Uganda is betting on the overhauled tax laws to plug revenue leaks and boost domestic revenue collections, which have historically remained low.

 

While reading Uganda’s $20.1 billion budget for the financial year 2025/2026, Finance Minister Matia Kasaija announced high revenue targets for the tax body to finance 51.5 percent of the budget.

Uganda Revenue Authority (URA) has been tasked to raise almost $9.5 billion (Ush34.051 trillion), which is 47 percent of the total budget requirements. From fees and local government collections, URA is expected to collect $903.1 million (Ush3.246 trillion), representing 4.4 per cent of the total requirement.

To facilitate the taxman, MPs amended the Income Tax, VAT, Excise Duty, Tax Procedure Code, the Stamp Duty, and the External Trade Bills to facilitate the generation of an additional $675.8 million.

Mr Kasaija also introduced a “small fee of one percent of the customs value” on taxable items under the common external tariff. The measure seeks to align Uganda’s tax policy with those of other East African Community partner states, where similar fees have been imposed.

Currently, imported goods that attract no import duty are not subject to infrastructure levy, tax experts at PwC explained, meaning that the proposed amendment is likely to increase the cost of importation of certain goods, since it is based on the customs value of such goods and not on the applicable import duty rate per se.

Uganda also has a $10 per tonne of wheat bran, cotton cake, and maize bran tax levy to discourage the export of the raw materials needed to sustain the livestock feed industry from competition.

This levy will be payable by the consignor to the URA at the time when the wheat bran, cotton cake, or maize bran is consigned out of Uganda.

Tax experts at PwC said Uganda has not been levying such an export tax and the proposed export levy is aimed at encouraging domestic production of animal feed and reducing foreign exchange expenditure on imported animal feed.

Read: Uganda plans corporate bonds to raise new capital for State firmsUganda has introduced an anti-avoidance rule for VAT importers to rope in importers who have been avoiding shipping goods valued at Ush150 million ($41,661).

According to tax experts, it was common for traders to import goods under separate consignments, which, if aggregated, would qualify the importer to be registered under the VAT Act.“These fragmented consignments are commonly referred to as groupage cargo or Less than Container Load. The amendment introduces an anti-fragmentation rule for VAT purposes that empowers the Commissioner of the URA to aggregate several consignments which, when combined, would have a turnover that triggers the VAT registration threshold of Ush150 million ($ 41,661),” said Juliet Najjinda, senior tax manager at PwC.“The proposed amendment will allow the commissioner to treat the fragmented consignments as a single transaction for purposes of assessing the VAT threshold.“The amendment is aimed at preventing tax evasion, enhancing VAT compliance, and promoting equity within the VAT tax administration regime. Taxpayers, especially groupage cargo importers, should review their consignments regularly to assess whether they meet the VAT registration threshold of Ush150 million,” the PwC official explained.

The shadow finance minister, Ibrahim Ssemujju Nganda, has described the revenue collection targets set by the finance ministry for the taxman as unrealistic.

In the budget report presented to Parliament last month, he stated that the URA had met its revenue collection targets from the 2020/21 financial year to the 2022/23 financial year.

His colleague, Joel Ssenyonyi, the leader of the opposition in Parliament, named tax leakages as the major concern that the country must address.“This country faces challenges in raising local revenue due to a narrow tax base, weak enforcement, high informality, and low taxpayer compliance. The gold sector is an example where there is limited regulation and smuggling, resulting in little or no revenue from the most lucrative industries,” Mr Ssenyonyi said.

For example, the Auditor General's report to Parliament in 2023/24 stated that Uganda lost $19 million in revenue through gold exports valued at $3.014 billion (approximately Ush11 trillion).

These exports were made without the necessary permits from the Energy Minister.

Tax measures for the 2025/26 fiscal year:Excise duty on cigarettes of Ush65,000 per 1,000 sticksImport declaration fee of one percent of the customs valueExport levy of $10 per metric ton of wheat bran, cotton cake and maize branImport duty on imported fabrics of $2 per kilogram or 35 percentFive percent export levy on hides and skinsGaming and Betting Centralised Payments Gateway systemUse of National Identification Number as a Tax Identification NumberWinnersThree-year income tax holiday for startup businesses established by Ugandans after July 1, 2025.

One tax exemption for Bujagali hydropower up to 30th June 2026.

Removal of excise duty rate of 30 percent or Ush950 per litre on beer manufactured from barley that is grown and malted in UgandaRemoval of stamp duty of 0.5 percent or Ush15,000 on mortgages and agreementsExemption from capital gains tax on transactionsZero tax rate on aircraft suppliesRemoval of Ush950 per litre on beer locally produced from barley in Uganda

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