As Uganda continues to face struggles from different sides of the sector, the new VAT Bill 2023 has been passed by the Ugandan Parliament, and with it comes significant changes to the country’s taxing system which doesn’t have popular standing with the citizens.
In the new amendment, the tax aims to expand its reach by adding electronic services such as advertising and streaming platforms, subscription-based services, transport hailing services, cloud storage and data warehousing. Once the amendment is fully implemented, it means all companies providing these services outside Uganda to a receipt in Uganda will be required to register for VAT and pay VAT on those services provided.
In a simple way, let’s say you have a website that is being hosted by a foreign company and on a monthly basis you pay for web hosting services. Technically, that foreign business, which is not based in Uganda but offers services to you will now have to register for VAT within Uganda. This could impact services in a number of ways, one of them being a price increase on services.
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 new VAT (Value Added Tax) 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.
Source: Tech Jaja
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