Electronic Receipting and Invoicing in Uganda

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By CPA Kalinda Gonzaga Joseph

Introduction

The Uganda Revenue Authority has introduced and directed the effective implementation of the use of E-invoices and E-Receipts in line with Section 73A of the Tax Procedures Code Act, effective 1st July 2020. This was affirmed by the Gazette Notice No. 595 of 2020, published on the 23rd June 2020 by the Uganda Revenue Authority. The Notice requires all VAT-registered taxpayers to issue e-invoices or e-receipts in accordance with the Tax Procedures Code (E-Invoicing and E-Receipting) Regulations, 2020. Thus the implementation of EFRIS (Kakasa E-Invoicing).

What is EFRIS?

EFRIS in full is the Electronic Fiscal Receipting and Invoicing Solution. EFRIS entails the use of Electronic Fiscal Devices (EFDs), e-Invoicing or direct communication with business transaction systems to manage the issuance of e-receipts and e-invoices in accordance with the Tax Procedures Code Act 2014.

Once a transaction is initiated using any of the solution’s components, transaction details are transmitted to URA in real-time to generate e-receipts and e-invoices.

Electronic Fiscal Devices were first introduced in the 1980s in Japan and several countries in Europe. In recent years, there has been a massive implementation of the same in Sub Saharan Africa.

EFRIS in other East African Countries

Kenya was the first East African country to use Electronic Fiscal Devices (EFDs) and was mandated by Gazette notice No. 47 of 22nd October 2004, which was implemented from 2005.

In Tanzania, the system has been in use since 2010. It is currently in the second phase of implementation and is believed to have led to increased VAT compliance, although it still comes with challenges. It is in line with the VAT Regulations of 2015 as amended and also includes non VAT registered traders administered under the Tax Administration Act, 2015.

In Rwanda, Electronic Billing Machines were introduced in 2012 under Article 24 of the Law No. 37 of 2012 establishing the value-added tax, requiring all VAT-registered taxpayers to issue tax receipts and invoices for all transactions with their customers or clients. The system, however, was implemented from March 2014.

Why URA introduced electronic invoicing and receipting

URA has introduced e-receipting and invoicing to address the following challenges:

  1. Suppression of sales.
  2. Non-issuance of tax receipts/invoices.
  3. False refund and offset claims.
  4. Fictitious purchases with no physical movement of goods.
  5. Matching of input tax and output tax hence paying the minimal Tax liability. (Gross profit liability is maintained between 0.1 to 1%)
  6. Unverifiable claims by taxpayers due to loss of records.
  7. Limited access to taxpayers’ records – Some taxpayers selectively provide records for tax administration purposes.
  8. Non- remittance of VAT collected.
  9. Invoice Trading – Unscrupulous Individuals (employees of Companies, accountants and tax agents) selling previously issued invoices of final customers to third parties to claim false input tax credit hence abusing the VAT mechanism.
  10. Using multiple sets of business records.
  11. A large informal sector.

The above challenges are hoped to be addressed as the system will provide evidence of daily sales transactions in a technically easy and undisputed way.

Who is required to use the EFRIS?

Section 73A of the Tax Procedures Code 2014, provides the legal framework for implementing EFRIS. The law provides for the commissioner to specify by a Notice in the Gazette, taxpayers for whom it shall be mandatory to use EFRIS under the various business models i.e. Business to Business (B2B),   Business to Government (B2G) and Business to Consumer (B2C) in Uganda.

The components of the EFRIS

The EFRIS comprises of the following components;

  1. E-Invoicing
  2. Electronic Fiscal Devices (EFDs).
  3. Electronic Dispenser Controllers (EDCs) to manage compliance of gas stations.

What options are available for taxpayers to issue e-receipts and invoices?

The   Solution has the following options available to users to generate e-receipts and e-invoices;

  1. System to system connections for clients with existing sales systems.
  2. The URA web portal.
  3. The Client app.
  4. Electronic Fiscal Devices (EFDs) and
  5. USSD-Quick codes

Options available for the small business client

Taxpayers who cannot afford to purchase an EFD or ERP system will use the web portal, USSD and client application options. 

