The Ministry of Finance has rolled out a series of proposed tax reforms designed to boost startup activity, simplify business restructuring, and strengthen formal sector regulation.
These proposals are contained in seven amendment bills ahead of the 2025/26 financial year, which kicks off in July. The reforms align with the government’s broader fiscal plan for raising revenue and managing expenditure.
A standout provision in the proposed Income Tax Amendment Bill 2025 is a three-year income tax holiday for startups formed after July 1, 2025, with initial investments of up to UGX 500 million (around $135,000 USD). Experts say this incentive could provide vital relief to early-stage businesses typically strained by tax liabilities.
However, there’s concern about the definition of “investment capital” and the treatment of businesses that launch shortly before the cutoff date.
John Jet Tusabe, Tax and Regulatory Services Director at BDO Uganda, discussed on The Tax Hub Podcast that while the exemption supports new businesses, it might leave out struggling small enterprises already in operation. He also highlighted the need for clear tax filing guidelines for exempt startups, especially those without accounting support.
The reforms also seek to widen the scope of “rollover relief” for business restructuring. Currently limited to inter-company asset transfers, the new bill proposes including individual-to-company transfers provided ownership remains unchanged thus offering a more tax-efficient route to business reorganization.
Tusabe cautioned that the legal language must be precise to prevent misinterpretation by the Uganda Revenue Authority (URA).
Digital service taxation is another area under review. The new rules would exempt non-resident companies providing digital services to their Ugandan affiliates from the 5% digital service tax.
Instead, they would be subject to a 15% withholding tax a measure seen as a guard against tax evasion in internal digital dealings.
Additionally, the Finance Ministry wants to revive a COVID-era measure by waiving penalties and interest for taxpayers who clear their tax arrears between 2025 and 2026.
Bruce Musinguzi, a partner at Kampala Associated Advocates, noted that this relief could ease the burden on businesses with longstanding tax debts.
In efforts to formalize business operations, the proposed laws would require a National Identification Number (NIN) to obtain a trading license, enabling URA to track ownership and commercial activity more effectively. Foreigners from countries with tax treaties would use their local tax IDs, while others must register in Uganda.
The gaming sector is also in focus. Betting firms would be required to connect their systems to a central platform linked to bettors’ NINs eliminating anonymous gambling and enhancing tax monitoring. Analysts say this will give URA more oversight of large transactions in the industry.
Together, these amendments aim to balance promoting innovation with strengthening tax enforcement. Their effectiveness, however, will depend on the clarity of the final laws and the government’s ability to implement them.
