The government relies on taxes to run the entire economy of the nation, with numerous government activities that assist to improve the overall welfare of the people tied to tax, the government can further improve the welfare of the citizens through the payment of taxes. One such tax collected by the government is the Value Added Tax (VAT).
This article offers all there is to know about the Value Added Tax in Uganda.
What is Value-Added Tax?
Value-added tax (VAT) is a consumption tax imposed on goods and services at every point in the production chain until the finished product or service is prepared for sale to the consumer. While detractors claim it is a regressive tax that unfairly burdens lower-income consumers, the tax style often creates revenue for the government and is paid for by the final consumer. The VAT system is in operation in more than 160 nations, and it is often challenging for anyone to evade paying the VAT.
Value-added tax (VAT) rate in Uganda
In Uganda, VAT is levied on imports as well as on products and services offered in the country. Certain imports, some products and services are listed by the Uganda Revenue Authority as not subject to VAT. The usual VAT rate in Uganda is 18%, thus if you are providing taxable supplies, a VAT of 18% will be applied. The sale of commercial cars, the sale of company assets like furniture, the use of company assets by business owners or their family members for personal use, and leasing products to third parties are a few instances of taxable supply.
Following the Uganda Revenue Authority, supplies that a business provides at a discount to its customers are still taxable. A taxable supply in Uganda is one in which the business receives a commission for selling a product or service to someone else, whether or not it is offered at a discount. Zero-rated supplies are a different area of VAT, in Uganda, the business can claim input VAT on purchases of goods and services utilized for business activities, and zero-rated suppliers have a zero percent VAT assessed on them. Exports, Ugandan-made prescriptions and medications, and transportation supplies of goods are all considered zero-rated supplies.
VAT process in Uganda
1. Charge VAT on supplies
If the business operated is a taxable supply, business owners must have a system in place to make sure they are issuing accurate VAT allocations to the government.
The tax invoice should be specific about the item’s cost and the amount of VAT that the client or customer is charged for each item. To avoid issues later on, it is the job of the business owners to charge VAT on purchases and send out tax invoices on time.
2. File VAT return
As soon as the business is qualified to collect VAT, the business must register for VAT on the Uganda Revenue Authority website. After completing the registration process, the business must file a refund. The deadline for completing this process is 15 days after the preceding month. In Uganda, the VAT return must be filed monthly.
Despite there being no transactions during the specified month, filing the VAT return is required and highly necessary. For all returns, it contains information on the input tax and output tax of the business. In Uganda, the greater of the two penalties listed below must be paid if returns are not submitted by the deadline: Shs200,000 or 2% each month of the compounded return amount to be submitted for that month.
3. Maintain records
Most importantly, businesses must register for VAT in Uganda when their annual income reaches Shs150 million and their taxable turnover surpasses Shs37.5 million. Businesses that fall below this threshold in terms of turnover are exempted from VAT payments. Also, businesses do not have to register for VAT if they are dealing with exempt goods, but businesses must register if they are making zero-rated supplies.
How to register your business for VAT in Uganda
Businesses can easily register for VAT in Uganda by following the steps below:
1. Go to the URA website
Visit https://ura.go.ug, the Uganda Revenue Authority’s official website, and log in with the business’ credentials. If the business hasn’t registered yet, it can do so quickly by entering the necessary information, including its Tax identification number, effective registration date, form number, and passcode.
2. Download the form online
Go to the bottom page of the website when successfully logged in. A section labelled “Download Forms,” followed by “Download Online Forms”, would be visible, click on the section and move on to “Annexure 2 for VAT Registration” then select “DT-1011,” which is shown in the e-Form column.
3. Fill out the value-added tax form
The form requires tons of information to be filled when making the application for VAT registration, including but not limited to, the reason for the registration, information about your company’s revenue, any applicable tax relief, and so on. Ensure to get in the appropriate and correct information.
4. Preview and validate
Click the “Validate” section after filling out the online form. Once this is done, a prompt will appear informing you of any mistakes that may have occurred during registration. If any, ensure they are sorted before validating once more. To create and upload the file once all is ready, click “Ok” on the screen.
You can then save the uploaded file for safe storage, and your VAT registration in Uganda has been completed.
Businesses that are exempted from paying VAT in Uganda
The majority of frequently used items and services that are VAT-exempt in Uganda fall under the category of medicine and pharmaceuticals, and some examples are as follows:
I. Pharmaceutical producers’ equipment for ventilation;
III. Hearing aid;
IV. Adhesive bandages;
VI. Ambulatory motorboat;
VIII. Blood analysis with chemical analyzers;
X. Ultrasound units;
XI. Ophthalmic equipment;
XII. Graphic heart-rate monitor;
XIII. AC equipment for makers of pharmaceuticals;
XIV. Fabricated body parts;
XV. Pregnancy supply;
XVI. Drug-laced cotton wool;
XVII. Braille sheets Braille equipment;
XVIII. Dental drill tools;
XIX. Automobile ambulance;
XX. Devices for the eyes;
XXI. Storage of dead bodies using refrigeration equipment;
XXII. Pharmaceutical manufacturers’ heating equipment;
XXIII. Along with these, supplies related to offering health and life insurance, agricultural insurance, educational services, passenger transportation-related services, petroleum and fuel, and social welfare services are also exempt from paying VAT.
VAT collection in Uganda has since gone through pivotal changes that have affected the overall growth and development of the production of goods and the offering of services in Uganda. This article offered all there is to know about VAT collection in the Ugandan economy.
Frequently Asked Questions
The Ugandan economy is one of the largest in East Africa, the country is mostly dependent on tourism and raw materials as a boost to its economy and GDP. The country’s economy stands at $40.53 billion as of 2022. The economy is considered a lower-middle-income economy and an emerging market.
Yes, foreigners and foreign companies can opt to register for the Ugandan VAT collection when offering services to Ugandans within the country or importing products into Uganda. Nonetheless, foreign companies are also exempted from paying VAT on products and services that are exempt from taxable supplies.