Uganda targets Facebook, Google and Netflix with new digital services tax

Uganda is introducing a 5 per cent levy on the gross digital services income received by non-resident providers operating in the country.

The new tax, which is contained in the 2023 Income Tax (Amendment) Bill, is in addition to Uganda’s 18% VAT on digital services, as the government seeks to collect additional revenue from multinationals such as Facebook's parent company Meta, Amazon, Google and Netflix.

According to local media reports, the Uganda Revenue Authority hopes to collect Ush.5 billion (about Ksh.190 million) from these companies.

The Bill outlines services subject to DST as online advertising services; data services; services delivered through an online marketplace or intermediation platform, including an accommodation online marketplace, vehicle hire online marketplace, and any other transport online marketplace.

Digital content services, including accessing and downloading digital content, will also be taxed, alongside online gaming services, cloud computing services, data warehousing and services “delivered through a social media platform or an internet search engine; and any other digital services as the Minister may prescribe by statutory instrument.”

The proposal had been thrown out by Parliament but Ugandan leader Yoweri Museveni last week returned it to legislators demanding it be revisited.

In Kenya, both resident and non-resident digital service and digital marketplace providers pay a DST of 1.5 per cent of the gross transaction value. This is in addition to a 16 per cent VAT.

Data from the Kenya Revenue Authority shows that the taxman has seen year-on-year growth in DST collection since the levy was introduced in January 2021.  

KRA collected Ksh.241 million in DST in the year ending June 2022 and netted Ksh.174 million in the six months to December 2022.

Last month, the taxman said they had 178 firms registered under its DST record.