EFRIS: Not just a tax compliance tool but a very functional tool for businesses; tax experts speak out

EFRIS— the Electronic Fiscal Receipting and Invoicing Solution is a smart business solution introduced by the Uganda Revenue Authority (URA) to manage the issuance of fiscal documents for purposes of real time transmission and authentication of business transaction data; ascertaining accuracy of self-assessment; facilitate pre-filing of tax returns; timely processing of tax refunds and any other purpose necessary for efficient tax administration purposes.

EFRIS was introduced in 2018 by Section 73 A (1) of the Tax Procedure Code Act. On 23rd June 2020, the Minister issued the Tax Procedures Code (e-invoicing and e-receipting) Regulations to give effect to the provision of the TPCA. On the same day, the Uganda Revenue Authority (URA) issued a public notice introducing EFRIS as a centralized system which would be used by all businesses to manage the issuance of e-receipts and e-invoices. The notice stated that all VAT registered taxpayers had a mandate to issue e-invoices or e-receipts (fiscal documents). 

A taxpayer may issue a fiscal document through any of the following methods:

• at the taxpayer’s business or enterprise resource planning system
• use of a web portal established by the Authority
• an application for tax administration installed on a computer or any other electronic device
• use of a USSD quick code provided by the authority
• use of fiscal devices.

There are exceptions where a manual receipt may be issued i.e., where the system is not available and offline transactions occur; the taxpayer’s system is off; the fiscal device is undergoing maintenance; or there is any other justifiable reason. A manual receipt issued in case the system is not available and offline transactions occur must be uploaded within 24 hours after the system has been restored. In the case where the taxpayer’s system is off, the fiscal device is undergoing maintenance, or there is any other justifiable reason, the manual receipt must be uploaded within 24 hours after issuing the manual receipt.

A taxpayer is required to maintain a Z daily report and price look up report. The price look-up report contains price settings of goods for purposes of verifying the prices on fiscal documents while the Z report is generated at the end of the day (business day) with transactions conducted and fiscal documents generated.

A taxpayer who does not issue an e-invoice or e-receipt, or who tampers with an electronic device shall be liable to penal tax. A person who attempts to acquire or acquired an electronic fiscal device that is not linked to the centralised invoicing and receipting system or authenticated by the URA commits an offence and is liable on conviction to a term of imprisonment not exceeding three years or a fine not exceeding UGX 6,000,000

A taxpayer who fails or refuses to perform the responsibilities, shall be deemed to have failed to maintain records and shall be liable to pay penalty tax for failing to maintain proper records within Section 49 of the TPCA (double the amount of tax payable by the person for the period to which the failure relates.)

Experts speak out about EFRIS efficiencies

Several tax experts the CEO East Africa Magazine spoke to, say the solution is as beneficial to taxpayers as it is to the taxman and indeed taxpayers are embracing the system.

Francis Kamulegeya, the Country Senior Partner PwC Uganda, one of the largest tax consulting and accounting firms in the country, in an email interview told CEO East Africa Magazine that the solution is a game changer and tax consulting professionals are in support of the initiative.

“EFRIS is, has been and will continue to be a game changer as far as tax compliance is concerned. It is a good initiative, and we in the Tax Consulting profession have been very supportive of it. We have also been working very closely with both the URA and our clients to ensure its smooth transition and implementation,” he says.

Whether the taxpayers are genuinely warming up to EFRIS as opposed to just complying with tax obligations, Nicolas Kabonge, a Senior Researcher at PricewaterhouseCoopers (PwC) Uganda says indeed the taxpayers are starting to appreciate EFRIS. 

“Generally, the taxpayers are starting to appreciate the EFRIS solution because it has eased some of the processes for example record keeping; VAT refund applications and support of audits,” he told CEO East Africa in an emailed interview. 

Currently only VAT registered taxpayers are required to register for EFRIS and issue electronic invoices. However, non- VAT registered taxpayers have also been encouraged to voluntarily register for EFRIS through the URA’s KAKASA campaign.

