The government is going to start taxing Netflix, Amazon, Meta and other online subscription services

Uganda is among several countries in the world that have not been taxed on subscription services such as Netflix, Spotify, Apple Music, Amazon, Meta (Facebook), etc. in the recent past due to new domestic taxes. To maximize taxes and through global data sharing, the tax officer is expanding technology to start collecting VAT from non-resident service provider companies operating in Uganda. It should be recalled that access to Facebook is limited and only available through a VPN.

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The introduction of digital taxes was muted by the Uganda Tax Authority back in 2020 when it officially notified these companies (non-residents) that provide electronic services primarily online and the people who consume them (tax-free individuals in Uganda) based on the section 16 of the VAT Law.

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This digital tax is indirect, unlike OTT, and is levied on the income of affected companies. However, the effect of this is that these companies will pass the tax on to end users in the form of higher subscription fees. This means that your future Apple Music or Netflix subscription is likely to increase.

The new taxes will come into effect on July 1, 2022 and will affect all e-service providers. URA Commissioner General John Musingusi said that lengthy negotiations with these companies delayed the collection of this tax, but they agreed and were finally agreed, with more fees to follow in time.

We have no idea of ​​the actual price increases for these digital services expected by the Uganda Revenue Authority (URA) and how they will be applied in case of non-compliance, Musinguzi says the authorities have completed all the digital infrastructure needed to collect this tax. effectively.

Under section 16(2) of the VAT Act, a non-resident person who provides electronic services to a person not taxed in Uganda makes a taxable supply. Thus, such a supplier is required to charge VAT on the supply, submit quarterly returns and pay the VAT due on the supply within fifteen days of the end of each quarter.

The tax will also affect web hosting software companies and those providing images, text and information, self-study packages, music films including gambling, and other broadcasts and events, as well as those providing remote software maintenance. and equipment. The government expects to raise an additional 2 trillion shillings, and digital services will contribute to this increase. “We are left with only one option: we must effectively collect revenues domestically, and we must mobilize more stakeholders to join us in this effort,” Musingusi said.

Digital taxes in other African countries

Zimbabwe and Nigeria are the latest African countries to have plans to collect taxes on e-commerce and digital companies such as Netflix, Google, YouTube and Amazon. Countries such as Kenya charge 1.50% on the gross value of the transaction, while Nigeria offers a 6% turnover tax.

The Kenya Revenue Service has posted a notice on its website regarding the Digital Services Tax (DST), which is “payable on income earned or accrued in Kenya. from services offered through the digital market(pdf). It defines digital marketplaces as platforms “that enable direct interaction between buyers and sellers of goods and services through electronic” means.

“The Digital Services Tax was introduced in the 2020 Finance Act and is effective January 1, 2021 (at a rate) of 1.5% of the gross transaction value.” The tax targets resident and non-resident digital service providers.

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