Practitioner Breakdown of Uganda’s Income Tax (Amendment) Bill, 2026: Wider Tax Base, New Commercial Pressure Points for Taxpayers.

The Income Tax (Amendment) Bill, 2026 is not merely a routine rate-adjustment bill. Read as a whole and contemporaneously with certain amendments sought to be introduced in tax procedure, it presents revenue-protection measures aimed at widening the tax base, pushing collection closer to the point of payment, and giving the Uganda Revenue Authority a firmer statutory platform in areas that have historically generated interpretive debate.

The bill proposes new withholding tax points on offshore debenture interest, purchases of non-business assets, telecom-related commissions, betting and gaming winnings, and payments to public entertainers. It also introduces an express rule on foreign-source income of resident individuals, extends selected exemptions, and revises the individual income tax bands. If enacted in its current form, the amendments introduce new commercial pressure points that might need to be addressed even before the new envisaged law takes effect, that is 1st July 2026.

At a policy level, the bill reflects a familiar pattern in modern tax administration. Government is not only looking for new sources of tax. It is also looking for better collection mechanics. That is why the bill should be understood not simply as a measure about rates, but as a bill about cash-flow control, earlier collection and broader withholding architecture. In practical terms, that matters just as much as the headline rates. A tax collected upfront through withholding often has a more immediate commercial impact than a tax that is only declared at year end.

More commercial activity to be taxed at source

One of the clearest themes running through the bill is the shift toward taxing transactions at or near the point of payment. The Memorandum to the bill says as much. It identifies new withholding tax on interest paid by resident companies to foreign financial institutions, on commissions paid for telecommunication retail services, mobile network services and mobile money services, on winnings under gaming or betting, on payments for the purchase of non-business assets, and on payments to public entertainers. By design, the bill reveals fiscal policy to move tax collection further deeper into the commercial bloodstream of transactions.

That approach has obvious revenue advantages for government. It reduces reliance on later self-assessment and can improve compliance in sectors where cash leakage or underreporting is more likely. But for taxpayers, it also means new withholding obligations, new administrative burdens, and in some cases new cash-flow distortions where tax is collected on a gross payment before the underlying gain is fully determined.

The controversial proposed tax on trading losses

The clause most likely to generate the sharpest debate is the proposed amendment to section 36. The bill provides that where a taxpayer, after a period of seven years of income, continues to carry forward assessed losses, that taxpayer shall pay tax at 0.5% of gross income or the tax charged under section 4(1), whichever is higher.

This proposal is controversial for a straightforward reason. One of the cardinal principles of income taxation is that tax is imposed on gains and profits, not merely on turnover or economic activity in the abstract. Yet this amendment would force a taxpayer into tax even where that taxpayer remains commercially loss-making. It effectively introduces a minimum-tax style outcome for long-term loss makers. That may be attractive to revenue authorities concerned about taxpayers who perpetually report losses. But it is a blunt instrument. It does not distinguish clearly between abusive loss positions and genuine long-cycle businesses that remain in loss for commercially valid reasons.

The sectors most likely to feel the strain are those with long gestation periods and heavy upfront capital expenditure: infrastructure, hospitality, agribusiness, energy, mining, technology start-ups and other capital-intensive businesses. A taxpayer may be operationally active, revenue-generating and still genuinely loss-making for several years. Under this proposal, that taxpayer could nevertheless suffer tax on gross income. That is precisely why this amendment is likely to be one of the most debated provisions in the bill.

Offshore debt financing becomes more expensive

The bill also amends section 82 by requiring a resident company paying interest in respect of qualifying debentures to withhold tax on the gross amount of that interest at the rate prescribed in Schedule 4. Schedule 4 then sets that rate at 5%.

Commercially, this is significant. It means that qualifying offshore debt, which had previously benefited from more favourable treatment, now carries a tax leakage at the point interest is paid. In cross-border financing structures, someone always bears that cost. If the lender does not absorb it, the borrower often does through gross-up mechanics or pricing adjustments. In both cases, the cost of debt rises. That has implications not only for treasury planning but also for project bankability, debt pricing and debt-versus-equity structuring.

For highly leveraged businesses and project-financed sectors, this is more than a technical amendment. It is a real financing cost issue. A 5% withholding on gross interest may appear modest on paper, but across long-term cross-border debt it can materially affect returns, pricing and funding decisions.

Worldwide income of residents now stated more bluntly

Another notable amendment is the insertion of section 150A, which provides that income derived by a resident individual from a foreign source shall be taxed at the same rate that applies to the same type of income sourced in Uganda.

Strictly speaking, the worldwide-income concept is not entirely new to Uganda’s income tax framework. But this clause matters because it states the principle more expressly and more visibly. It sharpens the point that resident individuals are within Uganda’s tax net on foreign-source income, subject of course to whatever relief may be available elsewhere in the Act. In practical terms, this amendment reduces room for argument and strengthens the enforcement narrative around offshore income, diaspora income streams and foreign investment returns of resident individuals.

In the years ahead, this provision is likely to be read alongside broader international transparency and compliance trends. Even where the legal principle already existed in substance, restating it expressly in the Act matters. It signals intent, and in tax law, intent translates into judicial interpretations favourable to enforcement.

