Uganda to tax foreign online service providers in VAT Bill

The Value Added Tax (Amendment) Bill 2023, which has been passed by the Ugandan Parliament, brings in several significant changes to the country’s tax regime.

The bill seeks to expand the meaning of electronic services to include advertising platforms, streaming platforms and subscription-based services, cab-hailing services, cloud storage, and data warehousing. This means that companies providing these services from a place of business outside Uganda to a recipient in Uganda will be required to register for VAT in Uganda and pay VAT on the services provided.

The bill also proposes to amend the place-of-supply rules to determine when a supply of services by a person who carries on business outside Uganda will take place in Uganda.

This will affect companies that provide services physically performed in Uganda by a person who is in Uganda at the time of the supply, in connection with immovable property in Uganda, radio or television broadcasting services received at an address in Uganda, or electronic services delivered to a person in Uganda at the time of the supply.

The supply of telecommunications services initiated by a person in Uganda, other than a supplier of telecommunications services or a person who is roaming while temporarily in Uganda, will also be subject to VAT under the new rules.

Furthermore, the bill proposes to expand the list of supplies with non-creditable input tax to include payments made by a taxable person for membership in a club, association, or society of a sporting, social, or recreational nature. It also includes goods and services incurred by a taxable person under Section 16(2) of the VAT Act, stipulating the conditions under which a supply made by a person who carries on business outside Uganda will take place in Uganda.

These amendments to the VAT Act will have significant implications for businesses operating in Uganda. Companies providing electronic services to Ugandan consumers will be required to register for VAT in Uganda and comply with the VAT rules. They will also be required to keep accurate records of their transactions to ensure they comply with the new regulations.

The changes to the place-of-supply rules mean that businesses operating in Uganda will need to review their operations to determine if they will be affected by the new rules.

Companies providing services in connection with immovable property in Uganda, radio or television broadcasting services received at an address in Uganda, or electronic services delivered to a person in Uganda at the time of the supply will need to ensure that they comply with the new VAT rules.

Businesses operating in Uganda will need to review their operations to determine if they will be affected by the new rules and ensure that they comply with the new VAT regulations.