Gov’t To Impose Taxes On Twitter, Netflix &Facebook

The Minister of State for Finance (General Duties), Hon. Henry Musasizi, has defended the proposal to impose a 5% tax on the gross income earned by international digital companies in Uganda.

Musasizi alongside other officials from the Ministry of Finance appeared before Parliament’s Finance Committee on Thursday, 13 April 2023, to defend the proposals in the seven tax bills intended to raise revenue to finance the 2023/2024 national budget.

The tax bills being considered include; the Excise Duty (Amendment) Bill, 2023, the Traffic and Road Safety (Amendment) Bill 2023, the Tax Procedures Code (Amendment) Bill 2023, the Income Tax (Amendment) Bill 2023, the Automatic Exchange of Information Bill 2023, the Value Added Tax (Amendment) Bill 2023 and the Lotteries and Gaming Bill 2023.

In the Income Tax (Amendment) Bill government seeks to impose a tax on non-residents providing digital services in the country. The proposal reads: ‘A tax is imposed on every non-resident person deriving income from providing digital services in Uganda to a customer in Uganda at the rate of 5%.’

The digital companies eligible of paying this tax include companies whose income is derived from providing a digital service in Uganda through the internet, electronic network or an online platform. 

Asked by Hon. Karim Masaba (Ind., Industrial Division) on how this tax will be implemented, Akello said this is a charging system that will require the digital companies to account for the income sourced in Uganda.

“They introduced a tax on Netflix in Canada, but what happened was, the only way they could charge the tax was to charge on the payments made. Netflix continued to get what it gets and pushed the charge on the consumers,” Masaba said.

Hon. Basil Bataringaya (NRM, Kashari North) wondered if taxing the companies will not result in the companies charging Ugandans for social media services and also increase the costs of adverts.

Tracy Akello, the Rulings and Interpretations Business Policy Supervisor at Uganda Revenue Authority (URA), revealed that the tax will not have to be paid by Ugandans but by non-resident digital companies.

“We intend to tax the likes of Amazon, Netflix, Twitter, and Facebook, as long as they are sourcing income from Uganda,” said Akello

URA Commissioner General, John Musinguzi, said that they have put up a provision for international digital companies to file their returns online, and this will be done on a quarterly basis.

“We have already started collecting VAT, and now we are proposing to collect income tax,” Musinguzi said.