A taxpayer can apply for voluntary Value Added Tax (VAT) registration for various reasons. One of the common incidences is that business owners apply for voluntary VAT registration to compete for certain bids.
This request, once granted, requires the VAT taxpayer to meet several obligations. However, many such VAT-registered taxpayers tend to abandon their VAT obligations once they lose out on the bid of interest, thus leaving behind a trail of arrears, interests and penalties accrual.
VAT is an indirect consumption tax charged on value-added to taxable supplies at different stages in the chain of distribution. In Uganda, VAT is imposed on the supply of goods and services (taxable supplies) made by a taxable person, other than exempt supplies and non-exempt imports.
As a VAT-registered taxpayer, whether mandatory or voluntarily registered, you are supposed to have a fixed place of business where you trade in the goods or services they deal in, charge VAT while issuing proper tax invoices which are generated through EFRIS, and keep proper financial records with proper invoices, sales records, and expenses incurred.
In addition, VAT taxpayers must file proper and reliable VAT returns every 15th of the next month after the previous month. A taxpayer can file a nil return in case there was no VAT collected, then they must pay the VAT collected on time every month.
If one has a Shs37.5 million taxable turnover in three consecutive months or registers Shs150m annual turnover, or deals in goods or services that have an aspect of value addition or value derived, then they are mandated to register for VAT.
Failure to register for VAT when one meets the criteria attracts penalties, some of which include a fine not exceeding Shs3 million or imprisonment not exceeding 6 years or both on conviction if the act was done recklessly. They are also liable to pay a penal tax double the amount of tax payable for the period they remained unregistered.
Failure to file a VAT return by the due date attracts a fine of Shs2 million or imprisonment for not more than 6 years upon conviction. Failure to lodge a return within the required attracts a penal tax amounting to Shs200,000 or interest at 2% per month compounded for the period the return is outstanding whichever is higher.
In July 2020, URA introduced the Electronic Fiscal Receipting and Invoicing Solution(EFRIS) mandating all VAT-registered taxpayers to enroll and issue fiscalised receipts and invoices. As at 31st December 2022, the EFRIS register stood at 57,588 taxpayers out of which 31,890 are VAT-registered taxpayers while the remaining 24,455 not VAT-registered.
The system was introduced to address illegalities in VAT which had over time posed a threat to efficient revenue collection. The system offers an end-to-end trace of the transaction data due to real-time taxpayer records interfacing with URA systems.
Non-usage of EFRIS also attracts penalties which include Shs8m for failure to obtain an e-invoicing device for mandated taxpayers. In addition, failure to issue EFRIS invoices or tampering with an invoice attracts a penalty of Shs6 million. A taxpayer who decides to disconnect or refuse to link their electronic fiscal devices or systems to URA could either get imprisoned for 3 years or pay Shs6m or both.
These penalties are deterrents for taxpayers to avoid engaging in VAT-related offences.
“Taxpayers who charge VAT collect that tax on behalf of URA and are supposed to remit it is a selfish act on the part of the taxpayers because they deny Ugandans access to better services that such taxes would fund,” Ibrahim Bbossa, URA’s spokesperson emphasized.
Bbossa urges consumers to always demand e-receipts when they buy VATable goods or services from shops or several outlets.
“When you demand an e-receipt, you are guaranteed that URA will collect this tax since it has a direct interface with taxpayers through EFRIS,” added Bbossa.
When one does not voluntarily comply with VAT registration and obligations, URA applies several compliance measures such as issuing third-party agency notices to bankers of the affected taxpayers so that the taxes due are collected.
In all this, compliance with VAT obligations comes with benefits such as the ability to supply large and credible businesses which improves profit earnings and growth. The taxpayer also avoids inconveniences like unfair assessments and offenses related to VAT registration, return filing and failure to pay.