Vat Registration Requirements In Uganda
VAT is governed by the VAT Act and administered by the Uganda Revenue Authority (URA).
VAT is charged at the rate of 18% on the supply of most goods and services in the course of business in Uganda. Specified goods and services, as well as exports outside of Uganda, attract a zero rate of tax.
Some supplies are exempt from VAT, the main categories being services to conduct feasibility studies, locally produced raw materials subject to investment thresholds and industry, liquefied petroleum gas, financial services, health and life insurance, agriculture insurance policies, re-insurance services, unimproved land, leases and sale of certain residential properties, betting and gaming, education, medical and health services, imported drugs, medicines and medical sundries, social welfare services, pesticides, and petroleum products subject to excise duty.
Zero rating is preferable to exemption because the VAT on costs incurred in making a zero-rated supply can be recovered while those incurred in making an exempt supply cannot be recovered.
The zero-rated supplies include the supply of goods and services exported from Uganda; the supply of drugs and medicines manufactured in Uganda; the supply of seeds, fertilisers, pesticides, and hoes; and the supply of leased aircraft, aircraft engines, spare engines, spare parts for aircraft, and aircraft maintenance equipment and repair services.
Besides the exempted and zero-rated supplies, there is a deemed VAT regime that applies to the upstream and midstream operations in the oil and gas sector, mining operations, as well as aid-funded projects.
The tax payable on a taxable supply made by a supplier to a contractor executing an aid-funded project and by a contractor to a licensee to undertake mining or petroleum operations is deemed to have been paid by the supplier (in the case of the aid-funded projected) or the contractor (in the case of mining and petroleum operations) provided the supply is for use by the contractor solely and exclusively for the aid-funded project or the petroleum/mining operations.
The annual threshold for VAT registration is UGX 150 million. Persons who make supplies that are Vatable and whose turnover exceeds UGX 150 million are required to register for VAT with the URA. VAT-registered persons are required to:
- Charge VAT whenever they make supplies that are Vatable.
- File monthly returns before the 15th day of the month following the reporting month.
- To only claim a tax credit on expenses supported by e-invoices or e-receipts.
Also, taxable persons supplying remote services such as electronic services to non taxable persons in Uganda are required to register for VAT and file quarterly VAT returns.
Credit for input tax
- A person making exempt, zero-rated, and standard supplies can recover all the input VAT if the exempt supplies are less than 5% of the total supplies. However, if the exempt supplies are more than 5% but less than 95%, the person is required to recover only a portion of the VAT input tax corresponding to the percentage of the taxable supplies. If the exempt supplies exceed 95%, the person cannot recover any input VAT.
- A taxable person can only utilise their input tax credit within 6 months from the date of the invoice.
Imported services
The VAT Act defines a supply of service to mean any supply that is not a supply of goods or money, including the performance of services for another person.
There is no definition of imported services in the local legislation. However, the tax authorities generally consider an imported service to be one provided by a person normally resident outside Uganda who is not required to register for VAT in Uganda.
According to Regulation 14 of the VAT Regulations 1996, any person who imports a service into the country must account for VAT on such a service.
The Regulations require the person importing the service to account for the VAT at the time when performance of the service is completed, when payment for the service is made, or when the invoice is received from the foreign supplier, whichever is earliest.However, an imported service is exempt for VAT purposes if it is to be used in the provision of an exempt supply.
The tax on imported services is computed at the rate of 18% of the cost of the service.
VAT-registered companies are no longer required to prepare self-billed tax invoices, thus they are unable to claim the VAT paid as input tax; however, a contractor or licensee in the petroleum and mining industry is able to claim an input tax credit for the reverse-charge VAT paid on imported services.
Also, persons providing business process outsourcing (BPO) services are allowed to claim credit for input tax for VAT paid on imported services. Further, if the importer of the services is not registered for VAT, the importer is required to calculate and pay the VAT to the URA.
Failure to pay VAT on non-exempt imported services is tantamount to lack of compliance with the law, and a penalty of 2% per month, compounded, may apply.
Interest payable on late payment of VAT is capped to a maximum of the aggregate of the principal tax and penal tax.
VAT representative for non-resident persons
The Tax Procedure Code Act now provides for a role of tax representative for a non-resident person being the individual controlling the person’s affairs in Uganda, including a manager of a business of that person or any representative appointed in Uganda.
A tax representative under the Tax Procedure Code Act is responsible for performing any duty obligation imposed by a tax law on the taxpayer, including submission of tax returns and payment of tax.
What products are tax exempt in Uganda?
The exemption is limited to the following activities: Processing of agricultural goods. Manufacture or assembly medical appliances, medical sundries or pharmaceuticals, building materials, automobiles, household appliances. Manufacture of furniture, pulp, paper, printing and publishing of instructional materials.
Who pays VAT in Uganda?
Persons who make supplies that are Vatable and whose turnover exceeds UGX 150 million are required to register for VAT with the URA. VAT-registered persons are required to: Charge VAT whenever they make supplies that are Vatable. File monthly returns before the 15th day of the month following the reporting month.