Contrasting approaches for promoting usage of EFRIS in Uganda

To drive compliance levels with EFRIS, both the government in its tax policy formulation role and the URA in its tax administration role have applied a variety or mix of rules or tools, rooted in the well – established theories on what influences tax compliance behaviours.

These have included “incentives-based” measures which indirectly encourage or cause compliance, and the “punishment/punitive” approach which applies deterrent measures like penalties and fines to directly discourage non–compliance.

Two “incentive–based” measures will take effect from 01 July 2026.

Firstly, a final consumer or customer (other than a taxable / VAT-registered person) who purchases goods or services from a taxable seller/supplier and is issued e- receipt(s) or e–invoice (s) worth 2 million within a 30-day period is entitled to a refund of 5% of the tax paid. 

This new 2026 position replaces and lowers the qualifying threshold for the 5% tax refund from the 5 million introduced in July 2021 to 2 million.

 By way of illustration, if a final consumer purchases goods worth UGX. 3,000,000 during the calendar month of August (30 consecutive days) and is charged 18% VAT and issued e–invoice (s) reflecting VAT of UGX. 540,000, the customer is entitled to apply for a refund of UGX. 27,000 from URA (being 5% of the UGX. 540,000 VAT amount).

The refund of a portion of the taxes paid is an incentive to final customers who buy from EFRIS – compliant sellers or suppliers because it effectively reduces their tax cost/burden on goods or services procured.

The second “incentive” measure that took effect from July 2026 is that non–VAT registered final consumers like NGOs, etc who were designated for VAT withholding tax obligations, will not be required to withhold 6% of the taxable value paid to their suppliers as withholding VAT, where the suppliers have issued them e–invoices or e-receipts.  

This is a double incentive to customers and suppliers alike because it removes the administrative burden of withholding VAT for the customers as well as ensures that EFRIS–compliant suppliers receive the full payment without deducting withholding VAT amount.  

Unlike the deterrent and punitive measures which rely on active enforcement (forceful application) by URA, the incentives are self–executing, with minimal or no direct administrative costs for URA.

Here, because of the benefit from the incentive, it is the customers who will ensure that they demand e–invoices or will prioritise purchasing from EFRIS–compliant suppliers. The indirect consequence of this customer behaviour is for suppliers to be EFRIS–compliant in order to maintain existing customers, attract new customers and increase their sales.

Most importantly, the incentive–based approach will only achieve the expected results if the refund processes are clear, simple and conveniently accessible for qualifying consumers. The refunds should be made by URA in a timely manner since the refunds cover transactions for every consecutive 30 days.

Any unnecessary administrative burdens, delays or protracted pre–refund tax audits will only serve to make the incentive unattractive to customers and lower its uptake. And yes, awareness and education campaigns to inform and empower qualifying customers about the incentive can not be over emphasised.

The writer, Edward Balaba, is a Tax Partner, MMAKS Advocates/ALN Uganda