What proposed amendments of taxes suggest

A clause in the Bill, dangling a carrot to start-ups, stands out. It is essentially a three-year income tax holiday for businesses established after July 1, 2025, with investment capital not exceeding Shs500 million. On paper, it’s a lifeline. “Taxes are a key factor behind the short lifespan of many start-ups,” says Mr John Jet Tusabe, the director of Tax and Regulatory Services at BDO Uganda, on The Tax Hub Podcast. “This exemption could offer breathing room.” But the devil—as always—is in the details. The exemption only applies to businesses born after July 1, 2025. Launch on June 30? Tough luck. “The intention is noble, but the design risks leaving out those already struggling,” Mr Tusabe warns. Then comes the ambiguity. What exactly counts as “investment capital”? Is it what you start with? What you spend over three years? Or some average across time? Even the cut-off date raises questions. Register on July 1—are you in or out? And it doesn’t stop there.

The law requires these businesses to file tax returns, but skips the part about how. For Small and medium enterprises (SMEs) without accountants or chief financial officers (CFOs), this could feel less like a tax holiday and more like a paperwork nightmare. “Preparing financial statements costs money,” Mr Tusabe notes. “If filing demands mirror those of large corporates, most SMEs will just give up.” Even the phrase “registered business” is murky. Does it mean registration with Uganda Registration Services Bureau (URSB)? Or does it include cooperatives under the Saving and Credit Cooperative Organisations (Saccos) law? “Many SMEs operate as sole proprietors or under specific sector laws,” says Mr Bruce Musinguzi, a tax partner at Kampala Associated Advocates. “They may not fit neatly into the URSB mould, but they’re still legitimate.” He suspects the Bill intends to include them. But in law, good intentions don’t count without precision. Unless these kinks are straightened out, a reform meant to help small businesses could become just another source of confusion—and friction. Uganda’s SMEs are already dodging inflation, wrestling with sluggish demand, and navigating regulatory mazes. A well-crafted tax holiday could be the boost they need. But only if it’s written in plain language—and grounded in the reality they actually live in.

What about the rollover relief?

That’s another tweak in the Income Tax Amendment Bill, 2025 targeting business reorganisations. Normally, when a company or group transfers assets, any gain draws capital gains tax. But “rollover relief” has long offered a pass if there’s no change in ownership. The logic? Don’t punish restructuring done for strategy or survival. The catch? The relief mainly covered company-to-company transfers. In reality, shareholders often hold assets in their personal names and later fold them into a company. Under old rules, that move triggered tax, even if no money changed hands. The amendment fixes that. Individuals can now move assets into a company tax-free, as long as ownership stays the same. “It’s a welcome fix,” says Mr Tusabe. “You shouldn’t be taxed for a paper shuffle when no real value has changed.” The language, though, is still murky. Vague drafting could open doors to URA disputes—the very thing this aims to prevent. “Some sections need rewording to avoid misinterpretation,” Mr Tusabe cautions.

Why has the digital service tax stirred chatter?

Let’s start with the tweak. Non-residents earning from digital services provided to their associates in Uganda are now excluded from the usual five percent digital tax. Previously, it was one-size-fits-all, five percent, whether you were Netflix or a foreign parent company billing its Ugandan subsidiary. Now, related party transactions are kicked upstairs to Section 82 and face the standard 15 percent withholding tax. This isn’t just legislative hair-splitting. “URA may have feared the five percent rate could be gamed in cousin-company set-ups,” says Ms Jemimah Irene Nanziri, a senior tax manager at KPMG East Africa. Now, the message is clear: if you’re billing your sister company, don’t expect a discount just because it’s digital.

What makes the Tax Procedure Code game-changing?

It’s an extension of the Covid-era interest and penalty waiver. “If you settle your principal tax between 2025 and 2026, the penalties and interest disappear,” says tax expert Bruce Musinguzi, who is a partner at Kampala Associated Advocates. That’s no small relief. Imagine owing Shs1 billion—then getting slapped with another Shs800 million in add-ons. Most businesses would just throw in the towel. This time, though, it’s not all-or-nothing. The waiver is now pro rata: pay 50 percent of the tax, and 50 percent of your penalties are wiped out. Think of it as tax forgiveness—on a sliding scale.

What does the taxman intend to do with our National ID Numbers (NINs)? Forget just the Tax Identification Number (TIN), your NIN is now your passport to doing business. If the proposal passes—and it likely will—no NIN, no trading licence. “URA will now trace every deal straight to your NIN,” says Mr Musinguzi. No more vanishing into the informal mist. Foreigners aren’t off the hook either. If Uganda has a tax treaty or info-sharing pact with your country, your local tax ID works. But if you’re off the radar back home, you’ll need to register here. “The rule hasn’t vanished,” Mr Tusabe says. “It’s just shapeshifting.”

And betting?

 The gaming sector’s luck is up. While URA could already see online betting firms, your local joint was a ghost. Not anymore. All betting platforms must now plug into a central system tied to NINs. No NIN, no bet. So if you've been casually tossing Shs100 million into bets, brace yourself. “URA will want to know where that cash came from—and why your income tax file is blank,” Ms Nanziri warns. It’s tax surveillance, gamified.

Speak to the Electronic Fiscal Receipting and Invoicing Solution (Efris)… 

That’s the taxman’s digital watchdog. Previously, if you forgot to issue a receipt for a Shs1,000 bottle of water, the slip could cost you Shs6 million. “That penalty,” Mr Tusabe notes dryly, “was completely divorced from reality.” Now, reason kicks in. Penalties will be pegged to the value of the undeclared sale. Miss a Shs10,000 receipt? Expect a slap, not a sledgehammer. The message: URA wants compliance, not carnage.

What about Stamp Duty?

