Uganda Seeks to Impose 5% Tax on Foreign Digital Companies
Uganda is proposing to impose a 5% tax on income derived from the provision of digital services by non-resident companies such as Facebook, Twitter, Google, Netflix, and Amazon. The government argues that foreign digital companies should contribute a portion of their income earned in Uganda as taxes, separate from the taxes imposed on resident companies.
On Thursday 29th June, the proposal found in Clause 16 of the Income Tax (Amendment) Bill, 2023 reappeared when President Museveni returned the Bill and urged, among other things, that Parliament reconsider its previous position, which had rejected the same plan. Facebook, Twitter, Google, Netflix, and Amazon are just a few of the businesses that the government is aiming to collect the taxes from, along with other platforms that provide paid services in Uganda.
The state minister for finance in charge of general duties, Mr. Henry Musasizi, informed the committee that the Uganda Revenue Authority (URA), the government tax collector, hoped to recoup Sh5 billion from the foreign-owned digital enterprises.
“I recommend that [you] approve clause 16 of the Income Tax Amendment bill, 2023, to provide for imposition of a tax on income from provision of digital services in Uganda derived by a non-resident person,” Minister Musasizi requested of the members of the Finance committee.
The remaining 5% of their revenue earned here in Uganda, he continued, “should be left as taxes. It is distinct from other taxes we impose on local businesses and does not reinstate the Over-the-Top Tax [OTT], which our administration ended in 2021.
The 5 percent tax idea was reinstated after President Museveni ordered that it be withdrawn in a letter that was read to Parliament on Thursday of last week by Speaker Anita Among.
“Parliament rejected Clause 16 of the Bill, which sought the implementation of a tax on income earned from the provision of digital services in Uganda by a non-resident person. Part of Mr. Museveni’s letter states, “The proposal was intended to address the taxation of the digital economy, such as Twitter, Amazon, Netflix, etc.
The same letter said, “since it does not relate residents in Uganda as was mistakenly reported in the minority report, it should be reinstated.”
The Speaker of the House then gave the Finance committee the go-ahead to speed up the reprocessing of the same legislation and send it back to the committee of the full House for approval. The law is one of several tax laws that define and direct the URA, the taxman, on where and how to collect taxes in the fiscal Year 2023–2024, which started this month.
Early this year, as the Bill was being considered by Parliament, the opposition wing, which was headed by the shadow minister for finance, Mr. Muwanga Kivumbi, and which had the support of Kampala Central MP Mr. Muhammad Nsereko, disregarded the clause.
The government presented the committee with no firm proposal on the matter.
Even though the government has made repeated attempts to broaden the tax base and increase revenue to fund government programs, URA reported at the beginning of last month that at least Shs5.8 million of potential taxpayers have not been reached.
