Access Alert: Uganda follows growing trend, implements digital services tax law

Access Alert: Uganda follows growing trend, implements digital services tax law

On 11 July 2023, Uganda’s parliament enacted a new law, “The Income Tax (Amendment) Bill, 2023”, which inserts a new section (86A) that levies a 5% fee on the revenue of foreign providers of digital communications services operating in Uganda. The original bill, which was published on 30 March 2023, aims to increase tax collections by capitalising on the country’s burgeoning digital economy. Effective officially from 1 July 2023, the bill is still awaiting Presidential signature.

Officials have stated that the new law should not be viewed as a social media tax affecting Ugandan citizens, but rather it “intends to tax non-resident providers of digital services in Uganda”, such as Meta, Twitter, Amazon, Netflix, Uber, Airbnb, Google, and Microsoft, or any foreign-owned company offering digital services.

Therefore, where the digital service is delivered over the internet, electronic network or an online platform, and the foreign entity derives income from providing such digital service, the “digital services tax” will apply to such a foreign entity.

As defined by the new law, “digital services” includes but are not limited to the following:

  • 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 digital content.
  • Online gaming services.
  • Cloud computing services.
  • Data warehousing.
  • Services, other than those services mentioned, delivered through a social media platform or Internet search engine.
  • Any other digital services as the Minister may prescribe by statutory instrument made under the Act.

It is not yet clear how the tax will be implemented, nor how this will affect users in Uganda. But such a move follows similar policy announcements in Kenya, Tanzania, and Nigeria. Other governments are likely to follow this trend as they seek to bolster domestic tax revenue while being challenged by rising fiscal deficits and government debt levels.

Access Partnership closely analyses digital and tech legislative developments across the globe. Should you wish to gain insights into regulatory and policy developments on the African continent and more broadly, please contact Wydeman Coetzee at [email protected].

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