Uganda treats free supplies from employers to employees as taxable for VAT from 1 July 2024

What changed in detail

The Value Added Tax (Amendment) Act, 2024 was assented to by the President on 15 July 2024. Section 1 brings it into force on 1 July 2024, so it applies from a date two weeks before assent. Its long title describes this change as classifying the supply of goods or services by an employer to an employee at no consideration as a taxable supply.

Section 4 of the Act inserts a new subsection (10) into section 18 of the Value Added Tax Act, Cap. 349, immediately after subsection (9). Under it, a supply of goods or services by an employer who is a taxable person to an employee for no consideration is regarded as a supply for consideration made as part of the employer’s business activities.

The rule applies only to employers who are taxable persons, that is, registered for VAT. It does not say how the value of such a deemed supply is to be measured; that is left to the valuation rules in the principal Act.

What it means

Before July 2024 a free benefit given to staff could fall outside VAT because no consideration was paid. Since then, a VAT-registered employer providing free goods or services to employees must account for output VAT on them as if they had been sold.

The provision is in the 2024 Act as published by Parliament; the weekly feed records no later change to it. Uganda amends its VAT Act most years, so check the current consolidated text before relying on the subsection number or wording.