What are the main changes in the Income Tax (Amendment) Bill 2026?

The Bill introduces revised individual PAYE bands (with a higher tax-free threshold), a new 6% withholding tax on payments to entertainers, a proposed 5% withholding on foreign-debt interest, tighter capital gains reporting on property disposals and clarifications on digital-services income. These changes are enacted through amendments to the Income Tax Act (Cap. 340) and take effect from 1 July 2026.

When do the 2026 tax amendments take effect?

The primary effective date for all FY 2026/27 tax measures, including the Income Tax amendments, VAT schedule revisions and PAYE band changes, is 1 July 2026. Certain administrative guidance from URA may follow in July–August 2026, but taxpayers should apply the new rules from the commencement date. Employers must process the July 2026 payroll under the revised PAYE bands.

How will the PAYE tax-free threshold and rates change in 2026?

The monthly tax-free threshold increases from UGX 235,000 to UGX 335,000 (UGX 2.82 million to UGX 4.02 million annually). The 10% band applies to income between UGX 335,001 and UGX 410,000 monthly, the 20% band applies up to UGX 10,000,000, and income above that level is taxed at 30%. Employers should confirm the final enacted figures against URA guidance.

Who will be affected by the new 6% withholding on payments to entertainers?

Any person or entity making payments for entertainment services must withhold 6% at source. This includes event promoters, venue operators, broadcasters, advertising agencies and corporate clients engaging entertainers. The entertainers themselves, whether resident or non-resident, are directly affected. For non-residents, the withholding typically constitutes a final tax.

Can employers reduce PAYE liability by restructuring employee benefits?

Benefits in kind remain taxable under existing URA rules. Employers should not reclassify cash remuneration as non-taxable benefits without obtaining a formal legal opinion and confirming compliance with URA’s benefit-valuation guidelines. Aggressive restructuring without proper basis may attract penalties and back-assessments.

Do double taxation treaties affect the new withholding obligations?

Yes. Uganda’s double taxation treaties may reduce or eliminate withholding on interest, dividends and entertainment payments where the recipient is a tax resident of a treaty country. Payers must obtain the appropriate treaty-relief documentation (including a certificate of tax residence from the payee’s home jurisdiction) before applying a reduced rate. Where doubt exists, payers should withhold at the full domestic rate and assist the payee in claiming a refund through URA.

What penalties apply for failing to remit new withholding taxes?

URA’s standard penalty regime applies. Late remittance of withheld taxes attracts a penalty of the higher of UGX 50 per currency point or 2% of the tax due per month (or part thereof) of delay, plus interest. Given that the entertainer and foreign-debt withholdings are newly introduced categories, URA enforcement is expected to be rigorous from the outset. Employers and payers should build the new remittance deadlines into their compliance calendars immediately.

Uganda Tax Changes 2026 Practical Guide

Uganda’s fiscal landscape is shifting significantly from 1 July 2026, and this Uganda tax changes 2026 practical guide provides the actionable compliance roadmap that finance directors, in-house tax managers, payroll providers and SMEs need right now. The Income Tax (Amendment) Bill 2026, accompanying VAT amendments and a suite of FY 2026/27 budget proposals introduce revised PAYE thresholds, a new withholding tax on payments to entertainers, expanded withholding obligations on foreign-debt interest and material changes to capital gains treatment. With Parliament having advanced these measures through the legislative process for implementation at the start of the new financial year, the window for operational preparation is narrow.

This guide breaks down each amendment, provides worked payroll examples, and offers a 60-day employer action plan to ensure your organisation is compliant before the first July payroll run.

Uganda Tax Changes 2026, Key Changes at a Glance

Before diving into the detail, the following summary captures the headline amendments that every Ugandan taxpayer and employer must understand. Use this as a quick reference and return to the relevant sections below for full analysis.

