Africa’s Digital Tax Patchwork Requires Comprehensive Planning

Africa’s digital economy is expanding at a remarkable pace, driven by rising demand for streaming services, digital content, and mobile games. The result is a patchwork of rules that foreign businesses must understand and plan for before expanding into Africa’s high-growth online markets.

Forty percent of the African population is expected to shop online by the end of 2025 compared to just 13% in 2017. Gaming revenue across the continent in 2023 alone grew about 8%, more than two-and-a-half times the growth recorded in Europe or North America.

Because most digital services are supplied by companies based outside the region, African tax authorities want to capture a fair share of the value created when foreign firms sell to local consumers.

South Africa became the first country on the continent to tax electronic services in 2014, and today more than 20 countries require nonresident providers to collect value-added tax on digital sales. VAT is a key revenue source in Africa, accounting for 28% of total tax revenues across 31 African jurisdictions in 2020.

While in most countries the obligations of nonresident sellers are generally limited to VAT, some, such as Ghana, impose additional levies. Several African nations also have introduced standalone digital services taxes or “significant economic presence” rules aimed at foreign sellers.

Shared Goals

The common goal is to tax digital consumption where it occurs, but the systems differ on every key point—what counts as a taxable service; when a foreign supplier must register; and who must account for VAT on business-to-business sales.

The rollout of new VAT rules in Zambia, Morocco, Ethiopia, and Burkina Faso between 2024 and 2025 illustrates the diversity of VAT regulations across the continent, with each country defining its own taxable scope.

Senegal and Zambia cover services “delivered through the internet, electronic or digital network,” citing examples such as streaming, software as a service, cloud hosting, and online advertising. Ethiopia and Burkina Faso take a broader approach, treating any service sold into their markets by a foreign business as taxable, without listing specific categories.

Registration thresholds also vary. Morocco and Senegal use the EU model, requiring a nonresident provider to register after just one sale to a local customer. Zambia and Ethiopia impose revenue thresholds before registration becomes compulsory. Burkina Faso has set a threshold for domestic businesses but hasn’t yet clarified whether it will apply to foreign sellers.

Treatment of business-to-business supplies is equally inconsistent. Senegal, Morocco, Ethiopia and Burkina Faso shift the VAT liability on cross-border B2B services to the local customer, although guidance on how to confirm the buyer’s business status is still patchy. Zambia takes the opposite approach and obliges the foreign seller to charge and remit VAT even when the customer is already VAT-registered.

Beyond VAT, a growing number of African countries are adopting two additional tools to tax digital revenue earned by foreign companies: standalone digital services taxes and significant economic presence income tax systems. They both target suppliers with no physical presence in the market, but differ sharply in design.

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Enforcement Challenges

Foreign-seller compliance remains low despite the growing emphasis on taxing digital services. Tanzania, for example, listed only 56 nonresident service providers on its VAT register for the 2023-24 fiscal year.

Enforcement is difficult from the start because tax authorities struggle to identify nonresident businesses that neither register nor file. Techniques such as monitoring major online platforms, analyzing payment data and inviting tip-offs from consumers help, but they leave many smaller or less visible suppliers untouched.

Shifting the collection duty to digital platforms—an approach already adopted in many African countries—can help by narrowing the number of taxpayers the authorities must oversee.

Even when a nonresident business is identified, cross-border enforcement remains difficult. Audits and court actions have little bite against companies with no physical presence in the country.

Further complicating matters is the absence of harmonized rules. Definitions of taxable services, registration thresholds, and filing requirements vary widely, increasing the risk that foreign providers will misinterpret or simply overlook their obligations.

Administrative hurdles add to the challenge: unfamiliar forms, language barriers and fiscal representative requirements often make registration and ongoing compliance more burdensome than in providers’ home markets.

Preparing for Compliance

Given the complexity and variability of VAT regulations across Africa, foreign businesses entering the continent’s digital markets should clarify their specific obligations in each country where they have customers. This involves carefully assessing the definitions of taxable digital services, registration thresholds, and compliance procedures.

Foreign companies can benefit from partnering with local advisers who understand the regulatory frameworks, language nuances, and administrative procedures. Local specialists also can help businesses interpret laws accurately and keep them informed about evolving regulations and their potential impacts.

In some African markets, appointing a local fiscal representative is mandatory. Although this requirement can streamline compliance by shifting administrative responsibilities to a local expert, it may also increase the overall cost of doing business.

Adopting automated tax software capable of managing diverse tax rates, tracking registration thresholds, and monitoring filing deadlines across multiple jurisdictions can ease compliance burdens and support expansion into African markets.

These tools are especially useful in countries such as Kenya, Uganda, and Tanzania, where simplified electronic compliance procedures for foreign businesses are available in English.

In such jurisdictions, foreign companies often can handle VAT registration and ongoing compliance independently, without the need to rely on local experts. Tax software plays a key role in these cases by automating VAT calculations, tracking filing obligations, and ensuring timely submissions.

As Africa’s digital tax landscape continues to evolve, foreign businesses must remain informed and well-prepared. With the right mix of local insight and technological support, navigating VAT compliance across the continent can become a manageable part of doing business in one of the world’s fastest-growing digital economies.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Aleksandra Bal is global tax technology lead at Stripe and a frequent contributor to tax publications and industry conferences.

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