A few days ago, over three thousand (3000) companies were knocked off the Value Added Tax (VAT) registration. In the interview below, Assistant Commissioner, Service Management, Jolly Kaguhangire Kamugira explains.
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 is supplying 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;
i- If the turnover of taxable supplies of the enterprise for three consecutive calendar months exceeds UGX 12.5M or exceeded UGX 50M in the preceding year, this person is compelled to register.
ii-If the turnover is likely to exceed UGX12.5 M, 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.
Uganda Revenue Authority recently undertook the cancellation of VAT for several companies i.e. de-registration. What does this mean and what are the implications of being deregistered?
VAT cancellation or de-registration means that you are removed from the VAT register and you do not have any authority to levy VAT on your supplies. Your VAT will be cancelled where;
- It is established that you were neither required nor entitled to apply for registration.
• -You do not or cease to have a fixed place of abode or business.
• You have not kept proper accounting records relating to any activity carried by you
• -you have not submitted regular or reliable tax returns
• 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 re-register after de-registration?
Yes. If there is a positive change in the reasons of cancellation as communicated in the de-activation notice, the person may apply for re-activation.
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 e-mail address of the applicant.
What are the requirements for re-activation?
At re-activation, the requirements for registration shall hold i.e. 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?
De-registration does not occur after a specific period. It only happens when a taxpayer fails to meet or maintain the registration criteria regarding that they (a company) may be de-registered.
However, a client who is registered voluntarily and who decides to voluntarily initiate their VAT cancellation can only have their VAT cancelled within two (2) years from the date of registration.
How often does it happen?
VAT is a monthly tax and the taxpayer's 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. De-activation is therefore routinely carried out where a person has not complied consistently for six months with any of the registration criteria.