Nairobi — 21 African countries have enacted rules for non-resident suppliers to pay value-added tax (VAT) or goods and services tax (GST) on electronically supplied services.
The digital economy, driven by technologies like generative artificial intelligence (AI), is reshaping business operations and interactions globally, with CEOs recognizing its potential for efficiency, innovation, and transformational change, with 70 percent of them believing it will significantly change their companies within three years.
Tax authorities are adapting tax laws to capture revenue from digital activities within their jurisdictions.
"Unfortunately, there is no uniform or harmonised approach to taxing the digital economy in Africa. Different tax policies in different countries reflect significant variations and complexities in their definitions of services liable to tax, value thresholds, and tax rates and requirements associated with registration, compliance and enforcement," said Priya Shah, Senior Manager, Tax Loss at PwC Kenya.
He added that non-resident suppliers ofemployee self-service (ESS) often find that, increasingly, most countries in Africa are taxing both business-to-business (B2B) and business-to-consumer (B2C) supplies.
"Additionally, the legal framework in many countries remains fluid with regard to the definition and scope of services that qualify for taxation as digital supplies," Ms. Shah says.
"In short, rules and measures may not align to internationally accepted best practices and therefore create uncertainty, confusion and controversy for both tax authorities and taxpayers."
However, there is no uniform approach across Africa, leading to variations and complexities in taxation policies, definitions, and compliance requirements.
"As the digital economy continues to evolve, and as tax authorities continue to adjust to Africa's remarkable digital transformation, it is essential for businesses to understand and closely monitor tax developments affecting the digital economy in every country where they supply digital services," said Pamela Natamba, PwC Uganda Tax Partner.
Despite these challenges, Africa's digital transformation is driving economic growth, innovation, and opportunities, with the potential to contribute significantly to GDP and job creation by 2025.
