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Tax Alert
Withholding VAT is suspended!

The Minister of Finance, Planning and Economic Development has revoked Legal Notice
No.12 that had appointed 680 tax payers as designated withholding Value Added Tax
(“WVAT”) agents. The revocation was contained in Legal Notice No.19 which was “issued”
on 20 September 2018. However, withholding VAT was suspended from 28 September 2018,
being the date that the Legal Notice was gazetted.

What is Withholding VAT?

The concept of WVAT in Uganda first came to light
through the VAT (Amendment) Bill, 2018 which
was published in April 2018.
According to the Bill, designated persons were
required to withhold 50% of VAT charged on
payment for supplies from VAT registered tax
payers. The withholding VAT obligation also
extended to unregistered suppliers where such
persons made supplies for an amount equivalent
to one quarter of the annual registration threshold
(currently UGX 150 million x 25% =37.5 million)
However, when the VAT (Amendment) Act,
2018 was passed into law, it provided that the
designated persons would withhold 100% of the
VAT charged on payments for taxable supplies with
effect from 1 July 2018.
October 2018 This was followed by the issuance of the Legal
Notice No.12 of 2018 (The VAT Designation of Tax
Withholding Agents) Notice, 2018 which listed 680
taxpayers as WVAT agents.

What does the WVAT revocation mean
for your business?
a). Previously designated WVAT agents
Prior to revocation of Legal Notice No. 12,
taxpayers who were designated as WVAT agents
were required to withhold VAT on payments for
invoices issued after 1 July 2018. In reality, since
the Legal Notice designating WVAT agents was
only published/issued around 24 July 2018, agents
could only comply from that date.
The obligation to withhold VAT remained in place
until 27 September 2018, being the date before
the revocation notice took effect. As a designated
WVAT agent, you will still be required to comply
with your WVAT obligations in respect of payments
made until 27 September 2018. The VAT withheld
in the month of September 2018 (prior to the
revocation notice) should be declared under
schedule G-I ‘VAT withheld payable’ of the VAT
return as WVAT payable. This VAT return is due to
be filed by 15 October 2018.
In respect of VAT withheld on payments made on
or after 28 September 2018, this tax is not payable
to the URA as the WVAT obligation has been
cancelled.
This means that the former WVAT agent would
be required to refund the VAT component to the
respective suppliers from whom VAT was withheld.
b). Suppliers of designated WVAT the URA received a double payment of In addition, Section 5 of the VAT Act that
agents VAT on the same supply/invoice. provides for WVAT is still part of the VAT
Taxpayers whose VAT has been withheld Act. Further, the VAT (Tax Withholding)
2. The WVAT system did not provide
between 1 September and 27 September Regulations, 2018 were also issued and
for any exemption for compliant
2018 are required to claim the withheld are still in force. This means that the
taxpayers. This created an additional
VAT through Schedule G - II of the Government may re-issue a new list of
compliance burden, for instance, on
September 2018 VAT return. designated WVAT agents soon.
taxpayers who had been declared
On the other hand, if you received a tax compliant under the 6% WHT Way forward
payment after 27 September 2018 from exemption compliance checks.
We will engage with the URA and Ministry
which VAT had been withheld, you should Further, the system did not exempt
of Finance, Planning and Economic
notify the WVAT agent to refund the VAT key sectors of the economy, instance
Development on the challenges of the now
if the agent has not yet remitted it to power generation, transmission and
revoked WVAT system so as to avoid the
the URA. Otherwise, where the WVAT distribution.
same pitfalls when WVAT is re-introduced.
agent has already remitted the VAT to the 3. The WVAT system’s disregard for
URA, this VAT should be claimed through transaction volumes meant additional Let’s talk
Schedule G - II of the September 2018 VAT administrative burden on designated Should you require any clarification
return. WVAT agents who deal with numerous or guidance, please do not hesitate to
transactions and who make payments contact:
What led to the revocation/ on a multitude of invoices over any
suspension of WVAT? Francis Kamulegeya
given period.
The revocation of the WVAT Legal Notice Country Senior Partner
has been driven by the lobby efforts from What does the revocation of +256 (0) 312 354460
various industry sector groups due to the WVAT mean? francis.kamulegeya@pwc.com
challenges that were posed by the WHVAT
The Government now needs to find Joanita Nakimuli
system.
alternative revenue sources to plug the gap
Associate Director
These included: left by the revocation of withholding VAT,
+256 (0) 312 354433
1. Cash flow challenges: The suppliers from which revenue collection had been
projected to be UGX 40 billion. joanita.x.nakimuli@pwc.com
to designated WVAT agents were
required to account for output VAT the Such measures may include fast tracking Juliet Najjinda
normal way. This was in addition to the proposed use of electronic tax invoicing Tax Manager
the VAT withheld upon paymen of the which would provide greater transparency +256 (0) 312 354460
invoices by the purchasers. As such, in the tracing of VAT transactions. juliet.najjinda@pwc.com

This publication has been prepared as general information on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication
without obtaining specific professional advice.
© 2018 PricewaterhouseCoopers Limited. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers Limited which is a member firm of PricewaterhouseCoopers International Limited,
each member firm of which is a separate legal entity.