Government to start collecting VAT on Facebook ads on October 1

Small and medium-sized business owners in Uganda will now have to dig deeper into their pockets after the government imposed VAT on Facebook ads.

Meta, Facebook's holding company, announced in a statement on their business help center that all Facebook ads in Uganda will be subject to VAT at the "applicable local tax rate."

The development becomes effective on October 1, 2022.

“This applies to advertisers whose ‘Sold To’ country on their business or personal address is set to Uganda and who have not added their Tax Identification Number (TIN) to their Facebook ad account,” the statement reads in part.

Some local small and medium business owners have already cried foul, saying this is likely to increase the cost of doing business in an already troubled economy.

“That 18 percent VAT is going to make it difficult for us small business owners to conduct business on Facebook. We already have problems trying to target our customers because of the VPNs, and now this tax. Ridiculous!,” boutique owner, Patience Nsimire told Nile Post.

When users/advertisers are charged for their ads, VAT will be added regardless of whether they are purchasing Facebook ads for business or personal use.

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

“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 amount. If you pay for Facebook ads with a manual payment method, VAT is accounted for at the applicable rate when your ad account is funded to determine the total balance available,” Facebook added.

URA has yet to announce how VAT will be charged on Facebook ads.

However, in June, the taxman informed all non-resident suppliers of electronic services operating in Uganda that they must collect, file, and pay this tax.

The URA's spokesperson, Ibrahim Bbossa, told Nile Post at the time that they were ready to begin collecting the tax right away.

“A non-resident supplier supplying electronic services from a country outside Uganda to a recipient in Uganda who is not registered for VAT in Uganda must register as a non-resident supplier and collect VAT on electronic services,” Bbossa told The Nile Post.

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

This development comes when Facebook remains blocked in Uganda, more than a year after it was switched off  in the run-up to the 2021 presidential elections.

However, Nile Post understands that talks are ongoing between government officials and Facebook owners to restore the social media giant.

According to sources close to the discussions, there is hope that Facebook will be restored soon.

Emmanuel Wabwire, Executive Director of the Faraja Africa Foundation, which wants Facebook restored told Nile Post that Facebook would "likely" be restored in the coming days.

Rebecca Mukite, the spokesperson for the Uganda Communications Commission (UCC), refused to comment when asked if Facebook would be reopened anytime soon.