Understanding Rental Income Tax in Uganda

If you’re a landlord or property owner in Uganda, understanding how rental income is taxed is crucial for staying compliant and maximizing your income. The Uganda Revenue Authority (URA) has outlined a straightforward process to help individuals and organizations navigate rental tax obligations. Here’s a simplified overview.

What is Rental Income?

Rental income refers to the total amount of money earned by a person from leasing out immovable property—such as land or buildings—in Uganda. The income is taxed under Section 5 of the Income Tax Act and is treated separately from other sources of income.

Who is Subject to Rental Income Tax?

• Individuals – Private landlords or landladies

• Companies – Including real estate businesses

• Government institutions – Such as district administrations

• Organizations and Institutions – Like universities or NGOs

• Trustees and Retirement Funds

How Rental Income is Taxed

For Individuals & Partners

1. Calculate Total Annual Gross Rent (R)

2. Deduct 20% as a presumed cost of expenses
   → 80% of R is the net rental income

3. Deduct interest on any mortgage related to the property

4. Deduct a tax-free threshold of UGX 2,820,000

5. Apply a 20% income tax rate to the remaining amount

📌 Note: If your gross or net rent does not exceed UGX 2,820,000 annually, you owe no rental tax.

Example for Individuals:

If you earn UGX 6,000,000 annually from rent and have a mortgage interest of UGX 1,500,000:

• 20% cost = UGX 1,200,000

• Net rent = UGX 4,800,000

• Deduct mortgage = UGX 3,300,000

• Deduct threshold = UGX 480,000

• Tax payable = 20% of 480,000 = UGX 96,000

For Companies, Trustees & Retirement Funds

1. Calculate total gross rent

2. Deduct actual expenses incurred in earning that rent

3. Apply a 30% tax on the resulting net income

Example for Companies:

If a company earns UGX 15 million in rent and incurs UGX 3 million in expenses:

• Tax = 30% × (15,000,000 – 3,000,000) = UGX 3,600,000

Taxpayer Obligations

To stay compliant, rental income taxpayers must:

• File a rental income tax return annually

• Declare all sources of rental income

• Include supporting documentation, such as tenancy agreements or rent receipts

• Submit returns within six months after the end of the financial year (which runs from July 1 to June 30)

• Pay the assessed tax on time

Can You Claim a Tax Credit?

Yes. If you have made advance or provisional tax payments, you’re eligible for a tax credit, but this can only be applied to your rental income tax liability.

Final Thoughts

Failing to understand or comply with rental income tax laws could lead to penalties or unnecessary costs. Whether you’re an individual landlord, a business entity, or part of a partnership, following the URA guidelines is essential for financial health and legal compliance.

Need Help Navigating Rental Tax?

Tax regulations can be confusing, but you don’t have to go it alone. For expert guidance and support with your rental tax planning, filing, or compliance, reach out to our team at Mathonia Group.

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

Let’s make your rental tax compliance hassle-free!