A few days ago, the Uganda Revenue Authority (URA) struck over 3,000 companies off the Value Added Tax (VAT) register.
Assistant Commissioner, Service Management, Jolly Kamugira Kaguhangire explains the circumstances to Herbert Ssempogo.
What is VAT?
VAT is an acronym for Value Added Tax. It is an indirect tax on consumption. It is levied on specified goods and services which are described as taxable supplies, locally manufactured or sold and imported. It is not levied on a category of goods and services referred to as exempt supplies.
Who is required to register for VAT?
Any person who supplies goods or services for consideration as part of his or her business activities that are categorised within the definition of taxable supplies, may register for VAT if:
The turnover of taxable supplies of the enterprise for three consecutive calendar months exceeds Shs 12.5m or exceeded Shs 50m in the preceding year, this person is compelled to register.
The turnover is likely to exceed Shs 12.5m, in three consecutive calendar months, this person may voluntarily register.
Any person who is entitled to VAT relief as laid out in the VAT Act, Cap. 349 should also register for VAT.
URA recently undertook the cancellation of VAT for several companies; that is, deregistration. What does this mean and what are the implications of being deregistered?
VAT cancellation or deregistration means that you are removed from the VAT register and we do not have any authority to levy VAT on your supplies.
Your VAT will be cancelled when: it is established that you were neither required nor entitled to apply for registration; you do not or ceased to have a fixed place of abode or business; you have not kept proper accounting records relating to any activity carried out by you; you have not submitted regular or reliable tax returns; or in the opinion of the Commissioner General, you are not a fit or proper person to be registered.
Are there penalties for companies that have been deregistered?
At the point of VAT cancellation, the person shall be regarded as having made a sale (taxable supply) of all goods on hand (including capital goods) and shall be liable for output tax, on all the input tax credit they received in regard to these goods. The output tax shall be based on the fair market value of the goods at the time of cancellation. In addition, all outstanding principal tax, interest and penalties are due.
Can one reregister after deregistration?
Yes. If there is a positive change in the reasons of cancellation as communicated in the deactivation notice, the person may apply for reactivation. The applicant should complete the reactivation form DT-1016 which is available under manual forms on the URA Web Portal http://ura.go.ug.
After review of the reasons, the application may be approved or rejected and this decision is communicated via the registered email address of the applicant.
What are the requirements for reactivation?
At reactivation, the requirements for registration shall hold; that is, as if the company was not previously registered. The company may be additionally required to demonstrate that they shall consistently fulfill these requirements and add value to the VAT register.
What happens to government entities that are VAT deregistered, are they subjected to the same procedure as private companies?
The VAT law is applied consistently to all taxable persons.
After how long does a company get deregistered?
Deregistration does not occur after a specific period. It only happens when a taxpayer fails to meet or maintain the registration criteria that they [a company] may be deregistered.
However, a client who is registered voluntarily and who decides to voluntarily initiate their VAT cancellation can only have their VAT cancelled within two years from the date of registration.
How often does deregistration happen?
VAT is a monthly tax and the taxpayers' activities are reviewed on a monthly basis. Clients are sent reminders to correct their status on a monthly basis. It is important for VAT taxpayers to maintain accurate contact information so that they are updated about their activities.
Deactivation is, therefore, routinely carried out where a person has not complied consistently for six months with any of the registration criteria.