FULGENCE SSENDAGALA KAJUBI: Digitalization and an online or web based tax returns

This content is intended to throw some light on the new web based tax returns that are supposed to be filed by taxpayers effective November 2023. It must be recalled in 2022, URA introduced the web-based returns for filing of Rental income Tax provisions. This has enhanced efficiency and ease of administration.

Contents to be covered

• New Monthly VAT Prefilled Return- Web based
• New Rental Income Tax -Web Based Rental Tax Return
• Navigation through New URA web Portal
• Assessment

Requirements

• The EFRIS transactions must be on the system dally for all VAT registered Tax Payers.
• The return must be self-created on a daily basis
• The taxpayers must mind about the offline transactions and update the system when the system is back. Switch on the internet to update the Vat return.
• Mind about the position on the daily basis. Do not submit the breakdown of these items just click on view in the mid-month. By the last day of the month, the system will not allow you to view again.

Accessing Returns

Though the Brower and facets have been changed to drive customer experience, the steps remain calm and easy.

Unlike before, today the following items have been placed live on the page even without logging your details or credentials like the TIN and password

• Making of payments
• Getting a Tin
• Filling a tax return
• EFRIS log in
• DTS
• Tax incentives
• Getting a refund
• Choosing tax agent
• Computing taxes like PAYE WHT , Income Tax
• Whistle blowing
• Accessing exchange rates from URA portal

Alternatively, like before log in the URA portal by inserting your Tax Identification Number, Password and one time security code. The security code is a new feature that has come on board to authenticate authorization and detect or avoid robotic accesses.

When you log in the URA page, the various features are displaced for you to access. They include the eservices, reports and other platforms. Under each, there is a list of items that you need for your tax purposes.

Returns

Place the cursor or pointer of your mouse on. There is an option of filing a return or accessing other return services. If its VAT click on it , choose the return period , it will show view return or submit return options

In the mid-month click on view return and on the Task bar, the following features will be displayed.

• Tax computation summary
• Sales
• Purchases
• Input tax allowed
• VAT withholding credit
• Tax summary
• Return history

Sales

The system will show the nature of the transactions in terms of Local Exempt, Local Zero Rated, Exports Zero Rated, Local Standard Rated, Local Standard Rated, Government Supplies, Local VAT Deemed, and Out of Scope Supplies

The prefilled Values VAT excusive will be populated and the additional sales to get the total sales for the month

• Additional sales.

Any sales, which never passed under EFRIS, must be put under the additional sales slot/box and a taxpayer must account for VAT. This arise where the taxpayer may have sold anything without application of the EFRIS due to some challenges. The rationale is that when you leave such sales out of your Tax return, The Audited Financial sales for corporation tax will not match with your VAT return declared sales at year-end, which will cause you getting and affectional assessment

• Purchases

The purchases details will be shown in terms of exempted, zero rated and standard rated purchases and the amount of VAT claimable. The purchases are prefilled and populated. Make sure that all your purchases are from EFRIS compliant taxpayers to benefit from the auto-prefilled purchases on the system

Disallowed VAT

According to the VAT act, some expenses do not attract VAT and therefore the VAT charged on such expenses must be disallowed.

• Entertainment expenses, input VAT on Entertainment for Membership in a Club, Association or Society

The VAT charged by a supplier to a customer on any entertainment is  disallowed VAT as it cannot cognitively be related to business except to those who are in the business of entertainment  Therefore the adjustment for this must be accounted for to avoid claiming any  credit which are not correct

• VAT charged on Hotels and accommodation

The Act categorically disallows such VAT and any taxpayer who claim such in the return will be doing it on his own risk. In case URA carries a review of your Transactions, such VAT will be disallowed. So take keen interest and place who have some basic of filling and the ACT

• Telephone expenses,

Since EFRIS started, there has been a challenge on the application of the ACT about the claiming of input tax on Telephone bills. This has been a case, as the system would state that the FDN do not match the VAT return. Most taxpayers may have found themselves claiming the whole input VAT on telephones contrarily to what the law states. Due to this anomaly, the Web based Vat filling has come to streamline and eliminate such challenges. The 18% VAT must apply on the 90% rule and the 10% be adjusted accordingly.