One of the more business-friendly proposals is scrapping Stamp Duty on agreements and Memorandum of understanding (MoUs). Mr Musinguzi, a tax expert, points out that the previous Stamp Act was too broad and, frankly, a hassle. “If we sign an agreement today, we’d owe Shs15,000. Now, imagine a company signing thousands of agreements yearly,” Mr Musinguzi says. “Are all those taxed? And what exactly counts as an ‘agreement’? Does subscribing to DSTV qualify?” he adds. Beyond the ambiguity, enforcement was nearly impossible. 

Agreements stay private until disputes arise—so tracking taxes on them was like chasing shadows. “Unless someone challenges the agreement in court, the taxman won’t know," Mr Musinguzi adds. Last year, URA surprised companies by demanding Stamp Duty for agreements dating back to 2018, throwing a wrench in operations. The repeal? Timely and practical. In line with previous efforts to remove Stamp Duty on bank loans, this amendment removes Stamp Duty on mortgage deeds. “Logical,” says Mr Musinguzi. “Mortgages back bank loans, so this closes the loop.”

Why does the figure 2.5 percent stand out in the External

Trade Amendment Bill? The Bill introduces a 2.5 percent infrastructure levy on imports (1.5 percent for infrastructure, 1.0 percent import declaration fee). This is on top of regular taxes like VAT and Import Duty. “As a net importer, Uganda relies on foreign goods. The government says these charges will help fund roads,” says Mr Tusabe. “We complain about bad roads, so here’s the bill.” But this 2.5 percent isn’t the full story. With VAT potentially applying to these levies, the total cost to businesses could exceed 2.5 percent, Mr Tusabe warns. Imported consumer goods won’t escape this either. Next time prices at your local supermarket rise, it might not be inflation—it could be the infrastructure levy creeping onto the shelf. “We know how this goes—taxes rise one percent, but prices soar 40 percent,” Mr Tusabe quips.

What’s the thinking behind the Export Levy?

The government is introducing a $10 per tonne export levy on wheat bran, maize bran, and cotton cake. “Exports usually bring in foreign currency, but here the logic is different,” explains Mr Tusabe. “These are critical inputs for local manufacturers, particularly those producing animal feeds.” Manufacturers have long struggled with foreign buyers offering higher rates, pricing them out of the market. This levy aims to keep these raw materials local for value addition.

What impact will proposals in the Excise Duty Act have?

For businesses dealing in perishables, accidents, and expiry once meant double losses: product loss and no tax refund. Not anymore. The Excise Duty Act proposes remission for destroyed, expired, or decayed goods. While you won’t get cash back, taxes can be offset in future filings. Still, Mr Musinguzi warns: “Expect URA to audit every claim. The law lacks timelines for processing—it’s a start, but we need clearer guidelines.” Fuel prices are poised to rise again with a Shs100 increase in Excise Duty. Everyone—from commuters to cargo haulers—will feel the sting.

Will the VAT exempt give local textiles a boost?

The exemption applies to supplies to local manufacturers. It’s a long-term strategy to reduce reliance on second-hand clothing. “If investors do it right, this could work,” says Ms Nanziri, a tax analyst. “But will Ugandans, buy Ugandan?” Sceptics remember past failures under the “Buy Uganda, Build Uganda” initiative, where quality concerns hurt consumer confidence.

What is the bigger picture?

All these amendments point to one thing: Uganda’s government needs more domestic revenue. With donor funding drying up, the financial burden now rests squarely on local taxpayers. “Let’s just hope the new taxes don’t hit too hard,” says Ms Nanziri. “Because at the end of the day, the consumer always pays the price.”

Is it too late to voice my displeasure?

No, as Mr Musinguzi explains. “The cycle works like this: After the Finance minister tables the tax bills, they’re forwarded to Parliament. That’s the public’s cue to weigh in.” Each Bill goes to a parliamentary committee, which invites comments from businesses, associations, and even individuals. And this isn’t just for show. “We’ve seen real amendments happen because of public feedback,” Mr Musinguzi says. “So no, all is not lost—this stage matters.” After the committee finishes its review, the Bill moves to the full Parliament—formally known as the August House—for debate. And yes, the public can still push for changes. “If a particular clause will hurt your operations, reach out to your MP,” Mr Musinguzi adds. “Direct lobbying at this stage can still shift things.” Mr Tusabe agrees: “Parliament has, in the past, sent tax bills back to the Finance ministry for a rework. It’s not over until the gavel falls.” Once Parliament passes the Bills, they head to the President for assent. After that—and only after they’re signed and gazetted—they become law.

So, what should businesses and individuals be doing right now?

“Two things,” says Mr Tusabe. “First, clearly state what you support in the proposals. Secondly, be laser-specific about what you oppose—and propose workable alternatives.” He notes that while some proposals—like VAT exemptions for local textiles—are positive, many chronic issues facing businesses remain untouched.

“This is the moment to raise them,” Mr Tusabe says. “Because speaking up now might not just fix this year’s Bill—it could shape tax policy for years to come.”

What issues do the Amendments gloss over?

For all the headline-grabbing tweaks in the Finance ministry’s new tax amendments, the omissions might speak louder. In areas crying out for reform—clarity, fairness, and modernisation—the silence is deafening. And for Uganda’s business community and middle class, it feels like being locked out with the keys still in the door. Let’s start with the elephant in the tax room—capital gains. Yes, Uganda taxes non-residents on capital gains. But ask URA and a taxpayer to read the same clause, and you’ll get wildly different interpretations. “Investor confidence thrives on clarity,” says one tax advisor who sought anonymity. “You can’t woo foreign direct investment, then leave exit strategies hanging in legal ambiguity. Nobody wants to play roulette with their returns.”

It’s a long-standing source of litigation and frustration—and yet, not a single amendment.