KAMPALA – The Uganda Revenue Authority (URA) has instructed hotels, through their umbrella body, the Uganda Hotel Owners Association (UHOA), to pay Value Added Tax (VAT) on all food provided to their employees.
“Section 18(11) of the VAT Act stipulates that the supply of goods or services by an employer who is a taxable person, to an employee for no consideration, shall be regarded as the supply of goods or services for consideration, as part of the employer’s business activities,” reads part of URA’s letter to hotel owners, dated 4th November 2024.
The tax authority further clarified that based on this provision, when a hotel provides food to its employees for no charge, the provision of that food is considered a taxable supply for consideration, as part of the hotel’s business activities. As such, the hotel will be required to account for VAT in accordance with the law.
This decision follows a letter sent by the Chairperson of the Uganda Hotel Owners Association to URA on 18th June 2024, seeking clarification on whether food provided to employees while on duty falls under the definition of “supply for consideration.”
Although the hotel owners had requested a private ruling on Section 18(11) of the VAT Amendment Act, Samuel Ameu from URA, who signed the response, emphasized that the decision is not a private ruling.
The move has been met with mixed reactions from hotel owners and the general public, with many expressing concerns that this policy will particularly impact employees.
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