Executive summary

The President of the Republic of Uganda on 18 May 2026 assented to several tax amendment laws. The Acts include the Income Tax (Amendment) Act, 2026, the Value Added Tax (Amendment) Act, 2026, the Excise Duty (Amendment) Act, 2026, the Stamp Duty (Amendment) Act, 2026 and the Tax Procedure Code (Amendment) Act, 2026, among others. The Acts take effect from 1 July.

This Alert highlights the key amendments with respect to the:

• Income Tax (Amendment) Act, 2026
• Value Added Tax (Amendment) Act, 2026
• Excise Duty (Amendment) Act, 2026
• Stamp Duty (Amendment) Act, 2026
• Tax Procedure Code (Amendment) Act, 2026
• External Trade (Amendment) Act, 2026
• Lotteries and Gaming (Amendment) Act 2026

[Please note that at the time of publication of this Alert, the President of Uganda had not yet assented to the Income Tax (Amendment) Act, 2026, or the Excise Duty (Amendment) Act.]

Summaries of the key reforms contained in each Act follow.

Income Tax (Amendment) Acts, 2026

The key Income Tax reforms include the following.

1. Adding "software" to definition of "royalty"

Section 2 of the Act amends the definition of "royalty" to include "software." The amendment expressly clarifies that software is part of royalty and therefore attracts withholding tax.

The amendment clarifies that payments made by Ugandan businesses to nonresidents for imported software whether in the form of licenses, subscriptions or embedded software are subject to withholding tax. This expands the tax base and increases obligations for such businesses.

2. Expanded list of exempt income transactions under Section 21 of the Income Tax Act

The amendment expands the list of transactions exempt from income tax by including the following;

• The Amendment Act extends the exemption period for the income of Bujagali hydro power project from 30 June 2026 to 30 June 2032.
• The amendment corrects the clerical/typographical errors by removing the word "for" from paragraph (ae)(vii), thereby correcting or refining the wording between "and" and "diapers." The new provision will read "manufactures chemicals for agricultural use or, industrial use, textiles, glassware, leather products, industrial machinery, electrical equipment, sanitary pads and diapers."
• The amendment introduces a tax exemption for income of the developer of a hotel or tourism facility whose investment capital is at least US$10m, in the case of a foreigner, or US$5m, in the case of a citizen, who subject to availability, uses at least 70% of locally sourced raw materials and employs at least 70% of its employees who are citizens earning an aggregate wage of at least 70%of the total wage bill.
• The amendment expands the definition of "infrastructure bond" to mean "all bonds, notes or other similar securities used to raise funds for public infrastructure and other social services, if those bonds have a maturity period of at least ten years."

3. Amended bad debts provision under section 24

The Act expands Section 24(2)(b) and (c) to include microfinance deposit-taking institutions and tier-4 microfinance institutions alongside financial institutions.

Under subsection (b), a deduction for a bad debt is allowed if the amount of the debt claim was in respect of money lent in the ordinary course of a business carried on by a financial institution, "microfinance deposit taking institution or tier 4 microfinance institution in the production of income included in gross income."

Under subsection (c), a deduction for a bad debt is allowed if the amount of the debt claim was in respect of a loan granted to any person by a financial "microfinance deposit taking institution or tier 4 microfinance institution for the purpose of farming, forestry, fish farming, bee keeping, animal and poultry husbandry or similar operations."

The amendment extends the meaning of "bad debt" under subsection 24(3)(b) to include microfinance deposit-taking institutions and tier-4 microfinance institutions alongside financial institutions. The subsection will read as follows;

[A] bad debt means in relation to a financial institution, microfinance deposit-taking institution or tier 4 microfinance institution, a debt in respect of which a loss reserve held against presently identified losses or potential losses, and which is therefore not available to meet losses which subsequently materialise, has been made.

The meaning of "debt claim" is also amended to read as follows:

[A] right to receive a repayment of money from another person, including deposits with financial institutions, microfinance deposit-taking institution or tier 4 microfinance institution, accounts receivable, promissory notes, bills of exchange, and bonds.

4. Amended provision on interest under section 25(5)

The amendment replaces subsection 25(5), introduces definitions for "dormant" and amends the definition of "group" and tax earnings before interest, tax, depreciation and amortization (EBITDA).

The amendment defines "dormant" to mean "a person other than an individual that is not doing business and does not have an accounting transaction in a year of income."

