The Ugandan government will offer a three-year income tax holiday for new, Ugandan-owned startup businesses as part of its 2025-26 national budget.
The revelation was made by Finance Minister Matia Kasaija on Thursday, 12 with an aim to stimulate entrepreneurship and formal business growth. The policy applies to startups established after July 1, 2025.
Kasaija presented the Shs72.4 trillion ($19.4 billion) budget to Parliament, noting that the new tax measures are expected to generate an additional 538.6 billion shillings ($144 million) in domestic revenue.
“Additional revenue of Shs538.6 billion will be raised from new tax policy measures that were approved by Parliament,” Kasaija said. “In addition to raising revenue, the measures will support the growth of businesses and the economy.”
The income tax holiday is designed to reduce initial barriers for early-stage businesses, encouraging innovation, job creation and the formalization of enterprises in a sector often dominated by informal operations. The incentive specifically targets companies entirely owned by Ugandan citizens.
Beyond the tax holiday, the government also eliminated capital gains tax for individuals transferring assets to companies they own and control. This move is intended to encourage the transition to more structured corporate entities, Kasaija said.
Additionally, stamp duty on mortgages and agreements has been scrapped, which is expected to lower the cost of accessing credit for both individuals and businesses. Taxpayers with outstanding liabilities can also benefit from an extended waiver on penalties and interest if they clear their principal tax by June 30, 2026.
“This waiver is intended to provide relief to businesses and individuals to enable them to settle outstanding tax liabilities and resume normal operations,” Kasaija said.
On the compliance front, penalties under the Electronic Fiscal Receipting and Invoicing System (EFRIS) have been revised. Previously, non-compliance incurred a fixed fine of Shs6 million per invoice. This has been replaced with a penalty equal to twice the tax owed.
“The system promotes transparency and creates an even-playing field,” Kasaija urged, encouraging digital invoicing.
Other tax adjustments include an increase in excise duty on cigarettes from Shs55,000 to Shs65,000 per 1,000 sticks for soft cap brands, with higher rates for products from outside the East African Community. Excise duty on beer made with locally malted barley has been removed, while tax on beer brewed with 75% local raw materials has been increased to ensure tax parity.
Trade-related taxes have also been modified. A 1% import declaration fee will now apply to taxable goods under the East African Community Common External Tariff. A new export levy of $10 per metric ton has been imposed on wheat bran, cotton cake, and maize bran to promote domestic value addition.
In the textile sector, import duties on fabrics will decrease from $3 to $2 per kilogram, and on garments from $3.5 to $2.5 per kilogram or 35%, whichever is higher.
“These changes reflect our continued commitment to building a fairer and more predictable tax system that supports enterprise, encourages compliance, and funds national priorities,” Kasaija said.
To finance the 2025-26 budget, the government plans to raise Shs33.94 trillion from tax revenue, Shs3.28 trillion from non-tax revenue, Shs11.38 trillion from domestic borrowing, and Shs13.41 trillion from external sources.
