Updated: Jun 10
New digital services tax for non-resident companies in Uganda has been proposed effective the financial year 2023 - 2024. The proposed bill is among the 5 major tax amendments for the financial year 2023-2023 aimed at broadening the tax base.
New digital services tax for non-resident companies in Uganda. (income tax amendment 2023-2024)
The government of Uganda implemented administrative measures last year (2022) to begin collecting Value Added Tax (VAT) on digital services provided by non-residents to private individuals who are not registered for VAT in Uganda. As a result, companies such as Facebook, Zoom and Netflix began charging VAT on digital services provided in Uganda on July 1, 2022. However, because VAT is a consumption tax, the tax is currently borne by Ugandan users of such digital services.
Proposed Tax (2023-2024)
The income tax (Amendment) Bill, 2023 is now proposing to introduce a separate direct tax in form of digital services tax (DST) on such servuces. This will be charged on the gross revenue that non-resident digital service providers make in Uganda at a rate of 5 percent (5%).
Other countries in the region, including Kenya, and Tanzania, levy a similar tax on digital services, albeit at low rates of 1.5% and 2%, respectively.
Likely effects of this proposed Tax
A rate of 5% is likely to discourage such companies from investing in Uganda and should be reconsidered by the government.