Uganda has an interesting digital tax termed ‘over the top tax’ charged to access to internet. The tax charge is fixed and minimal. There has however been push back on the tax by the civil society who argue that internet is a basic need and taxing it would limit its access. Nonetheless, the tax remains in force. Additionally, Uganda requires for registration of Value Added Tax agents for foreign companies who are obliged to pay VAT in Uganda on digital services.
In Nigeria, any foreign company offering digital services like, downloads, streaming, integration services through a digital platform and whose turnover in an accounting year is USD. 64K and above is required to pay tax on its profits in Nigeria. Further, Nigerian residents are required to self-charge VAT at the rate of 7.5% when making payments to non-resident companies from whom they receive digital services regardless of whether the company has a presence in Nigeria. The digital tax rules came into effect in Nigeria from February 2020. A few things remain unclear with regard to how individuals will comply with the VAT obligation. It has been suggested that the government may appoint banks as agents for individuals. Moreover, there is withholding tax on foreign companies deducted by a person making payment to an offshore company providing Digital services in Nigeria. It is however not clear yet if foreign companies would need to file returns in Nigeria.
We also slightly touched on taxation of informal sector. In Uganda there is presumptive tax aimed at the informal sector. There was also introduction of e-receipting and a requirement for everyone to obtain a tax registration number to bring the informal sector in the formal sector. Nigeria is bringing informal sector into the formal sector for taxation through having bank accounts of everyone tied together with their tax registration numbers. One of the States in Nigeria is also applying a form of taxation on the informal sector through a obtaining a fixed fee.
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With thanks to Ian Mutibwa, of Signum Advocates Uganda and Jibrin Dasun of Aelex Nigeria.