2019 Worldwide VAT, GST and Sales Tax Guide - Uganda

• Taxable supplies of goods and services made in Uganda by taxable persons
• Imports of goods other than exempt imports
• Supplies of imported services other than exempt services

The term “taxable supply” refers to a supply of goods or services, other than an exempt supply, made in Uganda, by a taxable person for consideration in the course of his or her business activities.

The following are the VAT rates in Uganda:

• Standard rate: 18%
• Zero rate: (0%)
• Exempt: (not in the VAT regime)

The standard rate of VAT generally applies to taxable supplies of goods or services. The zero rate applies to exports plus other supplies, examples of which are listed below.

Examples of supplies of goods and services taxable at 0%

• Exports of goods or services from Uganda
• International transport of goods or passengers and tickets for their transport
• Drugs and medicines
• Educational materials
• Seeds, fertilizers, pesticides, and hoes
• Sanitary towels and tampons and inputs for their manufacture
• Leased aircraft, aircraft engines, spare engines, spare parts for aircraft and aircraft maintenance equipment
• The supply of cereals grown and milled in Uganda
• The supply of handling services provided by the National Medical Stores in respect of medical supplies, funded by donors

Exempt supplies generally do not give rise to a right to deduct input tax.

Examples of exempt supplies of goods and services

• Livestock, unprocessed foodstuffs and unprocessed agricultural products except wheat grain
• Postage stamps
• Financial services
• Services related to health insurance, life insurance, micro insurance and reinsurance services
• Unimproved land
• Sale, letting or leasing immovable property, other than:
  • Sale, lease or letting of commercial premises
  • Sale, lease or letting for parking or storing cars or other vehicles
  • Sale, lease or letting of hotel or holiday accommodation
  • Sale, lease or letting for periods not exceeding three months
  • Sale, lease or letting of service apartments
  —
• Education services
• Veterinary, medical, dental, and nursing services
• Social welfare services
• Betting, lotteries and games of chance
• Goods as part of a transfer of a business as a going concern by one taxable person to another taxable person
• Burial and cremation services
• Precious metals and other valuables to the Bank of Uganda for the State Treasury
• Passenger transportation services (other than tour and travel operators)
• Petroleum fuels subject to excise duty (motor spirit, kerosene and gas oil), spirit-type jet fuel, kerosene-type jet fuel and residual oils for use in thermal power generation to the national grid
• Dental, medical and veterinary goods, including:
  • Dental, medical and veterinary equipment
  • Ambulances
  • Contraceptives of all forms
  • Maternity kits (mama kits)
  • Medical examination gloves
  • Medicated cotton wool
  • Mosquito nets, acaricides, insecticides and mosquito repellent devices
  • Diapers
  —
• Animal feeds and premixes
• Selected machinery, tools and implements suitable for use only in agriculture
• Crop extension services
• Irrigation works, sprinklers and ready-to-use drip lines
• Deep cycle batteries, composite lanterns and raw materials for the manufacture of deep cycle batteries and composite lanterns
• Menstrual cups
• Agriculture insurance premium or policy
• Photosensitive semiconductor devices, including photovoltaic devices, regardless of whether they are assembled in modules or made into panels, light-emitting diodes, solar water heaters, solar refrigerators and solar cookers
• Solar power
• Life jackets, life-saving gear, headgear and speed governors
• Any goods or services supplied to the contractors and subcontractors of hydroelectric power projects
• Movie production
• Bibles and Qur’ans and textbooks
• Services to conduct feasibility study, design and construction:
  • Construction materials to a developer or operator of an industrial park or free zone, the developer’s investment capital is at least USD100 million and the operator’s should be at least USD15 million (foreigner) or USD10 million in case of a citizen
  • Locally produced materials for construction of premises, infrastructure, machinery and equipment or furnishings and fittings that are not available on the local market to a hotel or tourism facility developer whose investment capital is USD8 million with room capacity exceeding 100 guests
  • Locally produced materials for construction of premises, infrastructure, machinery and equipment or furnishings and fittings to a hospital facility developer whose investment capital is at least USD5 million and who develops a hospital at the level of a national referral hospital with capacity to provide specialized medical care
  —
• Wet processing operations and garmenting, cotton lint, artificial fibers for blending; polyester staple fiber, viscose rayon fiber yarn other than cotton yarn, textile dyes and chemicals garment accessories, textile machinery spare parts, industrial consumables for textile production, textile manufacturing machinery and equipment
• Fabrics and garments made in Uganda by vertically integrated textile mills that operate spinning, weaving/knitting, wet processing operations and garmenting
• Production inputs into iron ore smelting into billets for further value addition in Uganda
• Production inputs into limestone mining and processing and processing into clinker in Uganda and the supply of clinker for further value addition in Uganda
• Production inputs necessary for processing of hides and skins into finished leather products in Uganda and the supply of leather products wholly made in Uganda

