In a bid to boost revenue collection from multinational ,Digital Providers, corporations like Meta (Facebook’s parent company), Amazon, Google, and Netflix, the Ugandan government has announced a new tax measure.
The 2023 Income Tax (Amendment) Bill includes a 5% levy on the gross digital services income received by non-resident providers operating within Uganda. This levy will be in addition to the existing 18% value-added tax (VAT) on digital services.
Uganda Revenue Authority aims to generate Ush.5 billion (approximately Ksh.190 million) through this tax imposition on multinational companies. The Bill clearly outlines the various digital services subject to the Digital Services Tax (DST).
These include online advertising services, data services, services offered through online marketplaces or intermediation platforms (such as accommodation, vehicle hire, and other transport online marketplaces), digital content services (including access and downloads), online gaming services, cloud computing services, data warehousing, services delivered via social media platforms, and internet search engines. The Minister may also prescribe additional digital services through a statutory instrument.
Initially rejected by Parliament, the proposal was recently returned by Ugandan leader Yoweri Museveni, who demanded that it be revisited and reconsidered by the legislators.
In Kenya, both resident and non-resident digital service providers and digital marketplace operators are subject to a 1.5% Digital Services Tax on the gross transaction value, in addition to a 16% VAT. The Kenya Revenue Authority has observed a steady growth in DST collections since the tax was introduced in January 2021.
In the fiscal year ending June 2022, KRA collected Ksh.241 million in DST, with a further Ksh.174 million in the six months leading up to December 2022. As of the latest update, the tax authority has registered 178 firms under its DST record.
The introduction of the 5% levy on non-resident digital service providers in Uganda demonstrates the government’s commitment to harnessing the potential of the digital economy and ensuring a fair contribution from multinational corporations operating in the country. These tax measures are expected to enhance revenue generation while supporting the growth and development of the digital sector.
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