What you need to know:
- VAT on digital services, according to URA, seeks to level the playing field between local service providers that already charge VAT and foreign tech giants that were previously not obligated to collect VAT.
Uganda Revenue Authority (URA) has said it expects to collect at least Shs5b from the new Value Added Tax instituted on non-resident providers of electronic services such as social media, streaming sites and other internet-based tech giants.
In a brief shared with Monitor Thursday, Ms Sarah M Chelangat, the URA domestic taxes commissioner, said VAT on digital services seeks to level the playing field between local service providers that already charge VAT and foreign tech giants that were previously not obligated to collect VAT.
Uganda, she added, is not the first to implement this charge, noting that more than 70 countries including South Africa, Nigeria and Kenya, were already charging VAT on non-resident digital services providers.
“URA anticipates that this step will generate an extra Shs5b in tax revenue in the current [2022/23] financial year,” she said.
URA also indicated that the VAT measures target a number of electronic services, among which include, web hosting, software and streaming services, online advertising, online gaming and gambling, music and movie streaming, remote programmes and equipment maintenance.
Others are subscription-based media such as news portals, magazines, journals, electronic data management, online data warehousing, file sharing, cloud storage services and supply of search-engine and automated help-desk services.
Purchase of such services, URA said, will require non-resident electronic service providers such as Microsoft and Google to factor in their prices an 18 percent VAT charge, which will be remitted to URA.
In September, URA told Monitor that social media, streaming sites and other internet tech giants had until October 30 to be VAT compliant.
Monitor could not readily establish whether all non-resident electronic service providers had complied with the directive.
URA had earlier indicated that government had since December last year been engaging about 20 non-resident electronic service providers with virtual operations in Uganda to start collecting VAT from commercial proceeds, whose sold to country target Uganda.
The service providers, URA indicated included Netflix, Uber, Meta and Apple, among others.
Some, such as Zoom and Meta, which operates a number of social media sites including Facebook, WhatsApp and Instagram, among others, have since published notices, in which they indicated that as of October adverts that have Uganda as sold to country would be applicable to VAT. VAT on electronic services is provided for under the VAT Act, which was amended in July 2021 to provide for quarterly filing of VAT returns by non-resident providers of electronic services.
Companies that fall under this category, Ms Chelangat said, are those that meet the VAT threshold of Shs150m.
Such companies will be required to file returns online every 15th of every month and will also have to share transaction details with URA at the end of every quarter.
During discussions on how the new directive would be implemented, Mr Ibrahim Kibuuka Bbosa, the URA assistant commissioner public and corporate affairs recently said, some companies had challenged sharing client details with URA, noting that this would compromise thier privacy and confidentiality policies.
URA has also indicated that in future, it, together with government, will explore ways of taxing the direct income of non-resident digital companies, earned from sources in Uganda.