Non-business asset transactions pulled into the tax net

The bill proposes two connected changes in relation to non-business assets. First, it amends section 20 to include income derived from the disposal of a non-business asset. Second, it amends section 130 to require a person who purchases a non-business asset to withhold tax, with Schedule 4 setting the rate at 6% of the gross payment.

This is a critical amendment for real estate especially and is a veiled attempt to return an amendment that was rejected by parliament in the year 2024. That amendment sought to impose a final withholding tax on gains on disposal of non-business assets at a rate of five percent, with gains computed using the already existing capital gains tax rules.

The earlier proposed tax had been imposed on gains from the disposal of; shares of a private company; land in cities or municipalities except the principal place of residence; and rental property that is subject to rental tax.

The current proposed amendment is therefore a further attempt by the government to assert taxing rights on non-trading transactions through a charge to tax on similar disposals as rejected by parliament in 2024.

The amendment if passed will affect “non-trading” land transactions and other private asset disposals where parties may not previously have expected purchaser-side withholding obligations, later alone a capital gains tax levy on the transactions at all.

Local public entertainers are now brought into withholding tax

The bill introduces a new section 135B requiring a person who pays a public entertainer to withhold tax on the gross payment, and Schedule 4 sets the rate at 6%.

This is one of the more important structural changes in the bill. Previously, much of the withholding focus in entertainment was directed at international or non-resident contexts. This amendment now brings the domestic public entertainment ecosystem more squarely into the withholding framework. Promoters, venues, event organisers, media houses, sponsors and other payers in the entertainment chain will need to adapt quickly if the provision passes.

For entertainers themselves, the immediate effect is cash-flow compression because the withholding is on gross payment. The bill also does not, at least in its current form, clearly place this withholding into the final-tax basket under section 139. That leaves open the possibility that entertainers may still need to return the income in the ordinary way and claim credit for tax withheld. If that reading holds, the amendment increases not only withholding but also compliance complexity.

Betting, gaming and telecom commissions remain under close watch

The bill substitutes section 131 so that withholding applies to winnings from betting or gaming, and it defines “winnings” as the difference between the pay-out and the staked amount on the game or bet. Schedule 4 keeps the withholding rate at 15%.

That change is significant because, while the scope broadens from betting to betting or gaming, the definition of winnings is now expressed on a net basis. That is a more defensible tax base than taxing the full payout without regard to the stake. In that respect, the bill expands coverage but also introduces a more commercially rational measure of what is actually being taxed.

Similarly, the bill substitutes section 133 so that telecom service providers must withhold tax on commissions paid for telecommunication retail services, mobile network services or provision of mobile money services, with Schedule 4 setting the rate at 10% of the gross amount. This broadens the language and likely expands the number of relationships in the telecom ecosystem that may fall within compulsory withholding.

Some relief remains, but it is selective

Not everything in the bill is revenue-extractive. There are meaningful relief and incentive elements too. The bill extends the exemption for the income of the Bujagali hydro power project up to 30 June 2032. It also introduces an exemption for the income of a developer of a hotel or tourism facility meeting prescribed investment, local sourcing and employment thresholds. In addition, it broadens the infrastructure bond definition and adds BADEA and the Uganda Red Cross Society to Schedule 2 as listed institutions.

These measures show that government still sees the tax code as an investment policy tool. But the incentives are targeted and conditional. The tourism exemption, for example, is tied to capital thresholds, local sourcing and citizen employment requirements. So while the relief is welcome, it will likely be tightly policed in practice.

The other notable relief measure is the revision of the income tax bands for resident individuals. The bill raises the nil band to UGX 4,020,000, introduces a 25% band between UGX 4,920,000 and UGX 5,820,000, and retains the 30% band and the additional 10% charge above UGX 120,000,000.

That is one of the more taxpayer-friendly aspects of the bill. It should offer some relief to resident individuals, particularly at the lower and middle ends of the income scale. But even here, the broader political context matters. This kind of rate relief softens the presentation of a bill that is otherwise quite assertive in expanding withholding and strengthening the government’s collection position.

Transfer pricing and digital tax clean-up

The bill also inserts section 115A, requiring controlled transactions to be accounted for in a manner consistent with the arm’s length principle. It further amends section 86 to provide that the digital services rule shall not apply to income attributable to royalties.

These are more technical amendments, but they matter. The first gives statutory reinforcement to Uganda’s transfer pricing posture and is likely to support a more assertive audit approach in related-party transactions. The second appears designed to reduce overlap between digital services taxation and the royalty regime. In both cases, the direction is the same: clearer statutory footing, fewer taxpayer arguments built on ambiguity, and stronger alignment between the charging rules and enforcement practice.

Final thoughts

The Income Tax (Amendment) Bill, 2026 should be read as a base-expansion and enforcement bill with a few carefully chosen relief measures attached to it. The central message of the bill is not simply that some rates are changing. It is that government wants to tax more streams, collect earlier, and reduce ambiguity in areas that have historically sat at the edge of dispute.

The provisions that deserve the closest scrutiny are the proposed tax on long-carried losses, the 5% withholding on qualifying offshore debenture interest, the new withholding on purchases of non-business assets, the express statement on foreign-source income of resident individuals, and the extension of withholding into the local entertainment industry. Those measures alone have the potential to reshape cashflow, transaction execution, financing costs and controversy risk across several sectors.

If enacted in its present form, this will be a bill that taxpayers feel not only in their annual returns, but in their contracts, payment systems, financing arrangements and transactional timelines from day one.