By Ankit Jangla, Bruno Kalibbala and Bruno Edwin Amanya
The Ugandan tax landscape is on the brink of a significant transformation. With the tabling of the Income Tax (Amendment) Bill, 2026, the government has signalled a clear intent to widen the tax base, leverage digital transparency, and align domestic policy with global standards. For businesses and individuals alike, these changes—slated to take effect on 1st July 2026—are not merely administrative adjustments; they represent a fundamental shift in how wealth is captured and reported.
As we move toward this new fiscal year, it is imperative for stakeholders to look beyond the headlines and understand the granular impact of these proposals. Below, we break down the most critical shifts and what they mean for your financial strategy.
The Digital Clampdown: Software and Service Taxation
One of the most profound changes lies in the reclassification of software payments. For years, the digital economy has operated in a somewhat fluid tax environment. The 2026 Bill seeks to end this ambiguity by expanding the definition of a royalty to explicitly include payments for the use of, or the right to use, software.
Currently, many imported digital services attract a 5% tax under Section 86. Under the new proposal, these payments will be treated as royalties, triggering a 15% Withholding Tax (WHT). This effectively triples the tax burden on businesses that rely heavily on imported licensed software. Furthermore, the VAT (Amendment) Bill complements this by denying input tax credits on imported software, creating a dual-layered cost increase.
Stakeholder Action: Businesses must urgently audit their software licensing agreements. You need to determine if your providers are local or foreign and prepare for a significant increase in the cost of digital tools.
Bringing Personal Wealth into the Net
The era of tax-free personal land sales is drawing to a close. Historically, gains from the disposal of non-business assets—such as a personal plot of land or a family home—were generally exempt from income tax. The 2026 Bill proposes to include income derived from the disposal of non-business assets within the definition of taxable “property income”.
To ensure compliance, the government is introducing a 6% withholding tax to be paid by the purchaser at the point of sale. While intended to improve revenue collection, this creates a potential conflict with existing exemptions in Section 21(1)(j), which may lead to legal disputes unless further clarified.
Stakeholder Action: Sellers should factor this 6% “tax at source” into their valuations. Buyers, on the other hand, must recognize their new legal obligation to withhold and remit this tax to the Uganda Revenue Authority (URA), or risk being held liable themselves.
A Graduated Relief for Individual Earners
In a move to counter the effects of inflation and provide relief to low-income earners, the Bill proposes a revised Pay As You Earn (PAYE) structure. The tax-free threshold is set to increase to UGX 4,020,000 per year (UGX 335,000 per month).
While this removes many low-income earners from the tax net, the progressive structure remains steep for high earners. For those earning above UGX 120,000,000 per year (UGX 10,000,000 per month), an additional 10% tax is charged on the excess, maintaining a heavy contribution from the top tier of the workforce.
Related
Looking Over the Fence: Kenya's transparent judicial appointments and Uganda's troubling secrecy| Annual Chargeable Income | Tax Rate |
| Below UGX 4,020,000 | Nil |
| UGX 4,020,001 – 4,920,000 | 20% of the amount exceeding 4,020,000 |
| UGX 4,920,001 – 5,820,000 | UGX 180,000 + 25% of the amount exceeding 4,920,000 |
| Above UGX 120,000,000 | UGX 405,000 + 30% of excess over 5.8M + 10% of excess over 120M |
The “Alternative Minimum Tax”: A Warning to Loss-Makers
The government is tightening the screws on entities that report consistent losses. A new Alternative Minimum Tax (AMT) of 0.5% will be introduced on the gross income of taxpayers who have carried forward assessed losses for more than seven years. This is a clear signal that the URA will no longer allow perpetual loss-making to serve as a permanent shield against contributing to the national treasury.
Stakeholder Action: Boards and CFOs of long-term “loss-making” entities should re-evaluate their tax positions. The cost of doing business will soon include a tax on your top-line revenue, regardless of your bottom-line results.
Sectoral Incentives and Fairness Measures
Despite the focus on revenue, the Bill includes strategic olive branches:
- Tourism: To stimulate the hospitality sector, developers investing USD 10 Million (Foreign) or USD 5 Million (East African) may qualify for significant income tax exemptions.
- Microfinance: Tier 4 institutions and microfinance deposit-taking institutions will finally be allowed to claim deductions for bad debts, bringing them in line with larger commercial banks and promoting fairness in the financial sector.
- Electricity: The Bujagali hydro power project exemption is extended to 2032, a critical move to keep consumer electricity tariffs from skyrocketing.
The Road Ahead: Compliance is Your Only Strategy
The 2026 amendments reflect a “Global Income” approach. From taxing foreign-sourced income at domestic rates to harmonizing betting and gaming taxes at 30%, the message is clear: the URA is building a more integrated, digital, and unavoidable tax net.
For the taxpayer, the most significant relief offered is the proposed waiver of arrears for taxes, interest, and penalties outstanding as of 30th June 2016. This is a “clean slate” opportunity to settle your ledgers before the more stringent 2026 regime takes hold.
Tax is no longer just a year-end compliance task; it is a year-round strategic risk. As these Bills move through Parliament, now is the time to engage with your tax advisors to model the impact on your cash flows and investment decisions.
This article is an extract from the comprehensive Grant Thornton: Proposed Uganda Tax Amendments 2026commentary.
This article is co-authored by Ankit Jangla (Director – Tax), Bruno Kalibbala (Manager – Legal and Tax), and Bruno Edwin Amanya (Senior Associate). To access the full 2026 analysis or to consult on how these excise shifts will impact your business, contact Grant Thornton Uganda today at +256 200 807 600 or info@ug.gt.com. Schedule a comprehensive tax health check now to ensure your business remains resilient and 2026-ready.
