The Parliament of Uganda has approved a draft law that will tax foreign internet corporations like Facebook and Twitter who generate income in the country with a 5% levy.
Google, Amazon, Uber, and any other foreign-owned corporation providing services like data, online gaming, accessing and downloading of digital content, and data warehousing are also impacted by the new levy contained in the Income Tax Amendment Bill, 2023.
However, several lawmakers criticized the Bill, claiming it may raise the cost of internet services and stifle social media users. The Bill “is not a social media tax and will not affect an ordinary Ugandan in any way,” the finance committee of Parliament emphasized, according to the statement.
Another amendment included in the Income Tax Act includes the imposition of tax on companies that report losses for over seven years. The new law states that 50 percent of the losses that have been carried forward will now be subjected to taxation.
Members of Parliament have resolved to increase the time frame before the tax on carried forward losses is applied from five to seven years at a session that took place on July 11, 2023. The new law seeks to stop companies from using losses as an excuse to reduce their tax obligations.
The amendment is essential so as to address the problem of tax evasion, according to Hon. Amos Kankunda, Chair of the Committee on Finance. He claimed that as the law allows for a 100% carryover of losses for the first seven years and a 50% deduction after that, the objective was not to hurt legitimate enterprises operating at a loss. The Income Tax Act also gives businesses access to various deductions and capital deductions.
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Nevertheless, not all lawmakers backed the change. Hon. Nathan Nandala Mafabi voiced worry that the additional tax would force some businesses to collapse. He recommended that the Uganda Revenue Authority (URA) concentrate on enhancing tax audits to find and target tax evaders rather than enacting a tax.
The legislation also contains measures for taxing non-resident providers of digital services. Even though the services are provided online, the goal is to tax the income received by these suppliers.
Hon. Henry Musasizi, Minister of State for Finance, defended the tax, stating that the goal is to tax the income derived from these services.
The Bujagali Hydropower Project also received a tax exemption from the parliament for an additional year, in addition to the digital service tax. According to a directive from parliament, the tax status of the project will be examined during an audit and contract renegotiation.
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The Income Tax Act was reprocessed after President Yoweri Museveni brought it back last month, demonstrating the value given on ensuring that the nation had proper taxation.
