The margin on most retail lines is made at purchase, not at the till. A better price, a longer credit period or a return clause for slow stock can be worth more than a month of promotions. Yet many shop owners agree terms by phone, pay in cash and keep the record in their head. This post sets out what to agree with a supplier in writing, and the two tax points that change the arithmetic.
Agree the commercial terms first
Before the first order, settle these in a short written note or on the first purchase order:
- Price basis: per unit or per carton, whether it includes VAT, and how long the quote holds.
- Credit period: how many days after delivery payment is due, and whether early payment earns a discount.
- Minimum order and delivery: who pays transport, and what happens when a delivery is short or damaged.
- Returns: whether short-dated or slow-moving stock can be returned, and within what window.
- Price changes: how much notice you get, and whether orders already placed are honoured at the old price.
Credit is not free, for either side. The Bank of Uganda kept its central bank rate at 9.75 percent in May 2026, and commercial lending rates sit well above that. A supplier offering thirty days of credit is lending you working capital, and will price it in somewhere. Ask what the cash price is as well as the credit price, and compare the difference with what your own bank or mobile money overdraft would charge.
The 6 percent withholding tax
Uganda's income tax law requires certain payers to deduct withholding tax from payments to suppliers. URA's withholding tax guidance states that government bodies and designated withholding agents deduct 6 percent where the total payment or contract is above UGX 1,000,000. URA's example: a designated buyer purchasing furniture worth UGX 3,000,000 deducts UGX 180,000 and pays the supplier UGX 2,820,000, then remits the UGX 180,000 to URA.
Two consequences follow for a retailer:
- If you are a designated agent, you must deduct the 6 percent on qualifying payments to your suppliers, file the return and pay URA within fifteen days after the end of the month in which you paid, and keep the records for at least five years. URA notes that an agent who fails to deduct or remit is personally liable for the unpaid amount.
- If your customers are designated agents (a school, a hospital, a government office buying from you), expect to receive 94 percent of your invoice in cash. The 6 percent is not lost: URA describes it as an advance payment of income tax that you credit against your liability when you file your return. Your pricing and cash-flow planning should assume the deduction.
Importers face the same rate at the border: URA states that an importer generally pays 6 percent on the customs value of imported goods unless exempt, and gives the example of clothes with a customs value of UGX 10,000,000 attracting UGX 600,000 of withholding tax. If you import stock yourself, that is part of the landed cost.
Why the supplier's invoice format matters
EFRIS, URA's electronic receipting and invoicing system, is compulsory for all VAT registered taxpayers and for businesses in twelve designated sectors whether VAT registered or not. If your supplier falls in either group, the document they give you should be an EFRIS e-invoice carrying a fiscal document number, not a handwritten invoice book.
This affects you directly. URA's withholding tax guidance notes that no withholding VAT is deducted where a valid EFRIS e-invoice or e-receipt is received, which simplifies paying any supplier who is on the system. More generally, a supplier who should be on EFRIS and is not is a compliance risk for your own purchase records. Ask for the e-invoice before you pay.
Keep the supplier ledger honest
Every delivery should be received against a goods-received note that matches the purchase order and the supplier's invoice. Short deliveries, price differences and returns are recorded as they happen, so the balance you owe each supplier is always the balance you can defend. Under the Tax Procedures Code Act, as summarised by RSM Uganda, business records must be maintained so that tax liability can be readily ascertained and kept for five years after the end of the tax period.
A clean supplier ledger also makes the next negotiation easier. When you can show a wholesaler twelve months of orders, payment dates and the value of returns, you are negotiating from a record rather than from memory.
A checklist for the next supplier meeting
- Put the agreed price, VAT basis and credit days in writing.
- Confirm whether either party is a designated withholding agent.
- Ask whether the supplier issues EFRIS e-invoices.
- Agree what happens to short-dated and damaged stock.
- Set a date to review prices, given that costs have been moving.
Sources
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