The government has unveiled various new tax measures for the Financial Year 2026/27 to raise domestic revenue and finance its ambitious national budget. The measures are expected to support the collection of Shs45.96 trillion in domestic revenue, including Shs40.16 trillion in tax revenue. While presenting the Budget for the Financial Year 2026/27 at Kololo Ceremonial Grounds yesterday, the Finance Minister, Mr Henry Musasizi, said the Parliament approved several tax policy reforms designed to strengthen revenue mobilisation while supporting economic growth, investment, and job creation.
Income Tax reforms
Among the key income tax measures is the extension of the income tax exemption granted to Bujagali Energy Limited until 2032, a move aimed at maintaining stability in the energy sector. The government has also increased the Pay As You Earn (PAYE) threshold from Shs235,000 to Shs335,000 per month, providing relief to low-income earners and increasing disposable income for workers.
In addition, a 5 percent withholding tax has been introduced on interest payments made to foreign lenders. Taxpayers earning rental income will now have the option of filing and paying rental income tax monthly, a measure expected to improve compliance and ease administration. The reforms further provide tax holidays for developers investing in high-end tourism facilities, as well as tax relief for Tier 4 financial institutions through deductions for bad debt provisions.
Value Added Tax (VAT) changes
To support small businesses and reduce compliance costs, the VAT registration threshold has been increased from Shs150 million to Shs300 million in annual turnover. The government has also extended VAT deferment to inputs used in iron ore processing, a move intended to support industrialisation and value addition within the mining sector.
Excise Duty adjustments
Several Excise Duty rates have been increased as part of the government’s strategy to generate additional revenue. The Excise Duty on petrol and diesel has been raised by Shs200 per litre. Alcoholic beverages will now attract Excise Duty of Shs3,500 per litre, up from Shs1,700. Motorcycles at first registration will be subject to a higher Excise Duty of Shs500,000, compared to the previous Shs200,000.
Environmental concerns have also influenced the tax reforms, with substantially higher Excise Duties imposed on single-use plastics to discourage pollution and environmental degradation. Other increases include Cooking oil: from Shs200 to Shs400 per litre. Cement: from Shs500 to Shs750 per 50-kilogramme bag. Sugar: from Shs100 to Shs200 per kilogramme. It should also be noted that the government has also introduced new Excise Duties on paints, varnishes, and cooking fats.
New Stamp Duty charges
Parliament approved the introduction of Stamp Duty on vehicle registration and transfers. Under the new rates, motorcycles, tricycles, and quadricycles will attract a Stamp Duty of Shs30,000, while other motor vehicles will be charged Shs200,000.
Tax relief measures
To ease the burden on taxpayers and encourage compliance, Parliament approved waivers of principal tax, penalties, and interest owed to the Uganda Revenue Authority (URA) as of June 30, 2016. The government has also extended existing waivers on outstanding interest and penalties, providing relief to eligible taxpayers and supporting business recovery.
External trade and gaming taxes
The environmental levy on imported used clothing has been increased from 15 percent to 30 percent of the Cost, Insurance, and Freight (CIF) value. The measure is intended to promote local textile and garment manufacturing by making imported second-hand clothing less competitive. Meanwhile, taxation on betting activities has been raised from 20 percent to 30 percent. The government says the increase is intended to harmonise taxation across gaming activities while generating additional revenue for the national budget.