Uganda bets on business with 2026 tax reforms
Parliament is considering a package of tax, trade, and budget amendments proposed by the Minister of Finance, Planning and Economic Development for the 2026/27 financial year. The measures, which would take effect on 1 July 2026 if approved, are contained in several amendment bills currently before Parliament of Uganda.
The proposals affect small businesses, taxpayers with outstanding liabilities, importers of medical and agricultural inputs, investors in tourism, motorists, and the general public through changes in government spending.
VAT registration threshold
One of the proposed changes is an increase in the VAT registration threshold from Shs150 million to Shs250 million in annual turnover.
If approved, businesses with turnover below Shs250 million would not be required to register for VAT. Those above the threshold would continue to be subject to existing VAT obligations.
Waiver of Outstanding Tax Liabilities
The tax amendment bills also propose a waiver of outstanding taxes, including penalties and interest, for liabilities incurred up to 30 June 2016.
The measure is intended to address long-standing arrears and encourage affected taxpayers to regularize their tax status under the current system.
Import levies on health and agricultural inputs
Under the proposed External Trade (Amendment) Bill, certain goods would be exempt from the infrastructure levy and import declaration fee. These include:
- Vaccines, medicines, and medical equipment
- Agricultural inputs such as pesticides, rodenticides, acaricides, and insecticides
The exemptions are intended to reduce the cost of importing essential medical supplies and agricultural inputs.
The proposals also include recognition of the Uganda Red Cross Society as a listed institution for tax purposes, granting it specific exemptions to support its humanitarian activities.
Tourism investment incentives
The Income Tax (Amendment) Bill introduces tax incentives for developers of hotels and tourism facilities who meet minimum capital investment thresholds:
- USD 10 million for foreign investors
- USD 5 million for Ugandan citizens
To qualify, investors must meet local content requirements, including:
- At least 70% local sourcing of raw materials
- At least 70% Ugandan citizens in employment
- Ugandan employees accounting for at least 70% of the total wage bill
Environmental and road safety measures
The proposed Traffic and Road Safety (Amendment) Bill reduces the allowable age of imported motor vehicles from 15 years to 13 years from the date of manufacture.
In addition, an environmental levy of 30% of CIF value is proposed on imported worn clothing and other used articles. The measure is aimed at environmental protection and supporting local manufacturing.
Government spending for FY 2026/27
The Appropriation Act, 2026 proposes government expenditure totaling Shs47 trillion for the financial year ending June 2027. The funding sources include:
- Shs45.6 trillion from the Consolidated Fund
- Shs1.4 trillion from the Petroleum Fund
The funds are allocated across districts and cities for public services such as infrastructure, education, healthcare, and local government operations.
The proposals also include a tax exemption on income earned by the Bujagali Hydropower Project until 30 June 2032, intended to support stability in the electricity supply.
What happens next?
All the bills have been presented for First Reading and referred to the relevant parliamentary committees for scrutiny. Parliament is expected to debate and potentially pass the measures before the end of the current legislative cycle.
If approved, the changes will take effect on 1 July 2026.