• Input VAT on Passenger Automobiles, Repairs, Maintenance and Spare parts of the automobiles
• Deferred VAT at Importation
• Input tax directly attributable to Exempt Sales/ Supplies
• Deemed Input VAT
• Input VAT on unreceived payments for Supplies made on cash basis other than to Government for the Current Period
• Input VAT on Unreceived Payments for Supplies to Government for the Current Period

 Tax summary

The Tax summary will show the total Vat on sales against the total vat on purchases and the net amount of taxes payable or claimable at the end of the month.

The View return button has to be done on a daily basis to make sure you reconcile your transactions before end of the month.

Once the month ends like on the last day at mid night, the system will block/close the view button and you will not be able to view again. In viewing where you are not sure of the invoice raised by you or the supplier, you can immediately apply the credit note request to correct the errors if any.

VAT on Imported Services

This will be computed. Make sure you post the invoices in EFRIS in that month.

Credit Memos

The return will take Net. No more schedules. Where the discounts on sales are done in terms  of quantity, bulky or cash discounts, and are entered in the credit memo screen under EFRIS, the VAT return will automatically net off the credit notes from the sales.

VAT Withheld.

The VAT withheld is not prefilled. Fill the schedule to give details since URA do not have a single payment system it will not be possible for it to populate the VAT withheld in the new Web based VAT return.

Note that the only manually input schedule in the return will be the VAT withheld by the designated withholding VAT agents

Automation and adjustments

The following adjustments have been done and or maintained;

1. Adjustment to output tax

Cash accounting the government who file Vat only when the money has been receipted since you have been paid. Where you have purchased and you have not received any money from government do not benefit from that credit until a time in point that you are paid to claim your input in whole or in part.

• VAT deferment.

If there is any VAT deferment, the taxpayers must apply to URA to inspect the Plant and machinery. Once imported, the plant and machinery must be in operation for its intended use or else the VAT that arise out of it must be paid immediately. Where the plant and machinery are not put in proper use, the benefit of deferment will not be there.

• Change of accounting method.

Is there any change in the accounting method either from cash basis to accrual or invoice basis, then the adjusted VAT must be incorporated in the return.

• Recovery of bad debts

If you recover a bad debt, you can account it in the VAT return. This is declared under under adjustments

1. Adjustment to input tax

This can be due to credit notes to your clients, bad debts written off etc. Once a credit is approved, the return will be updated automatically. Always apply for the credit notes so early that the approval is done on time

• Timing difference on credit note issue.

If the credit note is for November and it is approved in December, the credit note will affect the December return

EFRIS INTERGRATION WITH THE WEBBASED/ONLINE RETURN.

It important to recall the major type of EFRIS used by taxpayers.

• System to system integration
• Web portal application
• SSD
• EFD

The VAT prefilled Return has been designed in the sense that, when you invoice in any of the above methods, the VAT return is updated real time. You can view the same in your return and plan your taxes accordingly      

Taxpayers must ensure that, they reconcile their EFRIS reports with the VAT return. EFRIS has the following reports, The Z daily report, the monthly Z report and the annual Z report. In addition, the detail and or summary reports are available for both sales and purchases.

Use of Exchange rates.

There are different exchange rates on the portal for example the exchange rate for Income tax, VAT, Imports and Exports.  It is advisable that the taxpayers use the VAT rate in their operating systems to avoid forex differences. Currently taxpayers find a challenge on the exchange rates for VAT and Exports, as they cannot update them simultaneously in the system. The Tax authority must look at this as it creates forex differences between the two rates for VAT & Exports

Filling of Vat return

Except for adjustments mentioned above, there is going to be an auto filing for VAT effective November 2023. Note that there will be a default assessment for any data captured in EFRIS and not captured in the return once all the adjustments have been made, and then click on submit, the return will be sent, and a notification will be received in your inbox.

Importance of Web based return filling

• Increased efficiency
• Time management
• Minimization of errors
• Easy refund process
• Easy in audit.
• Technology and digital embracement.

Method of Apportionment

The method of apportionment is default method or normal method but depending n your operations, there is standard or alternative method as well

Penalties

Failure to submit on time the returns, there will still be a penalty as stipulated under the TPC

Backdating of invoices

This option is available but only through an application.

Web Based Rental Tax Return

The provision return was done last year. The final income tax return now is to be done separately from the business income

Commence and effective date

Dear taxpayer’s note that effective November 2023, the return is to be Web based as highlighted above and it is advisable to start checking your Tax position before the month ends

Note: Wait for our next episode on the ledgers and the payment allocation system 

CPA Fulgence Ssendagala Kajubi