PAYE threshold increase. The monthly tax-free threshold rises from UGX 235,000 to UGX 335,000 (annual equivalent from UGX 2.82 million to UGX 4.02 million), providing relief for lower-income earners and requiring immediate payroll reconfiguration.
New 6% withholding tax on entertainers. Payments to resident entertainers are now subject to a 6% withholding at source, creating new obligations for event promoters, venues, broadcasters and media companies.
5% withholding on foreign-debt interest. Interest payments on certain categories of foreign debt will attract a proposed 5% withholding tax, affecting banks, corporates with cross-border financing and branches of foreign companies.
Capital gains and property sale adjustments. Changes to the taxation of gains on property disposals tighten compliance requirements for real estate transactions completed from 1 July 2026.
VAT base and exemption revisions. Selected VAT exemptions, including treatment of petroleum products, educational materials and health supplies, are amended, requiring vendors to update tax codes and invoicing templates.

Key Dates, Legislative Timeline

Date	Event	Action Required
April 2026	Income Tax (Amendment) Bill 2026 and VAT Amendment Bill 2026 tabled in Parliament	Begin impact assessment; brief tax and finance teams
May–June 2026	Parliamentary committee review, readings and passage; Presidential assent	Monitor final enacted text for any late-stage changes; update internal memos
1 July 2026	FY 2026/27 effective date, all key amendments operative	Payroll systems live; new withholding rates applied; VAT codes updated
July–August 2026	URA expected to issue administrative guidance notes and updated forms	Cross-check payroll and withholding configurations against URA guidance
15 August 2026	First monthly PAYE and withholding remittance under new rules (for July earnings)	Verify first remittance calculations; retain audit trail of parallel-run comparisons

Background and Legislative Context

Uganda’s annual budget cycle traditionally introduces tax amendments through Finance Bills and stand-alone amendment bills tabled alongside the budget speech. For FY 2026/27, the Government has pursued several reforms through the Income Tax (Amendment) Bill 2026 and a companion VAT Amendment Bill, both introduced in Parliament in April 2026. These bills form part of the broader fiscal strategy outlined in the National Budget Framework Paper and are designed to broaden the tax base, enhance revenue mobilisation and provide targeted relief for low-income earners.

The Income Tax (Amendment) Bill 2026 amends key provisions of the Income Tax Act (Cap. 340), including the individual tax bands, withholding tax schedules and the treatment of specific income categories. The VAT Amendment Bill revises the Second and Third Schedules of the Value Added Tax Act (Cap. 349), adjusting the list of exempt and zero-rated supplies. Both bills were advanced through Parliament’s Finance Committee and are expected to receive Presidential assent ahead of the 1 July 2026 commencement date, consistent with Uganda’s established legislative timetable for tax measures.

Industry observers expect URA to issue implementation guidance in July–August 2026, as it has done in previous fiscal years. Until that guidance is published, businesses should treat the enacted bill text as the primary compliance reference and apply a conservative interpretation where any ambiguity exists.

What Changed Compared With FY 2025/26 Rules

Individual PAYE. The tax-free monthly threshold was UGX 235,000, it now rises to UGX 335,000. Upper band thresholds are also adjusted upward.
Withholding tax scope. Entertainers were previously outside the withholding net for resident payments; the new 6% rate is a first-time imposition. Foreign-debt interest withholding at 5% is an expansion of existing rules.
Capital gains. Property disposals are subject to tighter reporting and adjusted cost-base rules, replacing the previous more generous treatment.
VAT exemptions. Certain petroleum products and educational materials previously exempt may see revised treatment, vendors must verify each supply line against the updated schedules.

Income Tax Changes, Practical Impact for Businesses

The Income Tax (Amendment) Bill 2026 contains amendments that affect virtually every category of taxpayer in Uganda. This section provides a line-by-line summary of the material changes, explains their practical effect and identifies what businesses must do to comply. The Bill amends provisions relating to withholding taxes, capital gains, individual tax bands and sector-specific exemptions.

For corporate taxpayers, the standard corporate income tax rate remains at 30 per cent. However, the Uganda tax changes 2026 introduce expanded withholding obligations that alter cash-flow dynamics and compliance workloads. Companies making payments in newly covered categories must now withhold, remit and report in accordance with the amended schedules.

On individual taxation, the revised PAYE bands (discussed in detail in the payroll section below) reduce the effective tax rate for employees earning below UGX 4.02 million annually. For employers, this means recalculating net pay and adjusting payroll systems before the July pay run.

The Bill also introduces clarifications on the taxability of digital services income, aligning Uganda’s approach with regional trends. Companies deriving income from digital platforms or services consumed in Uganda should review whether their activities fall within the expanded definition of Ugandan-source income and plan for tax compliance accordingly.

