According to traders in KACITA, there is inconsistency in their understanding of mis-invoicing and as such, they lose out on business. With this background, Denis Kateeba, the Commissioner Tax Investigations in URA explains invoice trading and what traders should look out for.
What is Invoice trading?
Trade misinvoicing is a form of tax fraud whereby a trader knowingly submits an invoice that misrepresents the price, quantity or quality of goods or services in order to reduce his tax liability.
Who are the main culprits?
From the investigations, the vice has been established to be rampant among Tax Agents who operate on behalf of their clients who give them full access to their Tax Identification Numbers(TINs) to conduct business. This at times happens with or without consent of their [business owners].
How is it done?
Trade mis-invoicing involves inflating of amounts for purchases on invoices given to Tax Agents to file. In so doing, the entrusted agent takes advantage of their role in the business to include purchases and sales that are non-existent to their client’s companies’ declarations.
However, the most notable fraud scheme is the registration of multiple companies which are non-existent for purposes of trading fictitious sales and purchases.
What are some of the risks that have been identified from traders that engage in trade mis-invoicing?
With the roll-out of Electronic Fiscal Receipts and Invoicing System(EFRIS) at URA as a means to combat these criminal activities, the following risks or system abuses have been identified to exist among traders;
Inflating amounts on original invoices i.e. fiscal document number (FDNs) at the time of filing;
Taxpayer inflates (increases) the amount that is appearing on the Invoice (FDN) at the time of filing so that s/he can obtain more input credits.
Use of Credit Notes to reduce on the tax to be paid by the Supplier by reversing or canceling sales.
Under declaration of invoices Issued in EFRIS compared to what is declared in E-tax
Declaring less amounts in E-tax compared to what the purchasers in EFRIS have declared.
Other risks include;
Use of forged EFRIS invoices to claim for input tax.
Use of other companies’ EFRIS invoice information to claim input tax
Some taxpayers obtain EFRIS information from other taxpayers then use the invoice numbers to claim for input tax that does not belong to them.
Claiming a specific invoice several times in several months.
What are the consequences of involving in Mis-Invoicing?
The consequences are dire as prescribed under the amended provisions of the Tax Procedures Code Act, 2022.
| Offense | Penalty/Fines |
| Section 58: Making false or misleading statements. | A fine increased from UGX 4 million to UGX 110 million. |
| Section 62E: Failure to use an electronic receipting or invoicing system | A fine not exceeding UGX 30 million or imprisonment not exceeding ten years or both. |
| Section 62F: Forgery of electronic receipt or invoice | A fine not exceeding UGX 30 million or imprisonment not exceeding ten years or both. |
| Section 62G: Interference with the electronic fiscal device or electronic dispensing control device | A fine not exceeding UGX 30 million or imprisonment not exceeding ten years or both. |
| Section 62H(c): Making a false or misleading statement in the information return | A fine not exceeding UGX 50 million for each day of default or to imprisonment for a term not exceeding ten years or both. |
| Section 62H(d): omitting from a statement made in the information return | A fine not exceeding UGX 50 million for each day of default or to imprisonment for a term not exceeding ten years or both. |
What is URA doing to wipe out mis-invoicing?
Inorder to wipe out the vice, URA has dedicated resources through the following inititives;
i. Automation of URA’s processes to ensure voluntary tax compliance.
ii. Encouraging taxpayers to use EFRIS and affix Digital Tax Stamps to ensure level ground for all business persons.
iii. Enhancing Tax Education programs through media
iv. Strengthening our intelligence network to hunt down those who involve themselves in the fraud scheme.
What are the benefits of enrolling on Electronic Fiscal Receipting & Invoicing System(EFRIS)?
Once a taxpayer enrolls on EFRIS, he is in a position to track and validate business transactions in real-time for efficient business management in form of proper book-keeping and sales management. The taxpayer can also fast-track his refund claims using e-receipts or e-invoices since information is readily available in the system.
Another benefit is that the system avails taxpayers with prefilled tax returns and thus minimizing delays and costs involved in filing tax returns.
Taxpayers should therefore note that the prefilled tax returns help taxpayers to avoid penalties associated with late or non-filing.
Any message to the Public of advice to taxpayers
Inorder to avoid penalties and imprisonment, taxpayers should embrace EFRIS and Digital Tax Stamps to enjoy a fair competition in the market.
Additional Reporting by Immaculate Wanyenze
