Not VAT-Registered? You May Still Need EFRIS; and It Could Cost You Your Tax Deductions

If your business is not registered for VAT, you have probably assumed that EFRIS is not your problem. For many Ugandan businesses, that assumption stopped being true some time ago.

On 10 August 2026, the Uganda Revenue Authority (URA) published a public notice titled "Additional taxpayers required to use EFRIS". It states that businesses in twelve named sectors must issue electronic invoices and receipts through the Electronic Fiscal Receipting and Invoicing Solution (EFRIS), whether or not they are VAT-registered. This requirement has applied since 1 July 2025.

Businesses in the affected sectors may already have issued thirteen months of invoices outside the system. And, as we explain below, the cost does not stop with the supplier  it lands on their customers' tax returns too.

Are you in one of the 12 sectors?

The sector list is drawn by activity, not by VAT status. If your business operates in any of these sectors, EFRIS applies to you:

Who is exempt? URA's notice carves out:

• Businesses in the listed sectors with annual turnover below UGX 10 million (they may join voluntarily)

• Taxpayers with annual rental income below UGX 2.82 million

• Passenger land transport ; taxis, boda-bodas, shuttles and buses ; for this phase

• Non-resident digital service providers already paying digital service tax

UGX 10 million a year is a low bar. A busy restaurant or a modest IT consultancy will cross it within a few months. Every e-invoice or e-receipt issued to a business must also carry the buyer's BRN, NIN or TIN.

The VAT threshold twist

From 1 July 2026, the VAT (Amendment) Act 2026 raised the VAT registration threshold from UGX 150 million to UGX 300 million in annual turnover. (Many reports still quote UGX 250 million that was the Bill's original figure before Parliament amended it.)

This is welcome relief, and many businesses turning over between UGX 150 million and UGX 300 million are now asking whether to deregister. But here is the trap: leaving VAT does not take you out of EFRIS if you operate in one of the twelve sectors. VAT and EFRIS are now two separate obligations that move independently.

A construction subcontractor turning over UGX 200 million can be outside VAT and still be required to issue every invoice through EFRIS. Before you deregister, weigh three things together: the input VAT you would give up, how your customers will treat VAT-exclusive prices, and your continuing EFRIS duty.

The real cost: lost deductions and doubled penalties

1. Your supplier's mistake becomes your tax bill. Under section 22(3)(m) of the Income Tax Act, no deduction is allowed for an expense that is not supported by an EFRIS e-invoice or e-receipt where the supplier was required to use EFRIS. You paid the money, but the expense does not count. Your taxable profit  and your tax  goes up.

Consider a hotel that pays UGX 80 million a year to a laundry contractor, a building maintenance firm and an IT support company, none of whom issue EFRIS receipts. If URA disallows those expenses, the hotel's taxable income rises by UGX 80 million. At the 30% corporate rate, that is UGX 24 million in extra tax, before any interest or penalties.

2. Penalties for not issuing e-invoices have changed. The 2026 amendments to the Tax Procedures Code set the penalty for failing to use an electronic fiscal device, failing to issue an e-invoice or e-receipt, or tampering with a device at double the tax due, or UGX 200,000 (ten currency points), whichever is higher. The previous floor was about UGX 6 million, so small slips cost less. But for larger transactions, the penalty is now twice the tax at stake.

3. Thirteen months of exposure. Because URA dates the requirement from 1 July 2025, an audit could look back over every invoice issued since then. Businesses that only learned of the rule in August 2026 should assess that window now, not when a URA letter arrives.

There is one upside for compliant suppliers: the 2026 VAT amendments remove VAT withholding where a withholding agent receives an EFRIS e-invoice or e-receipt. Compliance now improves cash flow, not just risk.

Five steps to take this month

1. Confirm whether you are covered. Check your activities against the twelve sectors and your trailing twelve-month turnover against the UGX 10 million floor. Mixed businesses should check each line of activity.

2. Register and choose how you will issue. Enrolment on the URA portal is free. Low-volume businesses can use the EFRIS web portal or URA's app; higher-volume businesses should integrate their accounting system so every sale posts to EFRIS automatically.

3. Review the period since 1 July 2025. Identify invoices issued outside EFRIS, quantify the potential exposure, and agree a remediation approach with your tax adviser before URA raises it.

4. Make EFRIS a condition of payment. Ask every supplier in a covered sector for EFRIS e-invoices or e-receipts, starting with your largest. Build the check into your accounts payable approval.

5. Revisit your VAT position. If your turnover is between UGX 150 million and UGX 300 million, model the impact of deregistering  including lost input VAT recovery and your continuing EFRIS obligation before deciding.

How Nexia Uganda can help

URA's direction is clear: transactions it can see are transactions it can tax, and EFRIS is how it sees them. Businesses that treat compliance as a system, not a scramble, will spend less and sleep better.

Nexia Uganda, a member of the Nexia global network of accounting and advisory firms, supports businesses across all twelve sectors with:

• EFRIS readiness check : a focused review of whether you are covered, your exposure since July 2025, and your suppliers' compliance

• VAT registration and deregistration advice : modelling whether staying in or leaving VAT makes financial sense under the new UGX 300 million threshold

• Tax health checks and URA audit support : identifying and fixing gaps before URA does

• EFRIS-integrated accounting systems : as an authorised Zoho partner, we implement Zoho Books and connected tools so invoicing, EFRIS and your books stay in step

Book a free 30-minute EFRIS readiness consultation. Email: [email protected], call +256 793 886 240, or visit nexia.ug.

This article is for general information only and does not constitute tax advice. The position described reflects URA's public notice of 10 August 2026 and the 2026 tax amendments as at October 2026. Please speak to an adviser about your specific circumstances.