Withholding Tax Changes, Foreign Debt, Interest and Dividends

One of the most significant corporate-facing amendments is the proposed 5% withholding tax on interest payments on certain foreign debt. This measure targets interest paid by Ugandan-resident companies and branches to non-resident lenders. The practical impact is substantial for companies with cross-border financing arrangements.

What businesses must do:

Review all existing loan agreements with foreign lenders to identify payments that will be subject to the new withholding.
Assess whether Uganda’s double taxation treaties with the lender’s jurisdiction provide for a reduced rate or exemption. Uganda has treaties with several countries, the applicable treaty rate may override the domestic 5% rate where proper documentation is filed.
Update accounts-payable systems to apply withholding on the relevant interest payments from 1 July 2026.
Ensure withholding tax certificates are issued to non-resident payees within the timeframe prescribed by URA.
Budget for the cash-flow impact: the withholding must be remitted to URA by the 15th of the month following the payment.

For dividend withholding, the existing 15% rate on dividends paid to non-residents remains in place. However, taxpayers should confirm whether any amendments to the eligible exemptions (such as inter-company dividends within qualifying holding structures) have been enacted in the final bill text.

Capital Gains and Property Sale Tax Proposals

The Bill tightens the treatment of capital gains realised on the disposal of property in Uganda. Under the revised provisions, the cost-base computation rules are adjusted, and reporting obligations at the time of sale are enhanced. Vendors disposing of commercial or residential property from 1 July 2026 should:

Obtain a professional valuation of the property as at 1 July 2026 to establish a reliable cost base under the transitional provisions.
Ensure the buyer withholds any applicable tax at source where required by the amended withholding schedule.
File the capital gains return within the prescribed period, early indications suggest URA will enforce strict timelines for property-related returns in FY 2026/27.
Retain all documentation relating to acquisition cost, improvement expenditure and valuation reports for at least five years.

Uganda VAT Amendments 2026, What Vendors Need to Update

The VAT Amendment Bill 2026 revises the Second Schedule (exempt supplies) and Third Schedule (zero-rated supplies) of the VAT Act. These changes alter the VAT treatment of several supply categories and require all VAT-registered traders to review their invoicing, accounting and filing processes before 1 July 2026.

The key areas of change include the treatment of petroleum and fuel products, educational materials, health-related supplies and selected agricultural inputs. Where a supply previously classified as exempt is reclassified as taxable (or vice versa), the vendor’s input tax recovery position changes accordingly. This means that some businesses will need to adjust their input tax claims and potentially repay previously claimed input tax on supplies that are now exempt.

VAT-registered businesses supplying digital services to consumers in Uganda should also verify whether the expanded digital-services provisions affect their registration and filing obligations. The likely practical effect will be increased compliance requirements for foreign digital-services providers with Ugandan customers.

Exemptions and Zero-Rating, Practical Checklist

Finance teams and VAT compliance officers should work through the following checklist before 1 July 2026:

Map every supply line to the updated schedules. Compare the current VAT treatment of each product or service against the amended Second and Third Schedules.
Update tax codes in accounting software. Ensure ERP and invoicing systems reflect any reclassifications, taxable to exempt, exempt to taxable, or standard-rated to zero-rated.
Recalculate input tax apportionment. If the mix of taxable and exempt supplies changes, the input tax recovery percentage must be recalculated.
Revise invoice templates. Ensure all tax invoices issued from 1 July 2026 display the correct VAT treatment and rate.
Notify customers and procurement teams. Where the VAT treatment of a supply changes, downstream customers need to be informed to avoid pricing disputes.
File transitional adjustments. Where input tax has been claimed on supplies that become exempt, prepare the adjustment in the July 2026 VAT return.

PAYE Changes Uganda 2026, Step-by-Step Employer Checklist

The PAYE changes Uganda 2026 represent the amendment with the most immediate operational impact for employers and payroll providers. The revised individual tax bands increase the tax-free monthly threshold from UGX 235,000 to UGX 335,000, with consequential adjustments to the upper bands. Every employer running payroll for employees in Uganda must update their systems before processing July 2026 salaries.

