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09 August 2018 Uganda introduces VAT withholding The Value Added Tax (VAT Amendment) Act, 2018 that took effect on 1 July 2018 has introduced a new concept of Value Added Tax (VAT) withholding in Uganda. The procedural regulations regarding its implementation are contained in the Value Added Tax (Tax Withholding) Regulations, 2018 and the persons that have to comply by withholding VAT on payments made to their suppliers are contained in the Value Added Tax (Designation of Tax Withholding Agents) Notice, 2018. Section 3 (b) of the Value Added Tax (Amendment Act) 2018 provides that the Minister shall, by notice in the Gazette, designate persons who shall withhold VAT on a payment for a taxable supply and the persons designated shall remit to the Uganda Revenue Authority one hundred percent of the VAT payable. In Uganda, VAT is charged at the rate of 18%. Before 1 July 2018, the person making payment for a taxable supply, would pay to the taxable person (supplier) both the transaction amount and the VAT charged. The taxable person would in turn remit the 18% to the Uganda Revenue Authority (URA) by the 15th day of the month following the month the VAT was incurred. With effect from 1 July 2018, a designated person is required to withhold 100% of that VAT, which is 18% of the invoice value, on payments made to any VAT-registered person or to a person who is not registered but is required to be registered on the basis that it makes a supply for an amount equivalent to UGX37,500,000 (Approximately US$10,000). To ensure tax compliance, it is important that every designated withholding VAT Agent making any payments to a VAT-registered supplier or a payment of at least UGX37,500,000 made to a non-VAT registered supplier should withhold the 18% VAT on the payments it makes to such suppliers and remit it to the URA by the 15th day of the month following the month it was incurred. The list of designated tax withholding agents for VAT purposes can be accessed at this link: www.ura.go.ug/Resources/webuploads/GNRART/LN%20VAT%20Withholding%20Agents.pdf. The list comprises approximately 680 taxpayers selected at the discretion of the Minister of Finance but mostly includes medium and large taxpayers. A designated VAT withholding agent is not relieved of its own obligation to file returns in accordance with the Value Added Tax Act Cap 349. Where no VAT is withheld during a period of three consecutive tax periods, the tax withholding agent shall notify the Commissioner in writing stating that no VAT was withheld in that period. A person designated as a VAT withholding agent shall upon making a payment for a taxable supply and deducting tax from the payment, keep the records of the payment and the tax deduction and, furnish the supplier with acknowledgement of payment in the form as the commissioner may prescribe. This prescribed form is not yet readily available for use by taxpayers. Furthermore, it is expected that a VAT withholding certificate will be issued by the withholding agent to its suppliers as proof for the amount paid while they file their own returns. Practically it will be expected that the person from whom tax has been withheld will prepare its tax returns and declare the output VAT on sales as well as input VAT on purchases, using the withholding VAT certificates as proof for the VAT withheld by its customers. For the purposes of obtaining full information regarding the accounting of VAT withheld, the Commissioner General may require any person to:
Document ID: 2018-5960 |
