Uganda has passed a new law imposing a 5% income tax on non-resident companies providing digital services in the country. The tax applies to services such as online advertising, data services, and online marketplaces. Major tech corporations like Meta (formerly Facebook) and Netflix will be affected by this tax, joining Kenya and Nigeria in implementing similar measures.

The law, signed by President Yoweri Museveni, designates a 5% income tax on non-resident individuals earning income from digital services provided to customers in Uganda. The definition of digital services includes various offerings, such as online advertising, data services, online marketplaces, digital content access and downloads, online gaming, cloud computing, and more.

Companies like Meta, Netflix, Google, and ride-hailing platforms like Bolt and Uber will be impacted by this tax. However, the specific implementation details, such as whether it will be enforced through withholding tax or income tax returns, have not been clarified. The law does not currently mention exemptions or adjustments to the final withholding tax rate, potentially resulting in a combined tax rate of 20% for affected companies.

Uganda now joins Kenya and Nigeria in implementing digital service taxes. Kenya introduced a digital tax of 1.5% on the gross transaction value, which later increased to 3%. Nigeria implemented a 6% digital services tax and also required non-resident providers to collect VAT on their offerings. These taxes apply to various digital services, including apps, electronic data storage, high-frequency trading, and online advertising.

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