Tag Archives: VAT IN UGANDA

East Africa Trade: Uganda’s Tax Appeals Tribunal clarifies on EAC Intra-Trade VAT

The Tax Appeals Tribunal has delivered a landmark decision that strikes at the heart of URA’s aggressive enforcement and over-reach tendencies and restores the much-needed balance in the taxpayer-taxman relationship.

(TRADE WORTH ESTABLISHMENTS LTD V URA TAT APPLICATION 338 OF 2024)

In perhaps the strongest language yet from the Tribunal against the revenue body, TAT observed:

“On the whole, we find that the Respondent acted not only unlawfully but also with impunity and in total abuse of their powers and authority… Rather than doing this [refund VAT unlawfully collected], the Respondent orchestrated a phoney scheme to deny the Applicant their refund – a taxpayer, who is the very reason for the Respondent’s existence.”

Citing its earlier decision in Canaan Sites Limited v URA, TAT further emphasises the ethical and legal obligation of URA to return taxes not legally due: “Where the Respondent collects taxes that are not legally owed, it is generally expected to refund those amounts to the taxpayer… it has an ethical and legal obligation to return those funds to maintain trust in the tax system.”

Uganda Revenue Authority goes after the Digital Economy: Payments Systems and third-Party Transaction Information in Tax Administration.

Whereas the digital economy is mostly composed of digital companies and the web-based commercial marketplace, the brick-and-mortar businesses are also covered since most now take payment through digital payment systems.

What this means is that digital payment systems now permeate nearly every sector, blurring the line between the traditional and digital economy.

The internet marketplace and the digital economy are data-driven and therefore I anticipate the next stage of the government’s tech-driven tax compliance enforcement campaign to be deployment of big data analytics and artificial intelligence in building taxpayer profiles using third-party payments and financial services information to flag transactions that would otherwise have escaped the tax net.

Sectors such as E-commerce, Gaming, Financial Services (fintech), and Telecoms process hundreds of thousands and for some, even millions of daily transactions.

Unlike a few years ago when tax authorities had no means of scrutinising such an
overwhelming volume of transactions and to assess tax upon each and every one including the tiniest of transactions.

Currently, Tax Authorities are able to rely on advanced data analytics and the deployment of artificial intelligence tools to track tax on even the smallest of transactions.

Uganda VAT E-INVOICING(EFRIS) Enforcement: Compliance Insights for Landlords and Tenants.

While initially criticised as premature and fought by taxpayers especially those under the KACITA umbrella, it appears the system is here to stay and has increasingly become the backbone of Uganda’s tax administration.

For commercial property landlords, who fall within the VAT net, strict EFRIS compliance marks a significant shift and fundamentally alters governance and tax reporting obligations for entities, which in turn poses risk to investments controlled under those entities.

The reason is simple; VAT administration directly intersects with income tax and rental tax compliance in a manner many lay taxpayers do not yet appreciate. The increased VAT scrutiny through EFRIS has a direct bearing on the landlord’s other tax compliance obligations under income tax and rental tax.

Landlords and property managers must therefore consider adjusting operating models to align with URA’s strict stance, as informal practices will expose them to heavier tax risk through deduction disallowances, penalties, additional tax assessments and a heavier professional fees burden.