The Ministry of Finance of Uganda has proposed a series of tax amendments aimed at boosting nascent businesses, streamlining corporate restructuring, and formalizing the economy, according to a recently published analysis. The seven amendment bills, tabled ahead of the new financial year starting in July, outline the government’s strategy for revenue collection and expenditure.
A key proposal in the Income Tax Amendment Bill 2025 is a three-year income tax holiday for startups established after July 1, 2025, with investment capital not exceeding UGX 500 million (approximately $135,000 USD). Tax experts note this could provide crucial breathing room for new businesses, which often struggle with early tax burdens. However, concerns have been raised about the specific criteria, including the definition of “investment capital” and the implications for businesses established just before the deadline.
John Jet Tusabe, director of Tax and Regulatory Services at BDO Uganda, speaking on The Tax Hub Podcast, highlighted the potential benefit but cautioned about the design, which might exclude existing struggling startups. He also pointed out ambiguities regarding filing requirements for these exempted businesses, which could pose challenges for small and medium-sized enterprises (SMEs) without dedicated financial personnel.
Another significant amendment targets “rollover relief” for business reorganizations. Existing rules primarily covered company-to-company asset transfers without triggering capital gains tax. The proposed change extends this relief to individuals transferring assets into a company, provided the ownership remains the same. This aims to facilitate restructuring without imposing tax burdens on what are essentially internal asset movements. However, experts like Tusabe have called for clearer language in the bill to prevent potential disputes with the Uganda Revenue Authority (URA).
The digital service tax has also drawn attention. The proposed amendment excludes non-resident entities earning from digital services provided to their associates in Uganda from the standard five percent digital tax. Instead, these transactions will be subject to the standard 15 percent withholding tax under a different section of the law. Tax analysts suggest this change may be intended to prevent potential tax avoidance within related company structures.
A notable proposal within the Tax Procedure Code is an extension of a COVID-era interest and penalty waiver. Tax expert Bruce Musinguzi, a partner at Kampala Associated Advocates, explained that taxpayers who settle their principal tax between 2025 and 2026 will have associated penalties and interest waived on a pro rata basis. This offers significant relief to businesses burdened by substantial tax arrears and related charges.
In a move towards greater formalization, the proposed amendments would link the National Identification Number (NIN) to business operations. If passed, a valid NIN would become a prerequisite for obtaining a trading license, allowing the URA to trace business activities directly to individuals. Foreigners from countries with tax treaties or information-sharing agreements with Uganda could use their local tax IDs; otherwise, registration in Uganda would be required.
The gaming sector also faces increased scrutiny under the proposed changes. All betting platforms would be mandated to connect to a central system linked to individuals’ NINs, effectively ending anonymity in betting activities. Tax experts suggest this will enable the URA to monitor large or frequent betting transactions and assess income tax compliance.
These proposed tax amendments signal Uganda’s intent to foster a more supportive environment for new businesses while simultaneously strengthening tax administration and formalizing various sectors of the economy. The effectiveness of these measures will likely depend on the clarity of the final legislation and its practical implementation.