"Group" is defined by the amendment to mean persons other than individuals with at least 51% interest of the common underlying ownership and excluding any member of the group that is dormant.

EBITDA is the sum of:

• Gross income, less allowable deductions other than brought-forward losses; also does not include a deduction under subsection (1)
• Depreciation
• Amortization

The amendment in essence ignores dormant entities in a group when applying the interest-capping rules and defines what amounts to a "group" for the purposes of the rules.

5. Amendment to asset classes for farming

The amendment updates Section 34(1) by replacing the reference to "class 4" with "class 3," thereby revising the applicable classification.

6. Amendment to withholding tax on interest paid outside Uganda under section 82(5)

The amendment replaces Section 82(5) to require a resident company to withhold tax on interest paid on debentures if the debentures are issued outside Uganda to raise foreign loans and are widely issued or held by public financial institutions, and the interest is paid outside Uganda.

7. Amendment excluding royalties from digital services tax

The amendment adds subsection 86(7) to exclude income from royalties from the application of Section 86, which imposes digital services tax on every nonresident person deriving income from providing digital services in Uganda to a customer in Uganda.

8. New Section 115A requiring taxpayers to comply with arm's-length principle when accounting for controlled transactions between associates

The amendment provides that if a person has entered into a controlled transaction or a series of controlled transactions, the person shall account for the transaction or account for the series of transactions in a manner that is consistent with the arm's-length principle.

"Controlled transaction" means a transaction between associates.

9. Introduction of monthly rental tax filing for individual

The amendment to Section 124 introduces subsection (1a), allowing individuals who are liable for rental tax to file provisional returns of rental income on a monthly basis.

10. Amendment to withholding tax on commissions that telecommunications service providers pay on airtime distribution and mobile money

The amendment replaces Section 131 to require a person who makes payment for winnings of betting or gaming shall withhold tax on the winnings at the rate prescribed in Part XI of Schedule 4 to the Act.

The amendment defines "winnings" to mean the difference between the pay-out and the staked amount.

The Section does not apply to winnings paid by a person licensed to conduct a national lottery under section 23 of the Lotteries and Gaming Act.

The Section does not apply to winnings derived from land-based casinos licensed under the Lotteries and Gaming Act.

11. Amendment to withholding tax on commission paid by telecommunications

The amendment replaces Section 133 to require telecommunications service providers to withhold tax on commissions paid for telecom, mobile network and mobile money services, at the prescribed rate on the gross payment.

12. Introduction of withholding tax on public entertainers

The amendment introduces Section 135B to require withholding tax on payments made to public entertainers at the prescribed rate on gross earnings.

The amendment defines a "public entertainer" to mean a person who performs in public, or in front of a camera or microphone for entertainment, artistic or similar purposes, including a person who performs in, participates in, or provides entertainment at any event or activity open to the public, and includes stage, radio, television and digital performers.

13. Amendment to provision on withholding tax being a final tax

The amendment updates Section 139 on withholding as a final tax to recognize withholding tax on commissions paid to insurance agents and to resident individuals for telecommunications and mobile money services as final tax obligations under sections 134 and 133, respectively.

14. Amendment to list of listed institutions.

The amendment updates Schedule 2 by adding the Arab Bank for Economic Development in Africa (BADEA) and the Uganda Red Cross Society to the list of listed institutions.

15. Amendment to income tax rates for individuals

The amendment increases the annual income tax-free threshold from 235,000 Ugandan shillings (UGX235k) to UGX335k, thereby reducing the tax burden and exempting a larger portion of low-income earners from income tax. Below is an extract of the comprehensive adjustment to the individual rates:

16. Amendment to withholding tax rates

The amendment revises the withholding tax rates under the income tax Act. Specifically, the amendment:

• Sets a withholding tax rate of 5% on interest paid by a resident company on debentures to nonresident persons under Section 82(5)
• Replaces Part XI to set the withholding tax rate on betting and gaming winnings at 15% under section 131
• Replaces Part XIII to set the withholding tax rate on payment of commission paid by a telecommunications service provider for telecommunication retail services, mobile network services or provision of mobile money services at 10% of the gross amount of the payment
• Introduces Part XVI to set a withholding tax rate of 6% on gross payments made to public entertainers under Section 135B

Value Added Tax (Amendment) Act, 2026

The key Value Added Tax (VAT) reforms proposed include the following.