The revised monthly PAYE bands, based on the proposals reported by leading tax advisory firms, are as follows (employers should confirm final enacted figures against URA guidance when published):

Monthly Chargeable Income (UGX)	PAYE Rate
0 – 335,000	0% (tax-free)
335,001 – 410,000	10%
410,001 – 10,000,000	20%
Above 10,000,000	30%

Note: These figures are based on the proposals as reported. Employers should cross-check against the final enacted text and any URA administrative guidance issued in July–August 2026.

Employer obligations under the Uganda employment law changes 2026 interact directly with these payroll adjustments. Payroll providers should coordinate with HR teams to ensure that employment law changes (such as any revised statutory deduction frameworks) are implemented in parallel.

Sample PAYE Calculations, Before and After 1 July 2026

The following worked examples illustrate the practical impact for two common salary levels. These calculations use gross monthly salary and apply the new bands.

Example 1: Employee earning UGX 800,000 per month

Band (UGX)	Taxable Amount (UGX)	Rate	Tax Due (UGX)
0 – 335,000	335,000	0%	0
335,001 – 410,000	75,000	10%	7,500
410,001 – 800,000	390,000	20%	78,000
Total PAYE			85,500

Under the previous bands (tax-free threshold of UGX 235,000), the same employee would have paid approximately UGX 105,500 in PAYE, a monthly saving of around UGX 20,000 under the new rules.

Example 2: Employee earning UGX 5,000,000 per month

Band (UGX)	Taxable Amount (UGX)	Rate	Tax Due (UGX)
0 – 335,000	335,000	0%	0
335,001 – 410,000	75,000	10%	7,500
410,001 – 5,000,000	4,590,000	20%	918,000
Total PAYE			925,500

Employers are encouraged to validate calculations using the URA PAYE calculator or equivalent payroll tools. Running a parallel payroll for June (old bands) and July (new bands) is strongly recommended as an audit control.

Withholding Tax on Entertainers, Contractors and Non-Residents

The introduction of a 6% withholding tax on payments to entertainers in Uganda is a notable addition to the withholding tax regime. This measure targets payments made to individuals and entities providing entertainment services, including musicians, actors, comedians, DJs, event MCs and similar performers.

Who must withhold: Any person making a payment for entertainment services is required to withhold 6% of the gross payment at source. This captures event promoters, venue operators, broadcasting companies, advertising agencies and corporate entities engaging entertainers for private functions.

Withholding vs final tax: For resident entertainers, the 6% withholding is creditable against the entertainer’s annual income tax liability. For non-resident entertainers, the withholding is likely to constitute a final tax, meaning no further Uganda tax return is required from the non-resident, but the payer must remit the withheld amount to URA by the 15th of the following month.

Documentation requirements:

Obtain the entertainer’s Tax Identification Number (TIN) before making payment.
Issue a withholding tax certificate to the entertainer within the prescribed period.
Retain contracts, invoices and proof of remittance for at least five years.
Where a double taxation treaty applies (for non-resident entertainers from treaty countries), obtain the relevant treaty-relief documentation before applying a reduced rate.

The proposed 5% withholding on foreign-debt interest also falls under the expanded withholding regime. Payers should integrate both new withholding categories into their accounts-payable workflows and URA filing calendars simultaneously.

Tax Compliance July 2026 Uganda, 60-Day Employer Action Plan

With the 1 July 2026 effective date approaching, finance teams need a structured action plan. The following 60-day compliance roadmap covers the period from early June through the end of August 2026, taking employers from preparation through the first compliant payroll and withholding remittances.