A credit is allowed to the taxable person for the tax payable with respect to taxable supplies made to that person during the tax period and all imports of goods made by that person during the tax period, if the supply or import is for use in the business of the taxable person.

On registration, a credit is allowed to a taxable person for input tax paid or payable with respect to taxable supplies of goods, including capital assets, made to the person, and imports of goods, including capital assets, made by the person before registration, if all of the following conditions are satisfied:

• The supply or import was for use in the business of the taxable person.
• The goods are on hand at the date of registration.
• The supply or import occurred not more than six months for capital goods and four months for other supplies before the registration date.

Nondeductible input tax. VAT may not be recovered on purchases of goods and services that are not used for business purposes (for example, goods acquired for private use by an entrepreneur). In addition, input tax may not be recovered for certain business expenses.

The following lists provide some examples of items of expenditure for which input tax is not deductible and examples of items for which input tax is deductible if the expenditure is for purposes of making a taxable supply.

Examples of items for which input tax is nondeductible

• Taxable supply or import of a passenger automobile and the repair and maintenance of the automobile, including spare parts
• Entertainment (provision of food, beverages, tobacco, accommodation, amusement, recreation or hospitality of any kind) unless the person is in the business of providing entertainment or supplies meals or refreshments to his or her employees in premises operated by him or her, or on his or her behalf solely for the benefit of his or her employees

Examples of items for which input tax is deductible (only if related to a taxable business use)

• A supply or import of a passenger automobile and the repair and maintenance of the automobile, including spare parts, if the automobile is acquired by the taxable person exclusively for the purpose of making a taxable supply of that automobile in the ordinary course of a continuous and regular business of selling, dealing in or hiring of passenger automobiles
• Entertainment if the taxable person is in the business of providing entertainment
• Supplies of meals or refreshments by employers to their employees in premises operated by the employers or on the employers’ behalf, solely for the benefit of the employees

Partial exemption. If a taxable supply to, or an import of goods by, a taxable person is partly for a business use and partly for another use, the amount of the input tax allowed as a credit is the part of the input tax that relates to the business use.

If the percentage of the total amount of taxable supplies to the total amount of all supplies made by the taxable person during the period (other than the supply of goods as part of the transfer of a business as a going concern) is less than 5%, the taxable person may not credit any input tax for the period.

If the percentage of the total amount of taxable supplies to the total amount of all supplies made by the taxable person during the period (other than the supply of goods as part of the transfer of a business as a going concern) is more than 95%, the taxable person may credit all input tax for the period.

The Commissioner General may approve a proposal by a taxable person for the apportionment of input tax credit when the taxable person makes both taxable and exempt supplies.

Refunds. If, for a tax period, a taxable person’s input tax credit exceeds the person’s liability for tax for that period, the Commissioner General must refund the excess to the person within one month after the due date for the return for the tax period to which the excess relates, or within one month of the date when the return was filed if the return was not filed by the due date.

Notwithstanding the above, if the taxable person’s input credit exceeds his or her liability for tax for that period by less than UGX5 million, the Commissioner General may offset the excess amount against the future liability of the taxable person, except in the case of an investment trader or person providing mainly zero-rated supplies. In addition, with the consent of the taxable person, if the taxable person’s input credit exceeds his or her liability for tax for that period by UGX5 million or more, the Commissioner General may offset the excess amount against the future liability of the taxable person, or apply the excess in reduction of any other tax not in dispute that is due from the taxpayer.

