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“So, you did absolutely nothing? Not even breathed?” – What filing NIL tells the taxman
Across Uganda today, filing NIL tax returns has quietly become a lifestyle.
Whether it’s a kiosk operator in Kikuubo, a fast-rising consultant in Najjera, or a company director in Bugolobi, the story often sounds the same: “We had no activity. No sales. No expenses. Let’s just file NIL and be done with it.”
It sounds quite neat, even smart, but is it true?
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In practice, filing a NIL return is not a placeholder. It’s a powerful legal declaration.
You are telling the Uganda Revenue Authority that your business experienced zero taxable activity in that month or year of income. No income. No purchases. No paid staff. No rent. No data bundles.
No mobile money inflows. Not even a boda expense. Basically, you're saying your business didn’t just sleep but rather flatlined.
Now imagine repeating that NIL message month after month. Meanwhile, URA notices that:
You filed NIL VAT, but a supplier declared they sold goods to you.
You filed NIL WHT, but a consultant filed income showing you paid them.
Your TIN is quiet, but your bank is busy.
You declared no employees, but NSSF records say otherwise.
URA now operates in a connected tax ecosystem, where one taxpayer’s declaration is validated by what others report. If you don’t declare an invoice, but someone else declares they invoiced you, URA knows.
If you file NIL returns, but a supplier or service provider lists you as a client in their return, URA’s digital red flags go up. And they’re no longer guessing, they have the data.
Even more worrying is the rise of invoice trading, a dangerous and illegal trend where struggling businesses buy or sell fake VAT invoices to appear compliant or claim input tax.
Some businesses that genuinely made no purchases are filing fake VAT returns to dodge the NIL label. Others are selling their invoice books for a fee to help friends “reduce tax.”
But URA keeps watching, and every mismatched invoice or suspicious pattern is now traceable. Filing NIL returns repeatedly is no longer seen as harmless. It’s quickly becoming one of the key risk indicators that trigger audits, system reviews, and even taxpayer profiling.
URA understands that some businesses are genuinely inactive, but they also know that others are simply avoiding the truth.
Yet many taxpayers, especially SMEs, are stuck in a cycle of NIL filings out of fear, confusion, or poor bookkeeping.
They believe it’s better to “just file something” than deal with penalties or URA follow-up. But this habit can be more dangerous than doing nothing at all.
Why? Because every NIL return says you did absolutely nothing—and that statement must be true and provable.
My article breaks down the truth about NIL returns:
What they mean by Income Tax, VAT, PAYE, and WHT
When filing NIL is legally safe and justified
How URA cross-checks your filings with third-party declarations
And why invoice trading may soon land some people in legal hot water
There are legitimate scenarios where filing NIL is justified. Maybe your company is dormant, newly registered, or hasn’t started operations yet. Seasonal businesses may also have inactive months.
But this justification must match your reality. If your business name is still circulating in the market, you maintain an active license, or you're running ads, moving stock, or paying utilities, URA has reason to doubt your NIL filing.
Falsely filing NIL is equivalent to giving a false statement under the Tax Procedures Code, punishable by penalties or prosecution. You can’t file NIL for VAT, but still file income tax showing sales.
You can’t file NIL for PAYE while declaring salary expenses in your financials. And you can’t file NIL for WHT when you’re listed as having rented a commercial property or subcontracted services.
URA’s integrated e-tax system performs these internal cross-checks, and contradictions raise automated red flags. Inconsistencies can trigger tax penalties. Even if you remain silent, others are talking.
URA’s compliance programs include third-party information collection from mobile money operators, landlords, telecoms, suppliers, commercial banks, NSSF, and even utility companies. If your supplier declares they sold to you (and claim input VAT), but you declared NIL, something is off.
If a landlord files withholding on your rent payments, and you report NIL across all tax heads, that’s suspicious. URA doesn’t have to believe your NIL declaration when others are naming you in their audits, denial of refunds, or risk suspension of your TIN.
One of the most abused tricks in Uganda’s business world is buying invoices to fake expenses. A struggling taxpayer may pay a broker to issue them fake fuel or goods invoices so they can claim VAT or inflate expenses for Income Tax. But this web is unraveling.
URA is matching invoice data with Digital Tax Stamps, e-Invoicing (EFRIS), and supplier filings. When you file NIL but your company is appearing on numerous invoices as a buyer or seller, you are exposed. Offenders can face penalties, deregistration, or even jail under fraud charges.
If URA sees you filing NIL for six or more consecutive periods, especially for VAT or PAYE, it assumes one of two things: either you’re abusing the system, or your business has collapsed and needs to be deregistered.
The tax authority uses a risk-scoring model, and NIL repeaters fall into the non-compliant high-risk cluster. This may trigger: - Forced VAT deregistration, Withheld Tax Clearance Certificates (TCCs), Audit selection, Denial of refund claims, Restrictions on EFRIS usage.
If your business is indeed not making money, explain it clearly when filing and consider adding a cover note. If you’re waiting on a big deal or have temporarily shut down, update your status with URA or file returns under the correct assumptions.
Above all, do not panic into filing NIL just because others do. A wrongly filed NIL return today could cost you credibility, cash, and compliance down the road. Tax isn’t about looking broke—it’s about being honest.
It is prudent therefore to think that before you hit “Submit NIL” again this month, pause and ask: “Can I defend this if the taxman knocks tomorrow?”
Because while you might believe your books are invisible, someone else’s tax return may already be exposing you.
The writer is a Chartered Accountant and a chartered Tax Consultant