Corporate Tax Credits and Incentives in Uganda: What Businesses Need to Know in 2025

As Uganda continues to position itself as an investment-friendly destination, the government has implemented a robust framework of corporate tax credits and incentives designed to reduce the tax burden on businesses, promote economic development, and encourage strategic sectors such as manufacturing, exports, and technology.

Whether you’re a local entrepreneur, a multinational investor, or an operator in a free zone or industrial park, understanding these tax reliefs can significantly impact your financial planning and growth strategy.

Here’s a breakdown of Uganda’s key corporate tax credits and incentives as of February 2025:

1. Foreign Tax Credit

Resident companies in Uganda are entitled to a foreign tax credit for any foreign income tax paid on foreign-sourced income that is also included in their Ugandan gross income. However, the credit is capped at Uganda’s standard corporate income tax rate of 30%. This ensures double taxation is avoided, while also aligning with Uganda’s domestic tax regime.

2. 10-Year Tax Holiday for Exporters

To boost Uganda’s export sector, a 10-year income tax holiday is granted to businesses that export at least 80% of their finished goods or agricultural produce. This incentive aims to drive export-led growth and increase Uganda’s presence in regional and global markets. Eligibility is subject to conditions defined under the law.

3. 100% Tax Deductibility for Key Expenditures

Ugandan tax law allows a full 100% deduction in the year the expenditure is incurred for:

• Scientific research

• Training of staff

• Mineral exploration

This incentive encourages innovation, human capital development, and growth in the extractive industries.

4. Incentives for Importation of Plant and Machinery

Investors who import plant and machinery for use in business operations benefit from:

• Exemption from customs duty

• VAT deferral on importation, which can later be waived upon meeting specified criteria

This is particularly valuable for manufacturers and industrial investors looking to reduce setup costs.

5. Employment Incentives for Inclusion

To promote employment equity and social inclusion, employers receive a 2% deduction from their income tax payable if they demonstrate that at least 5% of their full-time staff are persons with disabilities. Proof must be submitted to the Uganda Revenue Authority (URA).

6. Special Exemptions for Certain Bodies and Sectors

Uganda’s tax regime also offers targeted exemptions to encourage development in key areas:

• Agro-processing and exportation of consumer and capital goods (with conditions)

• Savings and credit co-operative societies (exempt up to June 30, 2027)

• Professional regulatory bodies, e.g. Uganda Law Society, ICPAU

• Employment income of prosecutors in the Directorate of Public Prosecution

• Bujagali Hydro Power Project income (until June 30, 2024)

7. Industrial Parks and Free Zones: A Strategic Advantage

Uganda provides a generous 10-year tax holiday to developers and operators in industrial parks and free zones. Key features include:

• Minimum capital investment of:

  • USD 50 million for foreign investors

  • USD 10 million for Ugandan citizens

Additionally, operators (within or outside the industrial parks) with capital investment of:

• USD 10 million for foreigners

• USD 300,000 for local investors

• USD 150,000 for upcountry local investors

are also eligible for tax exemptions, provided they engage in qualified activities, including:

• Agro-processing

• Manufacturing of medical supplies, electronics, and building materials

• Technical/vocational training

• Logistics, IT, commercial farming

• Textile and chemical manufacturing

• Publishing of instructional materials

To qualify, companies must:

• Source 75% of raw materials locally (where available)

• Employ at least 75% Ugandan citizens, who collectively earn 75% of the total wage bill

8. New Exemptions Under the 2024 Income Tax Amendment Act

Recent updates to Uganda’s tax law have introduced additional exemptions, including:

• Income from private equity or venture capital funds regulated under the Capital Markets Authority Act

• Income from disposal of government securities in the secondary market

• Income earned by strategic investors in electric vehicle manufacturing and components

• Income earned by operators of specialized hospital facilities

These incentives reflect Uganda’s focus on innovation, infrastructure, and technology-led growth.

Final Thoughts

Uganda’s tax framework offers a wide array of opportunities for businesses to reduce their tax liability, increase profitability, and contribute to national development. However, taking full advantage of these incentives requires proper structuring, documentation, and compliance.

Need Expert Help With Tax Matters?

Whether you’re looking to leverage tax holidays, claim deductions, or understand how new tax amendments apply to your business—Mathonia Associates is here to help. Our team of experts provides tailored advice and hands-on support for companies of all sizes and sectors.

📧 Email: info@mathoniagroup.com
📞 Tel: +256 (0) 393 194 445

Let us help you unlock the full potential of your tax incentives while staying fully compliant. Your business deserves the best guidance.