Authors
The Uganda Revenue Authority (“URA”) has taken a significant step toward enhancing tax compliance and formalising business operations across the country. Through General Notice No. 2218 of 2025, the Government has expanded the scope of the Electronic Fiscal Receipting and Invoicing System (“EFRIS”) to include a wide range of business sectors, effective 1 July 2025. This initiative is part of Government’s effort to increase transparency, widen the tax base, and ensuring that all economic players contribute equitably and fairly to national revenue.
What has changed?
Prior to 1 July 2025, only VAT-registered businesses or businesses with an annual turnover exceeding UGX 150 million from sale of taxable goods or services were mandated to issue electronic invoices via EFRIS. However, the new directive now includes non-VAT registered businesses operating in the following sectors: wholesale and retail of fuel, mining and quarrying, manufacturing, construction, transportation and storage, accommodation and food service activities, real estate activities, professional, scientific, and technical services, utilities (electricity, water, waste management), and arts, entertainment, and recreation.
This means that even small businesses and startups in these sectors such as informal transport operators (taxi, cab, and boda boda riders) and food vendors must now issue EFRIS compliant invoices or receipts for every transaction.
Implications for small businesses
The inclusion of non-VAT registered entities in the EFRIS mandate marks a major shift in Government’s attempt to widen the tax base. Many small businesses previously operated informally, without the need to issue electronic invoices irrespective of whether they were dealing in Vatable supplies or not. With effect from 1 July 2025, these businesses are now required to formalise their operations by adopting EFRIS, a digital invoicing system in order to comply with URA’s tax compliance requirements.
While this move is intended to improve tax compliance and reduce revenue leakage, it raises concerns about the readiness and capacity of small businesses to adapt to the electronic invoicing requirements. Many of these businesses lack the infrastructure, technical expertise and financial resources to implement EFRIS smoothly.
Currently, EFRIS compliance may be attained through use of URA’s web portal, direct linkage to a business’ accounting system or use of an Electronic Fiscal Devices (“EFD”), purchased from one of URA’s approved suppliers.
Impact on corporation tax
One of the most critical implications of this change relates to how businesses will be claiming tax deductions for expenses under Corporation Income Tax (CIT). Prior to 1 July 2025, the Income Tax Act (ITA), barred taxpayers from taking a tax deduction of expenses amounting to UGX 5 million shillings where such expenses were in relation to purchases from customers without Tax Identification Numbers (TINs).
The ITA also contains a requirement for taxpayers to rely on electronic invoices or electronic receipts (EFRIS invoices) to validate their expense claims. However, since only VAT registered persons were gazetted and mandated to issue electronic invoices, then expenses in relation to purchases from non-VAT registered persons did not have to be supported with EFRIS invoices (electronic receipts).
With the expanded scope of EFRIS, all businesses in the designated sectors must now issue EFRIS invoices for the respective expenses to qualify for corporation tax deductions, regardless of the transaction amount.
Penalties for non-compliance
Effective July 2025, businesses that meet the VAT registration threshold face a penalty of double the tax due for failing to issue EFRIS invoices. This is a shift from the previous fixed penalty of UGX 6 million, offering a more proportional approach based on the scale of non-compliance.
For businesses that do not meet the VAT registration threshold, non-compliance with EFRIS requirements may still attract severe consequences. Upon conviction, such businesses could face a penalty of UGX 30 million or imprisonment for up to ten years.
Challenges for informal and low-value vendors
The requirement to issue EFRIS invoices for all transactions, regardless of value poses a challenge for small vendors and service providers. For example informal transport operators like taxis, boda-boda riders, food vendors, may not have the capacity to issue electronic invoices. As a result, larger businesses may choose to avoid transacting with these informal providers to safeguard their tax deductions.
In addition, the expenses associated with implementation of EFRIS, such as purchasing EFDs, acquiring mobile data, training personnel, and integrating systems, will pose significant challenges, particularly for startups and businesses operating on thin margins.
The increased cost of compliance may be prohibitive and those unable to afford the transition risk being excluded from supply chains. While the government’s intention is to encourage formalisation, the transition must be managed carefully to avoid marginalising the very businesses it seeks to support.
Conclusion
Uganda’s expansion of EFRIS marks a major shift toward a more transparent and fair tax system. While it promises benefits like better compliance and reduced fraud, small and informal businesses may struggle with the costs of adapting to the new system.
The URA should therefore continue supporting businesses through training, sensitisation, and incentives. Introducing a value threshold for mandatory EFRIS compliance aligned with the presumptive tax regime could exempt small businesses with annual turnover below UGX 10 million, giving startups and micro-enterprises time to grow before facing full compliance requirements.
