With an ambitious goal to collect Shs37.2 trillion in domestic tax revenue for the current fiscal year 2025/2026, about 60 percent of the national budget, the government, through the Ministry of
Finance, and Uganda Revenue Authority (URA) came up with ax changes to support Ugandan entrepreneurs, among which are Small and Medium Enterprises (SMEs).
Most nations in the world, including Uganda, rely on taxes to raise the funds to cover their national spending needs and government may not meet the benchmarks required to fund the country’s financial allocation if tax compliance is persistently low.
Data released by the Uganda Bureau of Statistics in June 2025 categorised SMEs, with businesses with fewer than 30 workers as small, and those between 30 and 100 workers as medium and these, generate roughly 70 percent of Uganda’s Gross Domestic Product and account for 99.6 percent of all enterprises.
SMEs are becoming more significant in Uganda and many other developing nations, particularly when it comes to tackling the issues of job creation, economic growth, and alleviating poverty.
However, many SMEs locally encounter significant obstacles when it comes to fulfilling their tax compliance responsibilities.
SME’s tax compliance challenges among others include maintaining proper records, undertaking tax planning, hiring professionals to complete and file returns, and gaining enough knowledge to allow these obligations to be correctly done. The costs incurred in the performance of these activities are usually significant.
With the recent tax changes such as Nil Stamp Duty on Agreements, Memorandums, Mortgage Deeds, and Mortgage of a Crop among others, SMEs could stand to benefit from reduced legal and transaction costs as this removes a core barrier to registering key documents like contracts and loan agreements.
Additionally, easier loan collateralisation with mortgage deeds and crop mortgages free from stamp duty, smallholder farmers and agribusiness SMEs can pledge land or produce more affordably thus broadening access to agricultural finance. Importantly, this will boost formal business growth as cost savings make formalisation more attractive, encouraging informal traders to adopt structural legal agreements and participate in the formal economy.
Use of National Identification Numbers as Tax Identification Numbers (TIN) regardless of whether one is engaged in economic activity. This simplifies tax registration as SMEs and informal businesses can use alternative identification to obtain a TIN thus lowering the barriers to tax compliance. This will further encourage formalisation as more informal businesses may be incentivised to register and comply with tax regulations, granting them access to government programmes, financial services, and markets.
Revision of Penal Tax for non-compliance with the Electronic Fiscal Receipting and Invoicing System (EFRIS). This softer penal regime gives SMEs time to adapt to EFRIS requirements without facing harsh fines and shifts URA’s posture from punishment to guidance while encouraging compliance through support rather than fear.
This incentive improves cash flow through relief for resource-strapped SMEs as many struggles with digital adoption and record keeping. These softened penalties offer a learning curve without immediate financial consequences, thus reducing disruptions to their operations and liquidity.
Push for digital commerce: EFRIS helps create a transparent and real-time record of business transactions, benefitting SMEs through better bookkeeping, easier access to credit and improved inventory and sales management.
If 2025/2026 amendments are effectively communicated and complemented by capacity-building efforts (such as registration drives in collaboration with URA and local governments, legal aid services to draft formal agreements and mortgage documents, and digital skills workshops focused on tax compliance and EFRIS tools, Uganda’s SME sector could experience accelerated formalisation, higher tax morale, greater investment attractiveness and stronger integration into regional and global supply chains.