URA TIGHTENS ITS TAX NET: From construction and transport to real estate and professional services, businesses must embrace EFRIS or risk losing valuable income tax deductions.

Businesses in 12 sectors must now issue electronic invoices or receipts, while companies purchasing goods and services from them face a new compliance test for claiming expenses against taxable income.

The Uganda Revenue Authority (URA) has expanded the mandatory use of its Electronic Fiscal Receipting and Invoicing Solution (EFRIS) to 12 additional business sectors, in a move that could significantly change how companies record expenses and calculate their income tax liabilities.

The new requirement took effect retrospectively from July 1, 2025, meaning businesses covered by the expansion are expected to comply with the rules from that date, even though the relevant General Notice was published in the media later.

More importantly for businesses, expenses incurred from suppliers in the affected sectors may not qualify for income tax deductions if they are not supported by an EFRIS-generated electronic invoice or receipt.

The development represents a major expansion of Uganda’s digital tax administration system, moving EFRIS beyond its traditional focus on VAT-registered businesses and bringing a wider range of non-VAT registered businesses into the electronic invoicing system.

Twelve sectors brought under EFRIS

The expansion was effected through General Notice No. 2218 of 2025, which was published in the Uganda Gazette on July 25, 2025.

The 12 sectors covered are:

Wholesale and retail of fuel

Mining and quarrying

Manufacturing

Electricity, gas, steam and air-conditioning supply

Water supply, sewerage, waste management and remediation activities

Construction

Transportation and storage

Accommodation and food service activities

Information and communication technology

Real estate activities

Professional, scientific and technical activities

Arts, entertainment and recreation.

The Uganda Revenue Authority says the second phase of EFRIS rollout brought non-VAT registered taxpayers operating in the gazetted sectors into the system from July 1, 2025.

This is significant because EFRIS was initially associated largely with VAT-registered taxpayers. URA’s current guidance confirms that all VAT-registered taxpayers are required to use EFRIS, while the second phase extends the mandatory requirement to specified non-VAT businesses in the gazetted sectors.

The expense deduction trap

For businesses, however, the most consequential part of the new regime may not be the requirement to issue electronic invoices. It is the potential impact on income tax deductions.

Under Uganda’s income tax framework, businesses generally calculate taxable income after deducting qualifying expenditure incurred in producing income. The expenditure must satisfy the requirements for deductibility, including being incurred in the production of income.

The EFRIS expansion adds another layer of documentation. According to a tax alert issued by the Uganda Chamber of Commerce and Industry, expenses incurred by customers in the 12 newly covered sectors that are not supported by EFRIS invoices may be disallowed for income tax purposes.

In practical terms, this means that a company buying goods or services from a business operating in one of the affected sectors must pay greater attention to the documentation accompanying the transaction.

A construction company purchasing professional services, a manufacturer buying transport services, a hotel paying for repairs, or a company renting property could all find themselves needing to ensure that the supplier provides the appropriate electronic fiscal document.

The issue therefore extends beyond the supplier issuing the invoice. The customer also has a tax interest in making sure the invoice is compliant.

From paper trail to digital trail

EFRIS is designed to allow URA to receive transaction information electronically and in real time. URA describes EFRIS as a system involving electronic invoicing, electronic fiscal devices and direct communication between business transaction systems and the tax authority. Once a transaction is initiated, relevant details are transmitted to URA to generate an electronic receipt or invoice.

An EFRIS document contains features such as a fiscal document number, verification code and QR code, allowing transactions to be digitally authenticated.

For businesses, the significance is that transactions that previously existed primarily in paper files can now become part of a centralised digital tax record.

URA argues that this can improve bookkeeping, reduce the risk of lost invoices and receipts, facilitate tax audits and eventually enable pre-filled tax returns.

But for taxpayers, it also means that discrepancies between reported expenses and electronically recorded transactions may become easier for the authority to identify.

A wider tax net

The expansion is part of the government’s broader effort to increase domestic revenue collection and reduce leakages. PwC Uganda described the 2025 expansion as a significant step toward formalising business operations, widening the tax base and improving transparency in economic transactions. The logic is straightforward.

When businesses issue electronic invoices, URA obtains information about transactions that can potentially be compared against income declarations made by both sellers and buyers.

For example, if a company reports a substantial expenditure to a supplier, but there is no corresponding EFRIS transaction, the absence of an electronic record could raise questions during a tax review.

This gives URA greater visibility across the supply chain. It also potentially reduces the ability of businesses to inflate expenses using unsupported invoices or undocumented transactions.

Suppliers face penalties

The consequences are not limited to the loss of a customer’s tax deduction. URA says a taxpayer who is required to issue an EFRIS invoice but fails to do so can face a penal tax equal to twice the tax payable on the goods or services.

The Uganda Chamber of Commerce and Industry has similarly warned that failure to comply can attract a significant financial cost.

Businesses therefore face a double incentive to comply: they must ensure their own transactions are properly fiscalised, while customers have an incentive to demand compliant invoices. This could gradually create pressure throughout the supply chain for businesses to formalise their records and transactions.

What businesses should do

Businesses operating in the 12 sectors need to establish whether they fall within the new EFRIS requirements and ensure that their invoicing systems are compliant.

They should also review transactions dating back to July 1, 2025, given the effective date of the new requirements.

Companies purchasing goods and services should, meanwhile, review their expense documentation and ensure that suppliers in the affected sectors provide valid EFRIS invoices or receipts where required.

URA advises businesses to maintain accurate records of every transaction and retain invoices and receipts as proof of income and expenditure. The authority also warns that where taxpayers fail to maintain proper records, expenses may not be recognised during tax assessment.

For smaller businesses, URA says taxpayers with annual sales turnover below Shs10 million are excluded from mandatory EFRIS use, although they may voluntarily use the EFRIS app or portal at no cost.

A new era of tax compliance

The EFRIS expansion effectively changes the relationship between business transactions and tax administration.

An invoice is no longer merely a document exchanged between a buyer and seller. Increasingly, it is part of a digital tax trail visible to the revenue authority.

For businesses, the message is clear: an expense may have been genuinely incurred, but inadequate documentation can still create a tax problem.

The expansion to 12 sectors therefore places greater responsibility on both suppliers and customers. Suppliers must issue the required electronic fiscal documents, while customers must ensure that their business expenses are properly supported.

As Uganda continues to digitise tax administration, EFRIS is likely to become an increasingly important component of corporate bookkeeping, tax planning and audit preparedness.

For businesses, the safest approach is no longer simply to keep an invoice.

It is to ensure that the invoice is the right invoice, electronically generated where required, verifiable and properly linked to the underlying transaction.

URA EXPANDS EFRIS TO 12 SECTORS

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By Bbosa Sigowa

The writer is a tax consultant specialising in tax matters affecting small and medium-sized enterprises (SMEs).