A claim for a refund of input tax must be made in a return within three years after the end of the tax period in which tax was overpaid.

Preregistration costs. A credit is allowed to a taxable person on becoming registered for input tax paid or payable in respect of:

• All taxable supplies of goods, including capital assets, made to the person prior to the person becoming registered
• All imports of goods, including capital assets, made by the person prior to becoming registered

Where the supply or import was for use in the business of the taxable person, the input tax paid for those supplies is creditable provided that the goods are on hand at the date of registration and that the supply or import occurred not more than six months prior to the date of registration.

VAT invoices and credit notes. A tax invoice must contain the following particulars:

• The words “tax invoice” written in a prominent place
• The commercial name, address, place of business, and the tax identification number of the taxable person making the supply
• The commercial name, address, place of business, and the tax identification number of the recipient of the taxable supply
• The individualized serial number and the date on which the tax invoice is issued
• A description of the goods or services supplied and the date on which the supply is made
• The quantity or volume of the goods or services supplied
• The tax rate for each category of goods and services described in the invoice
• The total amount of tax charged, the consideration for the supply exclusive of tax and the consideration inclusive of tax

A credit note must contain the following particulars:

• The words “credit note” in a prominent place
• The commercial name, address, place of business, and the tax identification and VAT registration numbers of the taxable person making the supply
• The commercial name, address, place of business, and the tax identification and VAT registration numbers of the recipient of the taxable supply
• The date on which the credit note was issued
• Tax rate
• Taxable value of the supply shown on the tax invoice, the correct amount of the taxable value of the supply, the difference between those two amounts, and the tax charged that relates to that difference
• A brief explanation of the circumstances resulting in the issuance of the credit note
• Sufficient information to identify the taxable supply to which the credit note relates

Proof of exports. Goods that are supplied by a registered taxpayer to a person in another country that are delivered by a registered taxpayer to a port of exit for export may be invoiced at the zero rate if the registered taxpayer obtains documentary proof and if the goods are removed from Uganda within 30 days of delivery to a port of exit.

The Commissioner General may require that goods for export specified in a notice in the Uganda Gazette be distinctively labeled by the registered taxpayer. The Commissioner General will issue guidelines to specify the color, size, and type of labels.

For an export transaction to qualify for the zero rate, a registered taxpayer must show as proof of export the following:

• A copy of the bill of entry or export certified by the customs authorities
• A copy of the invoice issued to the foreign purchaser with tax shown at the zero rate
• Evidence sufficient to satisfy the Commissioner General that the goods have been exported, in the form of an order from, or signed contract with, a foreign purchaser, or transport documentation that identifies the goods such as transit order or consignment note, copy of bill of lading, copy of airway bill or copy of transit document

If services are supplied by a registered taxpayer to a person outside Uganda, the services qualify for a zero rate only if the taxpayer can provide evidence that the services are used or consumed outside Uganda. This evidence can be in the form of a contract with a foreign purchaser and must clearly indicate that the place of use or consumption of the service is outside Uganda or that the service is provided for a building or premises outside Uganda.

Foreign-currency invoices. Foreign-currency invoices are treated in the same manner as local-currency invoices. However, the tax authorities require that for purposes of accounting for output VAT and input VAT, the exchange rate prescribed by the tax authorities for that tax period is used.

B2C. Taxable persons (i.e., those registered for VAT or required to be registered for VAT in Uganda) making supplies to any person, are required to issue all customers with a VAT invoice. Simplified tax invoices can only be issued by a registered person with a taxable turnover below UGX100 million (approximately USD28,000) per annum to another registered taxable person and in respect to individual items on the invoice that do not exceed UGX50,000 (approximately USD14) and the total invoice value does not exceed UGX100,000 (approximately USD28).

Electronic invoicing. Electronic invoicing is not mandatory but is available for taxpayers. It is optional. Taxpayers do not have to apply to use electronic invoicing, and there are no special rules for taxpayers to use it. However, records (including invoices) kept in electronic format should be capable of being retrieved and converted to a standard record format equivalent to that contained in an acceptable paper record.