BusinessFEATUREDGeneralNewsTechnology

URA Highlights The Cost of Businesses on EFRIS non-Compliance

Arthur

In January 2021, Uganda Revenue Authority rolled out the Electronic Fiscal Receipting and Invoicing Solution (EFRIS) to address the tax administration challenges relating to business transactions and the issuance of receipts. Since then, the authority has been trying to get the business community to adopt the system and Ugandans to get used to demanding fiscalized receipts. Despite the success in rolling it out, reports still indicate that traders who have acquired the Electronic Fiscal Devices or integrated with URA through a system-to-system approach are not fully using EFRIS for transactions.

What are some of the common ways traders use to flout EFRIS?

  • Selective issuance of e-invoices includes not issuing e-receipts or invoices to final consumers at night or on weekends, especially for hotels, bars, and restaurants, or only to those that demand e-receipts.
  • Selling goods and services outside the EFRIS system, for example, through the use of manual receipts.
  • Invoice trading (missing trader link) is where taxpayers generate invoices without the fiscal movement of goods and services, leading to the claiming of a fictitious input tax credit.
  • Cancellation of authentic transactions through the use of credit notes

What is the penalty for not complying with the system?

Section 73B of the Tax Procedures Code Act 2014 specifies the different penalties for non-compliance with regard to EFRIS.

  • A penalty equivalent to the tax due on the goods or services or three hundred currency points (UGX: 20,000 for each currency point), whichever is higher, for not issuing an e-invoice or e-receipt or for tampering with an electrical fiscal device
  • A penalty equivalent to the tax due on the goods or services or four hundred currency points, whichever is higher, for not using an electronic fiscal device
  • A term of imprisonment not exceeding three years or a fine not exceeding three hundred currency points, or both, for acquiring an electronic fiscal device not connected to EFRIS.
  • Temporarily close your business for failure to comply with the EFRIS requirement

Reports indicate that traders who have acquired EFRIS use it selectively, what remedies has URA put in place to monitor and ensure qualifying businesses use the system for all transactions?

The supermarket industry has greatly improved its compliance with EFRIS requirements, with the majority issuing e-receipts and e-invoices as required. This progress is attributed to the collaboration and engagements we have had with the leadership of the supermarket associations and the Uganda Manufacturers Association to ensure that all the required taxpayers are on board and using EFRIS as required. We shall continue with these engagements to sensitize all taxpayers required to be on EFRIS in this industry and other taxpayers across the country.

We have introduced the “MPA Receipt Yange Campaign” to promote and increase EFRIS usage by increasing awareness of the use of EFRIS and empowering the buyer to demand an e-receipt for every purchase or supply. We have also increased field deployments and surveillance teams to enforce on non-complaint taxpayers, applying both the carrot and stick approach.

Traders have raised concerns around the cost of the electronic fiscal devices; what other channels does URA have that are cost-friendly to use?

The cost of the Electronic Fiscal Devices (EFD) is UGX 1,100,000, which is the cheapest compared to other East African countries in the region. In addition, the cost of the EFD is an allowable business expense for income tax purposes. EFRIS also has other invoicing methods such as; Desktop application that can be downloaded from the EFRIS web portal. It’s free and also supports the issuance of e-invoices in offline mode (invoices can be issued without the internet).  The Web portal is suitable for taxpayers with relatively few transactions. system-to-system invoicing method that supports taxpayers with existing billing systems to integrate with EFRIS and issue e-invoices from their ERPs, POS, or billing systems. The mobile app This financial year, we shall also roll out the mobile application to support taxpayers in issuing e-invoices from the comfort of their mobile devices. This is all intended to ease doing business and make the process of complying with EFRIS requirements seamless.

There are fears that integrating business systems into URA could give the tax body access to confidential information, what are these fears?

All commutation to URA is outbound; URA does not initiate any traffic to the taxpayer’s system. The EFRIS integration is through a secure layer via the HTTPS protocol. Taxpayers only share transactional information relating to sales, purchases, and stock as required by law.

URA has a statutory duty under the TPC Act, 2014, to keep taxpayers’ information that is required for tax purposes confidential. As such, URA’s policies and procedures always give priority to information security. Therefore, the security of all data exchanges between URA and any other taxpayers shall adhere to acceptable security controls, including encryption of data and the use of private and public keys to digitally sign off transactions.

What advice do you have for taxpayers who have not yet enrolled for EFRIS?

With EFRIS, all taxpayers regulated to interact with the system have already enrolled. The challenge is with selective issuance or not issuing e-invoices at all as required by law. My advice for such taxpayers is to stop this practice. Non-compliance with EFRIS is definitely going to be expensive, especially for taxpayers who have been fully trained and supported but have not complied. At an appropriate time, all taxpayers doing business in Uganda shall be required to be onboard and use EFRIS to issue e-receipts. This is intended to level the playing field and ensure that every taxpayer pays a fair contribution or share to the revenue target.

We shall also continue to engage and support all taxpayers, including those who are not VAT registered at the moment but are willing to use EFRIS because of the benefits of EFRIS.

  • Ability to validate e-receipts in real time
  • Shortened audit and return examination time
  • Improved record-keeping among taxpayers, especially small micro-taxpayers
  • Faster refund processing
  • Reduce unfair competition.
  • Prefilled tax returns for ease of compliance

How do interested taxpayers apply to enroll? What is the process?

Taxpayers who are registered for VAT are automatically enrolled in EFRIS. Non-VAT-registered taxpayers who may want to voluntarily use EFRIS can access the EFRIS web portal by following the steps below to register and start issuing e-receipts on EFRIS.

  • Log on to the URA web portal at https://www.ura.go.ug and click on the e-invoicing menu to access your account using your TIN and password.
  • A one-time password (OTP) shall be sent to your email or phone number registered on your TIN. Enter the OTP.
  • Select “First time registration, complete the details, and submit your application.
  • Once the application is approved, you are then enrolled in EFRIS and ready to start using EFRIS to issue e-receipts.

The “Mpa e-receipt change” campaign has been on a roll since July. What is the impact on EFRIS usage thus far.

The “Mpa e-receipt yange” campaign was rolled out in July 2023, and it has helped us increase awareness among all Ugandans about the use of EFRIS. We have also been able to register a 62% increase on average and a 11% increase on average in the number of invoices and the number of VAT-registered taxpayers, respectively, in areas where we have had activations. Our appeal to the public is to continue demanding an e-receipt for every supply or purchase, regardless of whether the supply is at the rate of zero (0%), exempt (-), or standard (18%), as this is the only confirmation that the tax the supplier or seller of goods and services has deducted has been submitted to the consolidated fund to support national development.