At least every person who has bought goods or services in Uganda has paid an indirect tax called value added tax (VAT), in addition to the purchase price. This tax, with exceptions, may be claimed from the Uganda Revenue Authority by a person who is registered for value added tax.
There are several conditions to be fulfilled before one can successfully be registered for VAT in Uganda. These range from the nature of the goods and services sold by the person seeking to be registered, the total turnover over a given period, to whether the person is fit and proper to be registered for VAT.
Persons required or permitted to register for value added tax are specified under the Value Added Tax Act, Cap. 345, Laws of Uganda. Registration is mandatory for a person who has made or expects to make taxable goods and services, whose value, exclusive of value added tax is UGX 37.5 Million in a period of 3 consecutive calendar months, or an annual turnover of UGX. 150,000,000.
Where the person has not met the threshold indicated above, deals in taxable goods and services and desires to register for value added tax, that person may voluntarily apply to the Commissioner General, Uganda Revenue Authority to be registered.
The Commissioner General may decline to register the applicant if that person does not have a fixed address; or the Commissioner General has reasonable grounds to believe that that person will not keep proper accounting records relating to any business activity carried on by that person; will not submit regular and reliable tax returns; or is not a fit and proper person to be registered for value added tax.
It is important to note that it is only persons who make taxable goods and services (taxable supplies) who can be registered for value added tax purposes. A taxable supply is defined to mean 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. Exempt supplies are specified under the Second Schedule to the Value Added Tax Act, and include financial services, livestock, unprocessed food stuffs, unprocessed agricultural products, burial and cremation services, education services among others. Any service or goods not provided for under this Schedule and is sold in Uganda, is a taxable supply.
Consequently, any person who sells goods or services which are specified as exempt from VAT need not apply to be registered for Value Added Tax, unless that person is dealing in separate goods and services where some are subject to VAT and some are exempted from VAT.
An application to be registered for value added tax is an online application made through the Uganda Revenue Authority website portal. Registration for value added tax takes effect, in case of mandatory registration, from the beginning of the month immediately following the period in which the duty to apply for registration arose; and in case of voluntary registration, from the beginning of the month immediately following the month in which the person applied for registration.
The obligations of the person upon registration include charging and accounting for Value Added Tax to the Uganda Revenue Authority at a rate of 18% or 0% whichever applies, in accordance with the Value Added Tax Act. The registered person will also be required to lodge a value added tax return for each month within 15 days after the end of that month. It is in the same returns that the registered person will claim for the value added tax paid on the goods and services purchased for use in the business.
Failure to register, and account for VAT poses a risk of additional taxes and penalties on non-payment and non-filing of the tax returns. The computation of this tax liability will cover the period from the month in which the person was required to be registered but did not.
Therefore, a business that ought to be registered for value added tax should make a timely application for registration in order to control the amount of additional tax and penalties due. Also, where a person is not required to be registered but fulfils the conditions for voluntary registration, that person may apply for VAT registration to take advantage of the claim for the value added tax incurred on purchases used or to be used in the carrying on of the business.
What Belongs to Caeser 