According to Kabonge, URA also plans to EFRIS to other tax heads by introducing some restrictions on businesses/taxpayers, for example, corporation income tax whereby when determining the taxable income for corporation tax purposes, taxpayers will not be granted deductions for expenses that are not supported by electronic invoices where the respective invoices are obtained from VAT registered persons.

Birungyi Cephas, a tax lawyer at Birungyi, Barata and Associates, notes that whereas URA needs to be cognizant of the need to enhance awareness/sensitization, it is equally important for taxpayers to take a moment and appreciate EFRIS and the game-changing benefits it offers to their businesses.

He mentions some of the notable benefits of EFRIS to taxpayers which include;

1. Enables business operators to record business transactions and share the information with URA in real-time (concurrently).
2. Business operators can connect directly to the system via the URA website or using the existing system used in the business (system to system connection) to issue e-invoices or e-receipts.
3. Refund claims using e-receipts or e-invoices are now fast-tracked given that the information is now available in the system.
4. Taxpayers will soon have pre-filled tax returns which will significantly reduce the time and costs involved in filing returns. This is because URA provides a report of the taxpayer’s transactional data on sales and purchases through the tax period which the taxpayer either confirms or modifies to include additional information. The prefilled tax returns will then help taxpayers avoid penalties for late or non-filing.
5. Taxpayers are now in position to track and validate business transactions in real time for efficient business management proper bookkeeping and sales management)
6. EFRIS now eliminates the risk of physical loss of tax invoices and receipts as transactional data or copies are digitally stored in the system. Should the taxpayer be audited many years later, they will avoid the penalty for failure to keep proper records since URA has all the necessary information.
7. Taxpayers now do not have to deal with the nightmare of fictitious invoices from their suppliers as URA has taken away the hurdle of taxpayers authenticating their supplier’s invoices.
8. Refund claims using e-receipts or e-invoices are fast-tracked and delays faced by taxpayers to get their refunds has significantly reduced.

Challenges

On the other hand, Birungyi says while this new system has got all these benefits, taxpayers are facing some challenges that URA should consider rectifying to enable smooth operations of taxpayers’ businesses. Some of the challenges include: 

1. Issuance of invoices whose billable amounts can only be determined at the month end for example customers who have made bulk purchases during the month and need to be given discounts and the invoices can’t be backdated.
2. Configuring stock for businesses with multiple inventory lines like supermarkets, building contractors etc;
3. Additional administration/reconciliation burden to amend prior VAT returns in order to claim input tax on old invoices.
4. Inability to issue credit notes for invoices issued pre- EFRIS.
5. Inability to issue credit notes after 3 months as transactions can be reversed even after 3 months.
6. Following up with customers who are not tech-savvy to approve credit notes.
7. Issuance of invoices when the URA portal is down.

Kabonge, also says that interactions with their clients, show that they are facing the same challenges above, but he acknowledges that URA has been making an effort to address some of the challenges, such as the issuance of credit notes and backdating of invoices, an option that is being granted to taxpayers on a case-by-case basis.  

“Some of the challenges that are yet to be addressed by the URA include but are not limited to the following the requirement to amend prior VAT returns in order to claim input tax on old invoices (additional administrative/ reconciliation burden); configuring stock for businesses with numerous inventory lines (e.g. supermarkets, building contractors); the provision of discounts to customers based on volumes purchased during the month and the issuance of invoices when EFRIS web portal is down,” says PWC’s Kabonge.

Birungyi also notes that when rolling out any new cutting-edge technology-based solutions like EFRIS, unease and discomfort that stems from challenging the status quo coupled with the anxiety of learning something new is expected from the taxpayers, however business owners should embrace the future that is digital innovation and invest in mastering how it works because there is no running away from it and if they do, they risk being left behind.

In conclusion, while the EFRIS tool is very beneficial to both the tax payer and URA, both need to walk this transitional journey together much to the realization of shared fruits for all,” Birungyi, a tax professional with over 35 years’ experience, both in government and in the private sector concludes.