1. Exclusion of a designated person from VAT withholding (Section 5)

The amendment excludes a designated person from VAT withholding where the designated person pays for taxable supplies and is issued with an e-invoice or e-receipt in accordance with the Tax Procedure Code Act.

2. Increment in the annual VAT registration threshold (Section 7)

The amendment increases the annual VAT registration threshold from UGX150m to UGX300m.

3. Introduction of Input Tax Credit for hotel/tourism developers (Section 28)

A new provision allows for a credit to a taxable person who develops a hotel or tourism facility and invests at least US$10m for a foreigner and US$5m for a citizen, provided that the services or goods below are supplied more than two years before the date of commissioning of the hotel or tourism facility:

1. Civil works
2. Services to conduct a feasibility study, design, construction services
3. Locally produced materials for construction of premises, infrastructure, machinery and equipment or furnishings and fittings not available on the local market

The credit shall apply only to that specific hotel or tourism facility and does not apply to other developments or businesses of the taxable person.

The credit shall arise on the date of commissioning the hotel or tourism facility.

4. Amendment of tax payment terms for mining inputs (Section 32)

The scope for the Minister to make regulations on deferred tax payments has been expanded to include regulations for prescribing payment terms for the mining sector, not just for plant and machinery.

5. Interest on overpayments and late refunds (Section 36)

The threshold below which the Commissioner General pays no interest on delayed refunds has been amended from a fixed amount of UGX50,000 to a percentage of 5% of the total tax refunds claimed. Therefore, no interest is payable if investigations establish that the excess input tax credit claimed exceeds the actual refundable amount by 5% of the total amount of the tax refund claimed.

The shift from a fixed UGX50,000 threshold to 5% of the claimed refund creates a more equitable system. A taxpayer with a large, legitimate refund claim will no longer be penalized with zero interest due to a small, honest error, as the 5% threshold is proportionally much larger.

6. E-receipt/invoice refund lottery threshold (Section 38)

The law has been amended to reduce the eligibility threshold from UGX5m to UGX2m, entitling nontaxable persons who obtain electronic receipts or invoices within 30 consecutive days to a refund of 5% of the tax paid.

By lowering the entry point to UGX2m, the incentive scheme is extended beyond higher-income shoppers to the public. This is designed to create a "consumer army" empowered and motivated to demand e-receipts for everyday purchases, bringing more transactions into the formal economy and tackling the informal sector at its base.

7. Public international organizations (Schedule 2)

The public international organizations list is widened to include Arab Bank for Economic Development in Africa (BADEA).

"Medical Research Council" is replaced with "Medical Research Council or Uganda Virus Research Institute and London School of Hygiene and Tropical Medicine (MRC/UVRI and LSHTM) Uganda Research Unit."

The above entities will be exempt from VAT and entitled to Refund of tax paid under Section 37 of the VAT Act.

8. Exempt supplies (Schedule 3)

The list of exempt supplies has been expanded to include nuclear energy projects. The exemption of nuclear energy projects will promote the development of nuclear energy in Uganda.

Excise Duty (Amendment) Act, 2026

Principal Act: Excise Duty Act, Cap. 336

Amending act: Excise Duty (Amendment) Act, 2026

New excise duty rates

The Act amends Schedule 2 to the Excise Duty Act as follows:

Lotteries and Gaming (Amendment) Act, Act, 2026

Lotteries and Gaming Act, Cap. 334

Key amendments:

The amendment substitutes Schedule 4 of the Principal Act (Lotteries and Gaming Act, Cap. 334) with a single uniform tax rate for both betting and gaming activities. The new rate of tax is 30% of the total amount of money staked less the payouts for the period of filing returns for a betting or gaming activity as summarized below.

Definition clarified: The amendment introduces a definition for "payouts" in the new Schedule 4, meaning the total amount of the money or fair market value of nonmonetary prize paid by an operator to a player as a result of a winning bet or successful gaming outcome, including the amount staked, wagered or contributed by the player.

Impact: Operators of betting activities will see a 10% increase in their effective tax base (stakes less payouts), aligning them with the gaming tax rate.

Tax Procedures Code (Amendment) Act, 2026

Tax Procedures Code Amendment Act, Cap. 343

Key amendments:

This Act amends the Tax Procedures Code Amendment Act, Cap. 343; the key changes relate to penalties and tax waivers.

