The Ministry of Finance has introduced a set of proposed tax reforms aimed at stimulating startup growth, simplifying corporate restructuring, and enhancing the formal economy, as detailed in a recent analysis. The seven amendment bills, presented ahead of the 2025/26 fiscal year that begins in July, lay out the government’s fiscal strategy for revenue generation and spending.
A key highlight in the Income Tax Amendment Bill 2025 is a proposed three-year income tax exemption for startups launched after July 1, 2025, with initial investment not exceeding UGX 500 million (about $135,000 USD). Tax professionals say this measure could ease the burden on emerging businesses often hindered by early tax obligations. However, there are concerns over how “investment capital” will be defined and how firms established slightly before the cutoff will be treated.
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John Jet Tusabe, Director of Tax and Regulatory Services at BDO Uganda, noted during The Tax Hub Podcast that while the proposal is beneficial, it risks excluding existing small businesses still facing financial challenges. He also raised concerns about unclear filing procedures for exempt entities, which could prove problematic for SMEs lacking financial expertise.
Another notable reform involves expanding “rollover relief” for business restructuring. Currently, this relief only applies to asset transfers between companies, shielding them from capital gains tax. The proposed changes would extend the benefit to individuals transferring assets into companies, provided ownership remains unchanged—making restructuring more tax-neutral. Tusabe, however, emphasized the need for precise legal wording to avoid interpretive issues with the Uganda Revenue Authority (URA).
Digital taxation is also under review. Under the new proposal, non-resident companies offering digital services to affiliated entities in Uganda would be excluded from the 5% digital service tax and instead fall under the 15% withholding tax rule. Experts believe this move is designed to prevent tax avoidance in intra-company digital transactions.
In the Tax Procedure Code, the Finance Ministry has proposed reviving a COVID-era incentive: a waiver of penalties and interest for taxpayers who clear their principal obligations between 2025 and 2026. Bruce Musinguzi, a partner at Kampala Associated Advocates, said this relief—applied proportionately—could significantly ease the financial strain on businesses with large tax arrears.
To advance formalization efforts, the amendments propose making a National Identification Number (NIN) mandatory for obtaining a trading license. This would allow the URA to better track business ownership and activity. For foreigners, tax identification numbers from treaty-aligned countries would be accepted, while others would need to register locally.
The gaming industry is also targeted in the reforms. All betting companies would be required to integrate with a central system connected to players’ NINs, effectively ending anonymous betting. Analysts say this will enhance URA’s ability to track high-value betting behavior and enforce tax compliance.
Overall, the proposed amendments reflect a dual approach: supporting entrepreneurial growth while tightening the tax net across various sectors. The success of these initiatives will largely hinge on how clearly the final laws are written and how effectively they are enforced.
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