Domestic Investors Get 3-Year Tax Holiday in Uganda
In a landmark move to stimulate entrepreneurship and empower local businesses, the Ugandan government has introduced a three-year income tax holiday for domestic investors and start-up enterprises. The policy, outlined in the Income Tax (Amendment) Bill 2025, is set to take effect on July 1, 2025, marking the beginning of the next financial year.
What Does the Tax Holiday Mean?
Under the new amendment, Ugandan businesses with an investment capital not exceeding UGX 500 million (approximately USD 130,000) will enjoy a complete exemption from income tax for a period of three years. This move is expected to ease the financial burden on young enterprises, allowing them to focus on growth, job creation, and sustainability before they begin remitting income taxes to the government.
Who Qualifies?
According to State Minister of Finance (General Duties), Henry Musasizi, the tax holiday will apply to all registered investments with a capital threshold below UGX 500 million. Both sole proprietors and small registered companies can benefit—as long as they meet the capital requirement.
“The intention is to help businesses to start and grow. We don’t want to see someone who has just started a business being approached by the Uganda Revenue Authority asking for taxes,” the minister said while tabling the Bill.
This is a departure from the existing tax framework, where start-ups are generally subject to a 30% corporate income tax rate, unless they operate in specified strategic sectors or industrial parks.
Not Just for Ugandans
In line with the Investment Code Act (2019), the definition of a domestic investor has been broadened to include citizens of East African Community (EAC) partner states. This regional inclusivity aims to promote cross-border investment and cooperation within the EAC bloc, further stimulating local economic development.
A Big Win for Start-Ups and SMEs
This tax relief is a significant opportunity for Uganda’s vibrant start-up ecosystem and small business sector. It will not only reduce entry barriers but also provide much-needed breathing space for entrepreneurs to test and refine their business models without immediate pressure from the taxman.
However, eligibility will depend on proper registration and compliance with regulatory guidelines, including investment capital documentation. As with all tax incentives, it’s essential for businesses to understand the fine print and ensure they remain compliant throughout the holiday period to avoid penalties later on.
Need Help Navigating Tax Matters?
Tax laws in Uganda are evolving—and staying compliant while optimizing your tax obligations can be challenging. Whether it’s income tax, rental tax, corporate tax, or taking advantage of incentives like the 3-year holiday, Mathonia Group is here to guide you every step of the way.
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Let us simplify your tax journey with clarity, compliance, and confidence.