Uganda: Tax authority publishes notice implementing digital services tax
Taxpayers who fail to register may face a 15% withholding tax.
Taxpayers who fail to register may face a 15% withholding tax.
The Ugandan tax authority on 20 October 2023 published a public notice implementing the 5% digital services tax (DST) that was introduced by the Income Tax Amendment Act of 2023 effective 1 July 2023.
The notice clarifies that nonresidents earning income from digital services provided to customers in Uganda must register through the Uganda Revenue Authority (URA) website. However, taxpayers already registered for the value added tax (VAT) digital services rules don't need to register separately for the DST, as the URA plans to register them for the DST automatically. Taxpayers who fail to register may face a 15% withholding tax.
Background
Uganda implemented VAT digital services rules on 1 July 2022. Under this regime, nonresidents must register if they provide digital services to consumers in Uganda and the value of services exceeds the registration threshold of UGX 150 million (approximately USD 39,650). Covered digital services include websites, web hosting, remote maintenance of programs and equipment, software and software updates, images, text, and information, access to databases, self-education packages, music, films, games (including games of chance), and various broadcasts and events. From 1 July 2023, the scope expanded to include advertising platforms, streaming platforms and subscription-based services, cab-hailing services, cloud storage, and data warehousing.
Uganda also implemented the DST on 1 July 2023. This regime taxes income from providing digital services to customers in Uganda. Covered digital services include online advertising services, data services, services delivered through online marketplaces or intermediation platforms (such as accommodation, vehicle hire, and other transport marketplaces), digital content services, online gaming services, cloud computing services, data warehousing, and services delivered through social media platforms or internet search engines. There is no registration threshold.
KPMG observation
Many jurisdictions are increasing their enforcement of taxes on cross-border digital services. In Uganda, the VAT digital services regime and the DST regime are separate but apply to the same services. As a result, the tax authority seems to have chosen to administer both regimes concurrently for convenience.
Nonresidents providing digital services in Uganda may need to carefully review their activities, because unlike the VAT on digital services, which has a registration threshold, the DST lacks a registration threshold, meaning tax obligations begin with even a single sale within the jurisdiction. In particular, non-residents already registered for the VAT digital services rules may need to regularly monitor their online accounts for automatic DST registration. This is crucial given the tax authority's emphasis on enforcing compliance through either voluntary adherence or a punitive withholding regime.
For more information, contact a KPMG tax professional:
Philippe Stephanny | philippestephanny@kpmg.com
Chinedu Nwachukwu | chinedunwachukwu@kpmg.com
Mark Tusiime I mtusiime@kpmg.com
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