Week 1–2 (early June): Obtain and circulate the final enacted text of the Income Tax (Amendment) Bill 2026 and VAT Amendment Bill 2026. Brief the tax, payroll, treasury and AP teams on the key changes.
Week 2–3: Update payroll software with the new PAYE bands and tax-free threshold. Configure new withholding tax codes for entertainer payments and foreign-debt interest.
Week 3–4: Run a parallel June payroll using both old and new PAYE bands to identify calculation differences and flag any anomalies. Document the parallel-run results for audit purposes.
Week 4 (end of June): Update VAT tax codes, invoice templates and input-tax apportionment calculations. Notify key suppliers and customers of any VAT-treatment changes effective 1 July.
Week 5 (1 July, go live): Process the July payroll under the new bands. Apply new withholding rates to all relevant payments made from 1 July onward.
Week 6–7 (July): Conduct a post-go-live review. Verify that payslips reflect the correct net-pay figures. Check that withholding tax certificates have been issued for entertainer and interest payments.
Week 7–8 (by 15 August): Remit July PAYE and withholding taxes to URA. File the monthly return. Retain all supporting documentation.
Week 8–9 (August): Cross-check the first remittance against URA’s administrative guidance (expected July–August 2026). Adjust configurations if URA clarifies any transitional provisions. Conduct staff training sessions for payroll and AP teams on the new ongoing processes.

For a broader view of Uganda’s tax environment, including investment incentives and structural tax features, see our detailed background article. Employers managing cross-border reporting obligations may also benefit from understanding Uganda’s automatic exchange of information (AEoI) framework.

Sector Impacts and Practical Issues

While the 2026 amendments apply across the economy, certain sectors face disproportionate compliance challenges and should undertake sector-specific tax planning Uganda 2026 exercises.

Oil and gas. Companies operating in Uganda’s upstream and midstream sectors should review the interaction between the new foreign-debt interest withholding and existing Production Sharing Agreements (PSAs). Cross-border service payments and intercompany financing structures require immediate assessment to determine whether treaty relief is available and whether contractual gross-up clauses are triggered.
Banking and financial services. Banks making interest payments to foreign correspondent banks and lenders must implement the 5% withholding on foreign-debt interest. This may affect the pricing of cross-border credit facilities and syndicated loans. Treasury teams should model the cash-flow impact and renegotiate agreements where necessary.
Entertainment and media. The new 6% entertainer withholding creates first-time compliance obligations for promoters, broadcasters and corporate event organisers. Systems for tracking payments to individual entertainers and issuing withholding certificates must be established before the first qualifying payment.

Reporting Obligations by Entity Type, Comparison Table

The following table summarises how the Uganda tax changes 2026 affect different categories of taxpayers and identifies the immediate actions required for each.

Entity Type	Key Reporting/Withholding Obligations from 1 July 2026	Immediate Actions
Resident company (incorporated in Uganda)	Updated withholding obligations for new categories (entertainer payments, foreign-debt interest); review capital gains exposure on property disposals	Review vendor contracts; update AP systems and withholding codes; notify treasury and tax teams
Branch of foreign company	Withholding on payments to head office and non-resident suppliers may change; 5% withholding on certain interest payments to foreign lenders	Assess all cross-border payments; check treaty-relief procedures; update documentation and filing processes
Employers / payroll providers	New PAYE threshold and bands effective 1 July 2026; employer withholding for entertainer and contractor payments	Update payroll software; run parallel June and July payrolls; update payslips; retrain payroll staff
Non-resident entertainers / contractors	6% withholding on entertainment payments (final tax for non-residents); payers to withhold at source	Provide TIN and treaty documentation to payers; retain withholding certificates for home-country tax credits
VAT-registered traders	Revised exempt and zero-rated schedules; updated VAT treatment for petroleum, educational and health supplies	Update VAT invoicing templates; review and remap tax codes; file transitional adjustments in July return

Conclusion

The Uganda tax changes 2026 practical guide above covers the full scope of the Income Tax, VAT and PAYE amendments taking effect on 1 July 2026. The operational message is clear: finance teams, payroll providers and tax managers cannot afford to wait for URA guidance before acting. Parallel payroll runs, system configuration updates, vendor notifications and staff training should all be completed in June 2026. Businesses with cross-border financing, entertainment-sector exposure or property transactions face additional withholding and reporting obligations that require immediate attention. For ongoing updates on Uganda’s tax environment, including the Automatic Exchange of Information framework and broader fiscal incentives, explore our related coverage. For tailored compliance support, contact our team to connect with experienced Uganda tax counsel.

Last reviewed: 4 May 2026. Check URA guidance after enactment for any administrative updates to the figures and procedures described in this article.

Need Legal Advice?

This article was produced by Global Law Experts. For specialist advice on this topic, contact Birungyi Cephas Kagyenda at Birungyi, Barata & Associates, a member of the Global Law Experts network.