Uganda: Why Ura is harnessing the digital economy to increase revenue collection


By Sarah M. Chelangat

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Uganda has joined the list of countries around the world that levy Value Added Tax (VAT) on e-services to increase government revenue and leverage the digital economy.

As of July 1, 2021, all non-residents providing electronic services to non-taxable persons in Uganda were required by law to charge 18% VAT on the service and remit the amount to the URA.

These exempt persons include consumers in Uganda who are not VAT registered. Companies subject to VAT will continue to use the reverse charge mechanism to pay this VAT.

The electronic services concerned

Electronic services targeted by URA include services such as web hosting, software and streaming services, online advertising, online gaming and betting, music and movie streaming, remote maintenance programs and equipment, supply of software and software updates, supply of images, text and information, access to databases and self-learning materials.

Other shows and events; including television, subscription media such as; news portals, magazines, journals, electronic data management, online data warehousing, file sharing, cloud storage services, provision of search engines and automated help desk services.

This means that when a customer in Uganda purchases or pays for any of these services from a company like Microsoft or Google, the company must charge 18% VAT and remit this amount to the URA.

Ugandan consumers will therefore pay 18% more for the value obtained by accessing the content or service online.

In order to determine whether a customer is using electronic services in Uganda, the non-resident provider may consider the customer’s address (residential or postal), proxy Internet address, telephone number or location of the customer. financial institution from which the payment is made. These should be in Uganda.

Uganda is not the first to introduce this charge, more than 70 countries around the world charge VAT on digital services, including African countries like South Africa, Nigeria and neighboring Kenya.

Countries are adopting the Digital Services VAT to level the playing field between local service providers who are already mandated to charge VAT and foreign service providers who previously did not have this obligation. The URA expects this step to generate an additional UGX 5 billion in tax revenue in the current fiscal year.

How will the VAT be implemented?

VAT on electronic services is provided for in Section 16(2) of the VAT Act, so the URA is not introducing a new tax but rather implementing a statutory tax.

To facilitate enforcement and collection, the VAT law was amended in July 2021 to provide for the quarterly filing of VAT returns by non-resident electronic service providers.

Non-resident companies that meet the VAT threshold of UGX 150 million are required to register for VAT using URA’s online platform, charge VAT on services provided to non-taxable Ugandans and to remit VAT to URA’s bank accounts on a quarterly basis.

Engagement of non-resident service providers

The URA has engaged non-resident service providers to guide them on the operation of the VAT regime and their obligations under the law. So far, companies like Amazon, Apple, ACCA, Bolt have registered while others are still in the process of registration like; Meta, Netflix, Microsoft, Google, Zoom and Spotify.

The URA has also facilitated the compliance process by providing non-residents with a streamlined online registration and reporting process in line with international best practices.

Public notices have been issued to provide further guidance to stakeholders and the government is at an advanced stage of issuing regulations. This aimed to provide guidance to non-resident electronic service providers in Uganda.

Returns are filed on the 15th day following the end of each quarter. Non-residents are also required to provide transaction details to the URA at the end of each quarter.

Non-residents are not required to appoint tax representatives in Uganda for the purposes of VAT compliance obligations.

Going forward, the URA and the government will explore ways to tax the direct income of non-resident digital businesses, from sources in Uganda.

The author is the URA Inland Tax Commissioner

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