On 8 July 2022, the Uganda Revenue Authority (URA) issued a release announcing that it is set to start collecting VAT from non-resident electronic service providers effective 1 July 2022. Under the requirements, non-resident providers of electronic services to non-taxable (non-VAT registered) persons in Uganda are required to account for VAT on a quarterly basis and submit a VAT return on the 15th day of the month following the end of each quarter. The requirements do not apply for supplies of electronic services to taxable persons because they are required to account for VAT through reverse charge.
UGANDA SET TO COLLECT TAXES FROM DIGITAL ECONOMY
Uganda Revenue Authority (URA) will start collecting Value Added Tax (VAT) from non-resident electronic services provider companies operating in the Ugandan economy, effective July 1, 2022. URA issued a public notice on January 27, 2022 notifying all non-resident suppliers of electronic services to collect, file and pay this tax.
These services include the following when offered remotely; online advertising, online music streaming, movie streaming services, websites, web- hosting or remote maintenance of programs and equipment, supply of software and software updates, supply of images, text and information, access to databases, self-education packages, music, films and games of chance, political, cultural, artistic, sporting, scientific and other broad casts and events including television etc.
According to Section 16(2) (d) of the VAT Act, URA is empowered to charge VAT on electronic services supplied to a recipient in Uganda. The Act provides that a non-resident person (NR) is considered to have made a taxable supply in Uganda, where electronic services are supplied to a non-taxable person in Uganda. A non-taxable person in this case refers to a person who is not registered for VAT. This provision applies to non-taxable persons because taxable persons already pay this VAT under the reverse charge mechanism.
Although this legal provision was first enacted in 2011, URA could not collect this VAT then due to undefined provisions for how the Non-residents would account for the VAT once charged. As a result, section 31A was introduced in July 2020 stipulating that Non-residents account for this tax every quarter on the 15th day of the first month following the end of a quarter.
To register or file a VAT return, a non-resident needs to visit the URA web portal http://ura.go.ug. Under e-Services, go to Payments and select Quarterly VAT Return for Non-Resident Service Providers. First time users must fill in the online registration form and a Tax Identification Number will be issued instantly. Thereafter, the non-resident fills the online return form, submits, and pays the tax within the stipulated time.
A non-resident person may appoint a tax agent or a tax representative for purposes of fulfilling their tax obligations.
While many countries around the world implement this measure, Uganda becomes the fourth African country to take this up after South Africa, Nigeria and Kenya.
URA has made initial contact with many of the non-resident service providers such as Google, Microsoft, Netflix, Meta, Spotify, Zoom, Amazon, Apple, Bolt, Uber etc and some of these entities have registered and paid the tax due. The tax man expects to collect at least UGX 5Bln in taxes from this measure.
This development is one of the steps Uganda is making towards collecting taxes from the e-Commerce economy. Like most countries around the world, Uganda is considering levying income tax on the Non-resident entities targeting the income they source in Uganda, a discussion that is still ongoing on the global stage spearheaded by Organisation for Economic Co-operation and Development (OECD).