In fulfilling their obligations, the suppliers and importers of taxable goods and services ought to collect VAT from the final consumers and suppliers of the non-exempt imported goods and services, file the VAT return and remit the tax collected to the Uganda Revenue Authority (URA) within 15 days after the end of the tax period.
Unlike other tax mechanisms, the VAT mechanism avails relief to businesses of the burden of VAT paid while purchasing goods and services used in the business. The VAT-registered supplier charges VAT at 18 per cent and issues the purchaser an invoice indicating VAT charged (inclusive or exclusive).
If the purchaser is registered for VAT, the business will be able to credit that input tax against the output tax charged on its sales and where the latter is greater than the former, the purchaser is obliged to remit the difference to URA. In the event that the input tax is greater than output tax, the purchaser will be entitled to claim an offset or a refund of the difference.
Over the years, this relief mechanism has been misused by some taxpayers who have engaged in missing trader fraud (the traders and/or transactions are non-existent and cannot be traced in the VAT chain) which have caused loss of revenue to government. In order to halt this vice, URA developed the Electronic Fiscal Receipting and Invoicing Solutions (EFRIS) project, which entails the e-invoicing and e-receipting system.
E-invoicing and e-receipting is an application system where a taxpayer is able to issue, receive and declare an invoice or receipt in a paperless manner using URA’s authentication facility. According to General Notice No. 595 of 2020 issued by the commissioner general, URA, John R. Musinguzi, it is mandatory for all VAT-registered taxpayers to issue e-invoices and e-receipts effective July 1, 2020.
In order to issue e-invoices and receipts, taxpayers must register with EFRIS via the URA web portal. The portal menu bar includes e-invoicing. Once you click e-invoicing, the EFRIS page will be opened and you will be able to input your Tax Identification Number (TIN) and password.
A One-Time Password (OTP) will be sent to your preferred method of communication (email or SMS). It is this OTP that you will use to log in and access the EFRIS menu bar which entails a drop-down menu indicating first-time registration. Upon filling in your registration details and uploading all necessary documentation, submit and await approval by URA.
The application system affords taxpayers various options through which they can generate the e-invoices and e-receipts. There is the system-to-system connection method which is the most preferred mechanism for a business with hundreds of daily transactions.
If a business has relatively few transactions a day, it might opt to generate the e-invoices and e-receipts via the EFRIS site. The non-tech-savvy taxpayers may issue e-invoices and e-receipts by using a USSD code. All these will be rolled out with time but currently all VAT taxpayers are obliged to register with EFRIS and issue the e-invoices and e-receipts via the EFRIS web portal.
This system presents various advantages; for example, a taxpayer can validate the authenticity of the invoice issued to him or her via the EFRIS web portal by running the Fiscal Document Number (FDN). With this system, government will be able to level the field for all taxpayers by closing in on illicit traders.
Despite its benefits, the enforcement of this system countrywide is a challenge. This is because majority of Ugandans are technology-illiterate and although URA is sensitizing the public about EFRIS, it may not be able to reach out to all taxpayers and prospective tax payers meaning many will be left out and as such, the tax base will still remain narrow.
Also certain sectors of the economy, for example the construction sector which transact a great deal with people in the informal sector, will be greatly inconvenienced by this system.
They may have to choose between tax compliance and purchasing that quality sand from the sand trader in Lwera who has deliberately refused to register with EFRIS. Unfortunately, our tax laws oblige the taxpayer in certain instances to help URA in the administration of tax. This is one of those instances.
Due to various inconveniences that the public is likely to face with this change, many are bound to resist it. As is the norm, the law imposes a penalty for non-compliance and in particular, failure to issue e-invoices and e-receipts attracts penal tax equivalent to the tax due on the goods and services or Shs 6,000,000 or both. With that said and with Uganda being the democratic state that it is, the choice to comply or defy is left to the taxpayer.
The author is a tax consultant