Government Of Uganda To Begin Collecting VAT On Facebook

Starting 1st October 2022, many small businesses using Facebook ads will have to dig deeper into their pockets to be able to enjoy this feature.
Facebook VAT tax collections starting October 1
| Photo Credit: Reuters

The government of Uganda has announced that all Facebook users will pay value-added tax (VAT) on all adverts, with effect from 1 October 2022. 

In a statement in their business help centre, Meta, facebook’s holding company, said that all Facebook users in Uganda would be subject to VAT at the “applicable local tax rate”. 

Facebook ads are an advertising platform of the social network that aims to promote products and services through text, image or video publications. It is a marketing channel widely used by companies due to its large audience and excellent segmentation possibilities. 

Facebook has announced that the Uganda Revenue Authority (URA) will charge VAT on each advert bought on Facebook, with the purchase location being Uganda. 

According to the Uganda Procedures Tax Code Act, Facebook will now be required to share data about page owners with URA. 

“This also applies to advertisers whose ‘sold to’ on their business or personal addresses are set to Uganda and those who have their Tax Identification Number (TIN) to their Facebook ad account”, the statement reads. Facebook has given account and page holders up to the end of September 2022 to register their TINs ahead of the enforcement of the new tax next month. 

The TIN can be added in the payment setting and will be included on receipts. When users are charged for their ads, VAT will be added regardless of whether they purchase Facebook ads for business or personal use. 

VAT in Uganda is charged at an 18% rate. However, URA is yet to announce how VAT will be charged on Facebook adverts. 

Facebook gave an idea of how the new tax will affect advertisers. “As VAT is added on top of charges, you won’t reach your billing threshold faster, but you may be charged more than your billing threshold. Suppose you pay for Facebook ads with a manual payment method. In that case, VAT is accounted for at the applicable rate, and your ad account is funded to determine the total balances available,” said Facebook.

The 18% VAT will make it difficult for smaller and medium businesses because it’s likely to increase the company’s costs in an already troubled economy. 

In a Twitter thread, Bbosa confirmed that Facebook would join other non-resident suppliers in paying VAT. He, however, remained tight-lipped on whether the service will be opened in Uganda or not.

This development came when Facebook remained blocked in Uganda for more than a year as it was switched off during the 2021 presidential elections. 

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