What is e-Invoice?

E-invoice is a new application that allows a taxpayer to safely, easily and free of charge, issue electronic tax documents, and check their validity, by logging onto the system, URA web portal, client app and use the e-receipt/invoice number or scanning the Quick Response (QR) Code using the URA validation app or a QR reader (such as Neo Reader app) installed on the smartphone to verify the receipt or invoice information.

Once a receipt or invoice number is valid or the code is scanned, it will open the verification details and a copy of the e-receipt or e-invoice will be displayed.

What is a system to system connection?

A system to system connection is the integration of a taxpayer’s invoicing system Enterprise Resource Planning (ERP) with EFRIS to generate e-receipts and invoices.

How the system to system connection works

When a sale is made, transaction details will be captured in the seller’s invoicing system (ERP), encrypted and transmitted to URA in real-time to generate e-receipts and e-invoices.

Upon receipt of the transaction details, EFRIS will decrypt the data, format the data into an e-receipt or e-invoice, attach a receipt or invoice number, a verification code, a quick response (QR) code, encrypt the fiscal data and transmit it back to the seller’s system.

At this point, the e-receipt or e-invoice can be printed. The entire process is very quick and should not affect the printing of the e-receipt and invoice for customers. Clients (seller and Buyer) can log onto the system, URA web portal, client app and use the e-receipt/invoice number or scan the Quick Response (QR) Code using the URA validation app or a QR reader (such as Neo Reader app) installed on the smartphone to verify the receipt or invoice information.

What is a Client App?

A   Client App is a software installed on a taxpayer’s device such as a smartphone, laptop and desktop computer for use to generate e-receipts and invoices.

What is USSD?

USSD   in full is Unstructured Supplementary Service Data and is sometimes referred to as “Quick Codes” that supports real-time connection between a mobile network operator and a user’s mobile phone. Taxpayers will be given a code for use to generate e-receipts and invoices using their mobile phones.

How it works

A VAT-registered taxpayer will have to click on the E-Invoicing menu on the URA web portal and it will bring the below screen:

In the login window above, fill in your usual TIN and password.

After logging in, the screen below will appear. It will prompt you to ask for a code called OTP.

Select whether to send the OTP by email or SMS and click log in. Thereafter the following screen will appear.

Select registration and choose new registration or amendment. Follow the steps and you will receive notice of approval as a registered taxpayer on the e-invoicing platform.

How to raise an e-invoice

Click on e-invoicing option and it will get you to issue a new invoice as in the diagram below:

Enter the client TIN if you have it, or the details asked and click next.

In section C, under Goods and services, select add and it will give you the menu above where you will be able to select and add all products and services billed plus their prices and add all items until the document is complete to generate the invoice. The process, however, requires one to select items from the list and product codes as designed and embedded in the system. Quantities and rates plus discounts if any are all catered for.

Challenges expected with the system

  1. Insufficient taxpayer education, including the tax agents.
  2. Limited internet coverage and unstable power.
  3. High illiteracy levels among taxpayers, the use of these devices will be a challenge.
  4. The high cost of devices and unavailability some times.
  5. Poor and congested networks especially during working hours.
  6. Difficulties in selecting items or services to generate invoices or time-consuming operations.
  7. Machines malfunctions and errors.

Recommendations:

  1. Sustained sensitization, education and training of taxpayers and other stakeholders.
  2. Subsidized or free Electronic Fiscal Devices.
  3. Improve the relationship between URA and taxpayers.
  4. Strict monitoring of EFDs and EFD using businesses.
  5. Efforts to address usability problems.
  6. Step-by-step implementation by taxpayer category e.g. starting with LTO and MTO clients.

Conclusion:

The EFRIS is a timely intervention as a measure towards improved compliance. However, it requires that taxpayers, accountants and tax advisors are fully involved in the implementation of the programme.

About the Author: CPA Kalinda Gonzaga Joseph is a Certified Public Accountant, Certified Tax Advisor, and A practitioner with Kalinda & Associates, Certified Public Accountant of Uganda

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