Customs compliance areas and reviews: What importers should know

By Nicholas Kabonge

Uganda heavily relies on imports and exports with the latest statistics published by the World Bank indicating these contribute an aggregate of 41% to Uganda’s Gross Domestic Product. Being a land-locked country exposes importers to both tariff and non-tariff barriers as they transport their goods to and from the seaport. It is therefore important that taxpayers understand their tax compliance obligations in order to ease the importation and exportation process.

The role of local customs administration primarily lies with the Uganda Revenue Authority (URA) Customs Department which comes with the responsibility of collecting taxes, customs duties, and other revenues, as well as facilitating trade and enforcing compliance with the relevant laws and regulations. Businesses that engage in cross-border trade should know what customs compliance areas the URA monitors and how to prepare for compliance audits.

The key business customs compliance areas include the following.

Value: Determination of the value of goods (customs valuation) is the basis for calculating the applicable duties and taxes. The URA follows the World Trade Organisation (WTO) valuation agreement, which specifies six valuation techniques, with transaction value being the main one. Businesses should disclose the true value of their items and provide invoices, contracts, transport documentation and payment records.

Classification: Customs classification assigns tariff codes to imported or exported commodities based on the Harmonised System (HS), an international standard for categorising items by type, composition, and purpose. The tariff code determines the duty, levy, and preferential treatment or exemptions for commodities. Businesses should classify their commodities appropriately and consistently and provide product descriptions, specifications, certifications, and samples in order to determine the correct rate of import duty that should be applied.

Origin: The country or area where goods are acquired or processed determines the application of preferential or non-preferential rules of origin. Uganda grants preferential tariff rates or exemptions to goods from the East African Community (EAC), Common Market for Eastern and Southern Africa (COMESA), or African Continental Free Trade Area (AfCFTA) under preferential rules of origin. Anti-dumping, safeguard, and countervailing tariffs; statistical and labelling requirements; and other trade policy measures are implemented.

Businesses should disclose the correct origin of their items and have certifications, declarations, invoices, and manufacturing records to confirm this.

Exemptions: Customs exemptions and incentives are available to some importers, including manufacturers, investors, diplomats, benefactors, and humanitarian organisations, subject to specified restrictions and processes. These are based on the East African Community Customs Management Act, Uganda Investment Code Act, Value Added Tax Act and Income Tax Act.  

Businesses should check eligibility, compliance, and reporting requirements for exemptions and incentives they claim and have supporting papers such as licences, permits, approvals, and returns.

Transit goods and warehousing regimes: Customs procedures and controls dictate the storage, movement, and clearance of imported or exported goods in bonded warehouses, free zones, or transit corridors. The URA controls storage and transportation to guarantee product security, safety, and integrity and duty and tax collection.

Taxpayers should follow the authorised processes and paperwork for storage and transportation and have warehouse receipts, transit declarations, seals, and guarantees.

Post-clearance audits

Uganda's self-assessment tax system requires importers to declare goods for customs purposes through clearing agents. These declarations and supporting documents are verified and examined before the goods are released by customs authorities.

The URA performs post-clearance reviews or audits to evaluate compliance, detect mistakes, omissions, and irregularities, collect unpaid or evaded duties and taxes, and issue fines or other sanctions for non-compliance. Businesses must preserve accurate and full customs transaction records and cooperate with URA auditors.

How to Prepare for Compliance Reviews

The URA regularly assesses taxpayers' customs compliance performance and provides comments, advice, and improvement suggestions. The scope and goals of compliance reviews determine whether they are done on-site or off-site. The following actions may help businesses prepare for such reviews:

• Conduct self-assessments: Businesses should routinely evaluate customs procedures, systems, and records to detect gaps, risks, or weaknesses in compliance. They should also check their declarations and documentation against URA data and correct any anomalies. They should also refresh and enhance their customs knowledge and abilities and ask the URA or other experts for clarification.
• Take remedial actions: Businesses must quickly and voluntarily disclose any customs transaction mistakes, omissions, or anomalies to the URA. Payment of underpaid or evaded duties and taxes and application for refunds or adjustments are also required. They should also follow any URA or other compliance guidelines.
• Maintain paperwork and proof: Businesses must retain reliable evidence to support customs declarations and claims and establish compliance. They should also organise, access, and standardise their documents and evidence and meet the record retention and presentation obligations. The URA will typically require further information or explanation during the compliance assessment, so all supporting evidence should be readily available.
• Collaborate with the URA: Businesses should interact with the URA in a timely, transparent, and professional way during compliance reviews. They shall respond to URA inquiries, requests, and notifications and provide access, facilities, and resources for the review. They should also ask the URA for advice, assistance, and clarification on any review problems and handle any conflicts politely and constructively.

Businesses may increase customs compliance, preparation for compliance reviews, and transaction efficiency, accuracy, and credibility by following these measures. They may also work proactively with the URA to reap the benefits of lower costs, reduced risks and delays, improved competitiveness, and preferential treatment.

The writer is a Tax Manager at PwC Uganda