Tag Archives: TRANSACTION TAX

2025 OECD Rules Update on Remote Workers: Tax Insights on Cross-Border Human Capital Management.

The 2025 OECD Model Convention Update on the International Taxation concept of Permanent Establishments(PE) has fundamentally redefined Human Capital and Workforce Management in the context of cross-border remote working. 

These changes, which African nations like Uganda are expected to localise as domestic tax law, widens cross-border tax risk exposure for Multi-National Enterprises(MNEs) beyond commercial presence through physical offices. The news rules recognise the notion of commercial presence through human capital and remote workers working from a home or a similar place in another jurisdiction.

This opinion critically analyses the PE concept and its application to cross-border remote working in the context of Uganda’s current PE law, and further discusses the likely implications of the update from two perspectives:

First, the implications for global and regional firms and technology start-ups scaling across borders, with emphasis on emerging human capital management complications likely to arise once African countries, including Uganda, localise the update into domestic tax law.
Secondly, the opinion discusses the advantages it offers to tax administrations(OECD Member nations and nations that eventually localise the update into domestic law), particularly on combating tax avoidance by multinational enterprises (MNEs).

For the non-technical readers, I will be returning to explain the concept of a PE in simple terms but below are the new changes in brief:

The New Test: A PE is now strongly indicated if an employee works from a home office in State A for 50% of their total working time for their Non-Resident employer in State B AND there is a commercial reason for their presence in state A (e.g, servicing local clients and time-zone alignment). The changes have explicitly rejected cost saving or employee convenience as sole justification for remote cross-border working.
Impact on Tax Administration: The update is a powerful anti-avoidance tool for Tax Authorities, allowing them to assert taxing rights based on functional substance rather than just legal form(e.g work-from-anywhere contract clauses permitting cross-border remote working), materially expanding the tax base beyond the current 183-day Service PE rule.

Headache for MNEs and Tech Start-ups: The new rules transform low-cost, agile market testing for tech start-ups into a high-cost compliance burden for start-ups and other regional businesses trying to enter new markets and to scale across-borders. 

The rules will likely result in immediate, non-negotiable Payroll, Social Security, and Immigration risk above Corporate Income Tax, aggressively eroding the limited cash runway of young scaling companies, and rope companies into a more complex compliance matrix.

Navigating Foreign Income Taxation in Uganda: Key Tax Insights on Offshore Asset holdings

In the last quarter of 2025, a significant number of Ugandans in the diaspora alongside resident High-Networth taxpayers with offshore interests received emails from the Uganda Revenue Authority (URA) conveying a directive that might be signaling the end of “Offshore Anonymity” for Ugandan Taxpayers

In the emails, URA informs taxpayers that it has received information indicating that “you have earned foreign income or gains” and that “Preliminary analysis indicates that one or more foreign financial accounts or assets associated with your name and TIN”

The taxpayer are then given seven days to review and regularize their tax affairs before commencement of a formal investigation.

This is not routine correspondence, but rather one that marks a new phase in Uganda’s tax administration, one defined by unprecedented financial transparency and access to foreign financial information regarding the commercial activities of taxpayers.

The notices confirm that Uganda has fully operationalized the global data-exchange framework built around the OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC), following the Uganda Parliament’s enactment of the Convention on Mutual Administrative Assistance in Tax Matters (Implementation) Act, 2023.

Under this framework, Foreign Jurisdictions volunteer taxpayer information on income generating asset holdings, transactions that might have resulted in taxable gains, emoluments subject to tax in Uganda, among other categories of information relevant to tax administration.

KRA Vs Sendy: Kenya’s High Court VAT Precedent Threatens East Africa’s Gig Economy and Digital Commerce Growth.

Kenya’s High Court has recently delivered a Key decision in the battle over VAT in the ride-hailing/digital platform economy, that risks far-reaching ripple effects across East Africa’s digital commerce landscape. 

The landmark decision fundamentally reclassifies digital platforms as primary suppliers of gig-economy services for VAT purposes. This brings them fully into the VAT net and forces gig workers/entrepreneurs and small merchants into VAT compliance, with potentially far-reaching consequences for the growth, structure, and taxation of the East African digital economy.

The immediate tax implication is that we now have two VATable transactions in every ride or delivery processed through a digital platform operating a similar business model. These are;

Supply from motor vehicle owner to tech platform (input VAT for the platform)

Supply from tech platform to end consumer (output VAT to the tax authorities on full final consideration paid by the end consumer)

This new reality is problematic from a commercial point of view, taking into consideration the nature and level of tax sophistication of most African economies.

The other immediate implication is that thousands of gig-economy participants have been hit with a VAT compliance shock overnight, and the reason is simple; e-commerce platforms lose input VAT if they trade with non-compliant taxpayers. Exposure to commercial activities of too many Non-VAT Traders or informal taxpayers makes the platform’s business model commercially unviable and wipes out margins.