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VAT does not apply to all products in Uganda. The supplies for which VAT isn’t applicable are referred to as VAT exempt because these products and services do not attract VAT to be levied on them. The Uganda Revenue Authority (URA) decides which products and services fall under standard VAT rates, which are zero-rated supplies, and which ones are exempt from VAT. VAT exemption is generally applied to those products and services which will benefit society such as in the pharmaceutical industry. A few examples of products exempted from VAT are medical equipment, medicines, wheelchairs, and crutches for disabled people.
VAT exempt supplies in Uganda differ from zero-rated VAT supplies. VAT exempted supplies are those to which VAT is not applied whereas zero-rated VAT supplies attract 0% VAT on them. Some examples of VAT-exempted products include maternity care equipment, braille papers, and motor boat ambulances. Some examples of zero-rated VAT supplies include all exports from Uganda, supply of medicines and drugs manufactured in Uganda, supply of seeds, fertilizers and pesticides and the supply related to international transport of goods. Note that even the supply of passengers for international transport along with their passports comes under zero-rated VAT.
There is another difference when it comes to VAT exemption and zero-rated VAT supplies. Businesses that supply only VAT-exempt products and services are not required to register for VAT regardless of their sales and turnover. However, businesses that are dealing with zero-rated supplies need to register for VAT if they meet the requirements of VAT registration. If the suppliers of zero-rated supplies do not meet the requirements, then they don’t need to register until they become eligible. The reason why zero-rated suppliers must register for VAT when eligible is so that they can input VAT paid on purchase of goods and services when they file their VAT returns.
The VAT exempt supplies in Uganda generally fall under medical and pharmaceutical usage and some of such goods and services are as follows:
Apart from these, the supplies related to providing health and life insurance, agricultural insurance, education services, financial services, passenger transport-related services, petroleum and fuel, and social welfare services are also exempted from VAT. Imports that are for hospital use are also exempted from VAT. These include laundry equipment, water heating equipment, blood freezers, stretchers, shadowless lamps, furniture, linen, kitchenware, kitchen equipment, bedside screens, trolleys, mattresses, air conditioners, medical autoclaves, packaging materials for medicines, hospital furniture, x-ray machines, examination gloves, and raw materials required for manufacturing medicines.