The parliament of Uganda announced that it has passed a new law imposing a 5% tax on income earned in the country by foreign providers of digital communications services such as Twitter, Netflix and Meta’s Facebook. The tweet from the Government of Uganda stated that the new levy was requested by President Museveni.
“The Income Tax (Amendment) Bill, 2023″ which contains the new levy considers the following as digital services”
- online advertising services;
- data services;
- services delivered through an online marketplace or intermediation platform, including an accommodation online marketplace, a vehicle hire online marketplace and any other transport online marketplace;
- digital content services, including accessing and downloading of digital content;
- online gaming services;
- cloud computing services;
- data warehousing;
- services, other than those services in this subsection, delivered through a social media platform or an internet search engine; and
- any other digital services as the Minister may prescribe by statutory instrument made under this Act.”
The Minister of State for Finance (General Duties), Hon. Henry Musasizi defended the levy, saying “We are not looking at the digital services; we are looking at the income derived by the provider of these services. For Uber, the money goes to California; the man derives income, but pays no taxes. Now we are saying, can we have a mechanism of having the taxes?”
Since July 1, 2022, web hosting, software and streaming services in the country pay a mandatory value added tax of 18% chargeable on consumers of services offered by platforms such as Amazon, Meta (Facebook), Twitter and Zoom.
There are apprehensions that this newly imposed levy would further contribute to the existing digital taxes paid by the already burdened consumers of digital services in Uganda.
However, taxation of U.S. tech companies by African governments is not exclusive to Uganda. Nigeria plans to impose a 6% tax on turnover for digital non-resident companies, while Kenya has implemented a 1.5% digital service tax based on the gross transaction value. This tax is applicable to income generated or accrued within Kenya from services provided through a digital marketplace.
