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IA recent report by PricewaterhouseCoopers (PwC) reveals that twenty-one African countries have implemented regulations requiring non-resident suppliers to account for value-added tax (VAT), goods, and sales tax on electronically supplied services (ESS).
The report underscores the increasing trend of taxation in Africa’s digital economy, with numerous countries on the continent amending their VAT, goods and sales tax, and other indirect tax laws to address the digital landscape.
Expanding the scope of taxation to encompass electronic services provided by non-resident providers to local consumers has been a common approach among these countries, the report notes.
Titled ‘2024 VAT Guide in Africa: Digital Services,’ the PwC report is a special edition of its VAT in Africa Guide, focusing on the new rules and measures introduced by African countries to tax the digital economy, especially concerning electronically supplied services across borders.
Out of the 54 countries in Africa, the report highlights that 21 have already enacted rules for non-resident suppliers to account for VAT/GST on ESS, with an additional five countries (Botswana, Ethiopia, Mali, Republic of Congo, and Rwanda) in the process of implementing similar measures.
Job Kabochi, PwC Africa Indirect Tax Leader, commented on the report, emphasizing the lack of a uniform or harmonized approach to taxing the digital economy across Africa. He noted significant variations and complexities in tax policies, definitions of taxable services, value thresholds, and tax rates among different countries.
Kabochi highlighted that non-resident suppliers of ESS face challenges as many African countries are now taxing both business-to-business and business-to-consumer supplies. He also pointed out the fluid legal framework regarding the definition and scope of digital supplies, which creates uncertainty for both tax authorities and taxpayers.
Abeku Gyan-Quansah, PwC West Market Indirect Tax Leader, emphasized the impact of smartphone adoption and digital transformation efforts on Africa’s digital economy. He noted that these efforts have facilitated access to the internet, mobile banking, e-commerce, and digital education platforms, contributing to economic growth, innovation, and improved quality of life across the continent.
Gyan-Quansah cited estimates from the World Bank, suggesting that Africa’s digital economy could contribute up to $180 billion to GDP by 2025, creating numerous job opportunities, particularly for youth and women, and driving entrepreneurship and innovation.
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