1. Reduction of penal tax for possession of goods without tax stamps

Section amended: Section 21(3) of the Principal Act

This represents a significant reduction in the fixed minimum penalty for stamp offenses, from UGX50m (2,500 pts) to UGX2m (100 pts). The Ministry of Finance Planning and Economic Development (MoFPED) stated that the current penalty, although deterrent, has been found to be difficult to pay, especially for businesses with small transactions. In the current case, the penalty may exceed the working capital of the affected businesses.

2. Reduction of penal tax for electronic fiscal device (EFD) and e-invoicing offenses

Section Amended: Section 93(1) and (2) of the Principal Act

Impact: While the "double the tax due" component could be severe for large taxpayers, the fixed minimum tax penalty is drastically reduced to UGX200k. The penal tax is now expressed as the higher of the two amounts.

3. New tax provisions on tax waiver

The Bill introduces Sections 47C and 47D as outlined below.

47C. Waiver of tax outstanding as of 30 June 2016

Any tax including penal tax and interest owed by a taxpayer as of 30 June 2016 and is outstanding as at the commencement of this Act, is waived.

47D. Waiver of interest and penalty on payment of principal tax

Any interest and penalty outstanding as of 30 June 2025, shall be waived where the taxpayer pays the principal tax by 30 June 2027.

Action items for taxpayers and operators

• All taxpayers with old debts should review their tax records for any outstanding liabilities from June 2016 or earlier. No action is required for automatic waiver under section 47C, but the taxpayer should confirm with the Uganda Revenue Authority (URA) that the waiver has been applied.
• Taxpayers with outstanding interest/penalties should identify any principal tax outstanding as of 30 June 2025, and plan to pay the principal amount by 30 June 2027 to benefit from the full waiver of interest and penalties under section 47D.
• Businesses subject to tax stamps and EFD rules should take note of the reduced (but still applicable) penal tax thresholds. Compliance remains mandatory, though financial risk of the fixed minimum penalty has been reduced.

Stamp Duty (Amendment) Act, 2026

Principal Act: Stamp Duty Act, Cap. 339

1. Inclusion that monthly returns by persons carrying on financial services (Section 7A)

The Stamp Duty Act is amended to include a new section 7A that requires a person carrying on the business of financial services to file monthly returns of all sums received in respect of stamp duty paid on the instruments.

Additionally, the section provides that on the basis of the monthly returns filed, the Commissioner General shall ascertain that the person has paid the stamp duty.

Failure to file the returns above attracts simple interest of 2% of the duty payable for every month during which the failure continues.

Section 7A (4) lists business activities that fall within the term "financial services":

1. Granting, negotiating and dealing with loans, credit, credit guarantees and any security for money, including management of loans, credit or credit guarantees by the grantor
2. Transactions concerning deposit and current accounts, payments, transfers, debts, checks and negotiable instruments, other than debt collection and factoring
3. Transactions relating to shares, stocks, bonds and other     securities, other than custody services
4. Management of investment funds, not including provision of credit facilities under a hire purchase or finance lease agreement
5. Transactions of money lenders under the Tier 4 Microfinance Institutions and Money Lenders Act

The implication is that businesses providing financial services are now legally required to submit monthly reports detailing all stamp duty collected on relevant transactions.

2. Books open to inspection (section 62)

The amendment requires a person, who is required to permit inspection of his documents or record, to retain the document or record for a period of at least five years from the date the document or record was generated.

This will enable the URA to follow audit trails with greater ease. The provision could improve tax enforcement and enable the URA to verify compliance over a longer period.

3. New stamp duty rates

The Act amends Schedule 2 to the Stamp Duty Act by introducing stamp duty on registration or transfer of motorcycle, tricycle or quadricycle and any other motor vehicles as follows:

External Trade (Amendment) Act, 2026

Principal Act: External Trade Act, Cap. 69

Key highlights of key External Trade (Amendment) Act reforms include the following.

1. Exemption of imports of medicines from infrastructure levy (section 3A)

The amendment expands the imports exempted from infrastructure levy by including imports of vaccines, medicines, medical supplies, pesticides, rodenticides, acaricides and insecticides.

2. Exemption of imports of medicines from import declaration fee (section 3B)

The amendment expands the imports exempted from import declaration fee by including imports of vaccines, medicines, medical supplies, pesticides, rodenticides, acaricides and insecticides.

3. Introduction of environmental levy on worn clothes and other worn articles (section 3C)

The amendment introduces a new provision that there shall be charged an environmental levy on worn clothing and other worn articles at the rate of 30% of the cost, insurance and freight (CIF) value.