Value Added Tax: When should you apply to be registered?
What you need to know:
To register. A business that ought to be registered for VAT should make a timely application for registration in order to control the amount of additional tax and penalties due.
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 (URA) by a person who is registered for VAT.
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 Shs37.5m in a period of three consecutive calendar months, or an annual turnover of Shs150m. Where the person has not met the threshold indicated above, deals in taxable goods and services and desires to register for VAT, that person may voluntarily apply to the Commissioner General, URA 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 the 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 VAT.
It is important to note that it is only persons who make taxable goods and services (taxable supplies), who can be registered forI VAT 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 VAT, unless that person is dealing in separate goods and services where some are subject to VAT while others are exempted from VAT. An application to be registered for VAT is an online application made through the URA website portal.
Registration for VAT 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 VAT to URA at a rate of 18 per cent or 0 per cent - 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.
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 VAT 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.
Ms Kemigisha is a lawyer and a tax consultant.
[email protected]
