Foreign businesses who charge VAT on Digital Sales in Uganda can finally differentiate between B2B and B2C sales.
As previously reported this year, non-resident taxpayers must register and charge 18% VAT when providing electronic services remotely to consumers in Uganda. As such, affected businesses will need to distinguish VAT registered (B2B) customers from non-VAT registered (B2C) customers.
This obligation became mandatory as of July 1, 2022.
What is the rationale behind this change?
When a non-resident taxpayer provides electronic services to a business in Uganda (B2B), the local business is required to collect and pay the VAT to the Uganda Revenue Authority (URA) under the reverse charge. As of July 1, 2022, non-resident service providers now must charge VAT on sales to consumers (B2C). With the introduction of this new rule, the URA expands the scope of VAT collection, increasing its stream of revenue.
What are the rules?
When a non-resident supplier provides electronic services remotely to a consumer in Uganda, the supplier must charge 18% VAT. Only B2C transactions are impacted. Regulations regarding B2B electronic services remain unchanged.
According to Section 16(5)(a) of the Ugandan VAT Act, electronic services include:
- Websites, web-hosting or remote maintenance of programs and equipment;
- Software and the updating of software;
- Images, text and information;
- Access to databases;
- Self-education packages;
- Music, films and games, including games of chance;
- Political, cultural, artistic, sporting, scientific and other broadcasts and events, including television.
If non-resident suppliers exceed the UGX 37.5m (~$10k) registration threshold, they must register through the Revenue Authority’s portal and submit a quarterly VAT return electronically. They must also appoint a tax representative to apply for VAT registration and file returns on their behalf.
Non-resident sellers must be able to identify and validate whether their consumer is a business or a final consumer. For business consumers, the reverse charge should apply and no VAT should be added by the supplier. For final consumers, the non-resident supplier must apply VAT on the invoice. Differentiating between business customers (B2B) and final consumers (B2C) will require a reliable VAT Number validation tool.
How can Fonoa help?
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