Tax net tightens: Why EFRIS, DTS, rental tax are closing in on every business

In today’s rapidly digitizing economy, tax compliance in Uganda is no longer a back-office obligation, it has become a cornerstone of business survival and competitive legitimacy.

The Uganda Revenue Authority’s enforcement of the Electronic Fiscal Receipting and Invoicing System (EFRIS), Digital Tax Stamps (DTS), and Rental Tax obligations is transforming the commercial landscape, compelling firms of all sizes to restructure how they record, report and manage revenue.

This shift reflects a broader data-centric tax administration strategy designed to broaden the tax base, reduce revenue leakage, and reinforce fairness across sectors historically prone to under-reporting. The move is more than bureaucratic tightening, it directly impacts business operations, cost structures, and strategic forecasting.

EFRIS was first legally introduced through the Tax Procedures Code (E-Invoicing and E-Receipting) Regulations in 2020, with mandatory use by VAT-registered taxpayers beginning on 1 July 2020.

Initially, the system applied only to businesses with annual taxable turnover exceeding UGX 150 million, roughly UGX 12.5 million per month, and required them to issue authenticated electronic invoices and receipts instead of manual paper documentation.

The purpose was clear: real-time digital capture of sales transactions transmitted directly to URA would reduce reliance on self-reported figures and substantially improve revenue recording mechanisms.

Early revenue data shows a notable upward effect on VAT; for example, VAT collections increased from UGX 2,992.92 billion (FY 2020/21) to UGX 3,295.90 billion and further into the next fiscal year, with reports attributing part of this growth to EFRIS implementation.

However, EFRIS remained somewhat limited in scope until 1 July 2025, when URA issued General Notice No. 2218 of 2025, expanding the mandate beyond traditional VAT-registered entities to include 12 additional economic sectors, regardless of VAT status.

This expansion now sweeps in businesses in fuel retail, mining, manufacturing, utilities, construction, transportation, accommodation, ICT, real estate, professional services, and other key industries.

In essence, where EFRIS once covered a defined subset of formal VAT taxpayers, EFRIS 2.0 now captures broad swathes of commercial activity, closing reporting blind spots and linking transaction data directly to tax assessment engines.

The technical promise of EFRIS hinges on uptake and usage. According to Uganda’s Ministry of Finance performance data for FY 2024/25, the EFRIS VAT register contained 106,093 taxpayers, a significant figure in formal compliance, of which 76.90% (81,585 businesses) were actively issuing fiscalized receipts.

This marks an improvement from the previous year’s compliance rate but also signals a substantial gap between registration and active usage.

Translated, roughly 23% of registered EFRIS taxpayers were not yet actively issuing compliant receipts, undermining the system’s visibility into their operational turnover. In earlier reporting, half-year data from FY2023/24 suggested that among eligible VAT taxpayers, only about 73% were actively issuing EFRIS invoices.

These gaps underline a critical compliance challenge: registration alone does not guarantee real-time, system-verified reporting, and non-issuance exposes businesses to enforcement risk.

Additionally, broader compliance data from an OECD peer review suggests that only about one-third of all URA-registered taxpayers have active EFRIS accounts, meaning a significant share of companies and partnerships remain outside full digital documentation oversight.

Uganda’s commercial ecosystem is diverse, from informal microenterprises to large manufacturers, but the emerging enforcement landscape treats all entities with economic substance as visible contributors:

• Informal enterprises with substantive turnover are increasingly exposed due to broader EFRIS obligations and third-party data feeds (e.g., bank transfers, utility records).

• SMEs face technology and training requirements, including reliable electricity, networking, and accounting capacity, investments that many find burdensome initially but that create stronger internal controls over time. 

• Larger businesses are integrating EFRIS into ERP and POS systems, reducing permeability in reporting and smoothing audit trails.

EFRIS now contributes significantly to tax performance; in December 2024, 88.4% of VAT collected was attributed to EFRIS-enabled transactions, affirming its centrality to revenue mobilization. 

Meanwhile, DTS, targeting excisable products like beverages, sugar, and cement, has also gained traction, with over 1,680 registered taxpayers under the scheme by early 2026. 

Under the expanded compliance regime, penalties have become more proportional and severe:

• VAT-registered businesses that fail to issue EFRIS invoices risk fines that are now set at twice the amount of tax due on the transaction rather than fixed levies. 

• Non-VAT registered businesses in newly included sectors can face fines of up to UGX 30 million or imprisonment up to 10 years upon conviction for non-issuance. 

• Previously, flat penalties like UGX 6 million per failure have largely given way to penalties scaled to the economic impact of non-compliance, sending a signal that digital non-reporting will no longer be tolerated. 

These financial consequences when compounded with interest and loss of deductible expense claims can erode profitability quickly.

Compliance costs money, but non-compliance costs even more: enforcement disruptions, restricted deductions, reputational damage, and potential business closures. At the same time, EFRIS compliance offers three strategic advantages:

• Access to formal financial services: Banks and investors increasingly require accurate digital documentation.

• Improved internal control and forecasting: Real-time data enhances planning and audit readiness.

• Fair competition: When all businesses report transparently, market distortion from undeclared sales diminishes.

In a digital tax environment, compliance is not a cost center, it is a risk control and business resilience strategy.EFRIS is not a tax. It is a system, a reporting tool designed to capture transactions as they happen.

It does not create new tax obligations; it simply makes existing ones visible. Much of the resistance to EFRIS stems from a long-held misconception among traders that VAT is a business expense, when in reality VAT is borne by the final consumer and merely collected by the business on behalf of government.That misunderstanding is now costly.

In a fully digital tax environment, old assumptions no longer protect businesses they expose them. The choice is no longer whether to comply, but when and at what cost.

For every business still undecided, this is the moment to wake up: early compliance is cheaper, safer, and far better than enforcement.

The writer is a chartered Accountant and a chartered Tax Advisor