAT that person is charged on packaging material is input VAT.

7. OUTPUT TAX

This is the VAT charged by a taxable person when selling a taxable supply. When a person is registered for VAT, they will charge VAT on the sale of a taxable supply and the VAT charged is output tax.

8. VAT PAYABLE or CLAIMABLE

Where a person’s output VAT (VAT on sales) is greater than the input VAT (VAT on purchases/expenses), the difference is VAT payable to URA. In case the person’s input VAT is more that the output VAT, the difference is VAT claimable by the person. A person whose input is greater than output and hence in a VAT claimable position may opt to either get a refund from URA where the claimable amount is more than 5 million shillings, or offset the claimable amount against any VAT payable in future.

9. VAT MECHANISM

VAT is collected at different stages in the production and distribution of a good or services. When a person imports or manufactures an item, they are charged VAT on what they use to make such an item including expenses incurred. When the person sells to the wholesaler, they charge VAT. The difference between the VAT they charge and what they have been charged is what they pay. This continues until the good or service gets to the final consumer who pays all the VAT, meaning that VAT is a tax on final consumption.

1. A person who carries on or intends to carry on business activities is required to apply to be registered for VAT, if their sales of goods and services charged to VAT for three uninterrupted calendar months exceeds or is likely to exceed Shs 37.5 million or if for twelve months, their annual sales chargeable to VAT exceed Shs. 150m. These supplies can either be zero-rated or standard rated.

2. A person being a national, regional, local or public authority or body which carries on business activities or intending to carry on business activities is required to apply to be registered for VAT regardless of the turnover.

Registration for VAT may be voluntary or compulsory.

• Compulsory Registration

If during the past 3 calendar months one made taxable sales whose value without VAT exceeded Shs. 37.5 million, that person has to immediately register for VAT. Or, if one reasonably expects that during the next 3 calendar months the total value of your taxable sales is likely to exceed Shs.37.5 million then that person must register for VAT.

• Voluntary Registration

A person whose sales do not exceed Shs 37.5 million for every three months or 150 million in 12 months may apply for voluntary registration. Such a person should satisfy URA that they have a fixed place of abode, are able to keep proper records and are a fit and proper person.

Accounting for VAT if value of supply is not clear

VAT on any goods or services where value is not clearly defined should be accounted for basing on the fair market value at the time the supply is made; e.g. barter trade, gifts, own use.

Obligations after VAT registration

Upon registration, a person is required to;

• Charge and collect VAT on supplies (sales) by issuing a tax invoice for goods and services sold
• Register for the Electronic Fiscal Receipting and Invoicing Solution – EFRIS and issue invoices online
• File a VAT return within 15 Days after the end of the month. EFRIS supports pre-filled returns and the person is only required to crosscheck if the facts in the return are true
• Pay VAT that arises in their return within 15 days after the end of the month. Currently when the return is filed, the the pay slip is automatically generated.
• Maintain proper records

EFRIS is a smart business solution that businesses use to issue e-receipts or e-invoices and manage their stock movement in real time. All VAT-registered taxpayers are required to use EFRIS to issue e-invoices to their customers. They are also expected to buy from suppliers who must issue them with e-invoices if the items bought include VAT. However, other non-VAT registered taxpayers can also voluntarily use EFRIS (in this case, they issue clients with e-receipts).

VAT is charged at 18% or 0% at each stage in the production/ distribution chain on the value added to a taxable good or service. Every VAT registered client in the value chain is entitled to a credit on the excess of VAT incurred.

A final consumer (non-registered VAT client) is not entitled to a tax credit and therefore bears the tax. This ensures that tax due is credited to you and tax due to the government is paid to URA as shown in the illustration below:

• In the above example when a trader is to purchase a taxable item at 1,000/=, they will incur 180/= as VAT. This makes the total cost of the item 1,180/=. In such a scenario 180/= is the VAT tax credit for the trader (input tax).
• When the trader sells the same item at 1,500/=, it will attract VAT of 18% amounting to 270/= that is output VAT.

Computation

Output VAT Ugx.270 minus Input VAT Ugx.180  

Therefore, Ugx.90 is payable to URA by the trader

If a trader is transacting through EFRIS, the above calculation is automatic. At the time of filing a VAT monthly return to URA, the trader only has a duty of confirming and updating these details before submitting a return to URA.