Following a Botched OTT Tax, URA has Devised New Mechanism to Tax Internet Users in Uganda Effective 1-July-2022.

To maximize tax collection, Uganda Revenue Authority (URA) has established mechanisms to start collecting Value Added Tax (VAT) from non-resident service provider companies operating in the nation’s economy, including social media giant Facebook. 

Collection of VAT from these companies starts July 1, 2022 and will focus on all electronic service providers such as Netflix, Amazon, Uber, and the like.

“There's a global forum under the OECD giving us access to 144 countries to share information with. It will tell us who is trading within our economy and is supposed to pay money to our country instead of taking it to another country,” URA commissioner general Mr John Musinguzi told a gathering at the tax-body’s post-budget conference in Kampala.

According to him, collection of the said tax had been delayed by lengthy discussions with the target companies.

“But we agreed and have finalized- then other levies will follow as time goes on,” Mr Musinguzi noted without necessarily detailing enforcement mechanisms in case of non-compliance.

Meantime, the tax is expected to stretch over websites, web hosting software firms, and those supplying images, text and information including self-education packages, music, film, gambling, and other broadcasts and events digital platforms, as well as companies on remote maintenance of programs and equipment.

While revealing the strategy expected to push Uganda beyond the FY2021/22 tax local tax revenue of about Shs23trillion, Mr Musinguzi said: “We are left with only one option to efficiently collect revenues from within the country and we must mobilize more stakeholders to join us in this effort.”

Ramathan Ggoobi, the permanent secretary to the ministry of finance projects Uganda to –for the first time- collect Shs25trillion locally despite no new taxes pronounced ahead of the FY2022/23.

Uganda currently has a public debt of more than 73 trillion shillings.

 “We are avoiding borrowing for consumption. We are to borrow for productive projects which we are also sequencing now and we are going to cancel those which are not likely- to deploy the money on time to avoid huge debt repayments,” Mr Ggoobi said in Kampala on Tuesday.

VAT Act 

Under section 16 (2) of the VAT Act, a non-resident person who supplies electronic services to a non-taxable person in Uganda makes a taxable supply. Such a supplier is therefore required to charge VAT on the supply, file quarterly returns, and pay VAT due on supply within fifteen from the end of each quarter.