Uganda FY 2026/27 Year on the Horizon: Tax Outlook and the Data-Driven Tax Controversy Era

From the Partners | 1 July 2026

Dear Clients and Stakeholders,

Uganda’s Financial Year 2026/27 begins today, 1 July 2026, against a policy backdrop that is both ambitious and commercially demanding. Parliament approved a national budget of approximately UGX 84.3 trillion for FY 2026/27, with Government framing the year around production, industrialisation, household incomes and the full monetisation of the economy. The budget also opens under fiscal pressure: debt servicing alone is projected at approximately UGX 33.4 trillion, nearly 40% of the total budget envelope.

The official budget priority sectors remain the ATMS pillars: agro-industrialisation, tourism, minerals including oil and gas, and science, technology and innovation.

Our central view for the year ahead is a tax system that has moved closer to the transaction, closer to payment flows, closer to digital records and closer to the commercial decisions that businesses make every day.

1. The year behind us: Tax controversy centered on data and tax evidence

The past year confirmed a trend we highlighted in our 2025 year-in-review and 2026 outlook notes: tax enforcement is becoming more data-driven, transaction-sensitive and consequential. URA’s ability to compare VAT returns, income tax returns, EFRIS data, financial statements, bank information, customs records, withholding tax records and third-party disclosures is now central to the enforcement environment.

For businesses, this means tax controversy increasingly begins long before an assessment is issued. It begins at the invoice, contract, board resolution, share register, payroll configuration, import entry, loan agreement, EFRIS record, valuation report or reconciliation schedule.

The 2026 tax amendment package reinforces that shift. The amendments widen collection points, strengthen withholding mechanisms, preserve targeted incentives, increase the VAT registration threshold, introduce or expand sector-specific taxes, and continue the move toward e-invoicing and recurring reporting.

2. Key market developments shaping FY 2026/27

A. Revenue mobilisation is now a business-planning issue

The tax package moves collection closer to commercial activity. E-invoices and e-receipts are no longer merely tax administration tools; they affect cash flow, VAT withholding treatment, audit defence and penalty exposure. For financial institutions and financial-services businesses, stamp duty is moving from a transaction-closing issue to a recurring monthly compliance stream.

B. Payroll relief requires immediate operational action

The PAYE changes are positive for employees, especially at the lower end of the income scale. Employers should not treat the change as a policy headline only. Payroll systems, employee communications, July 2026 payroll testing and PAYE deduction tables should be reviewed immediately. The risk is not only over-deduction or under-deduction; it is also employee relations, payroll reconciliation and monthly compliance accuracy.

C. Cross-border financing becomes more tax-sensitive

The introduction of withholding tax on certain interest payments to foreign lenders makes cross-border debt more expensive and more negotiation-sensitive. Borrowers should review gross-up clauses, tax allocation provisions, change-in-law clauses, payment mechanics and treaty positions. Where financing is part of a group structure, taxpayers should also maintain evidence showing the true source, use and commercial terms of debt.

D. Tax incentives remain available, but evidence-heavy

Government continues to use tax law as industrial policy, especially in tourism, health, agriculture, mining, energy and local manufacturing. But the practical lesson from recent disputes is that incentives are only as strong as the documentation supporting them. Eligibility must be proved through contracts, approvals, invoices, project records, import documentation, certificates, valuations and contemporaneous compliance files.

3. The controversy outlook: where disputes are likely to arise

1. VAT and income-tax variance disputes

We expect more URA reviews based on variances between VAT returns, income tax returns, financial statements, EFRIS records and management accounts. The recent Ericsson AB v URA ruling is important because it confirms that a numerical variance alone is not enough; URA must connect the variance to a taxable supply, taxable value and the statutory VAT framework. But the case is also a warning to taxpayers: reconciliation files should exist before the audit starts, not after the assessment arrives.

Expected risk areas include unbilled revenue, deferred revenue, milestone billing, related-party service contracts, mixed taxable and exempt supplies, foreign-currency invoices, branch accounting and large customer contracts.

2. M&A, restructurings and deemed disposal disputes

Transaction tax will remain one of the highest-risk areas in FY 2026/27. In URA v Tunga Nutrition, the High Court treated roll-over relief as a statutory tax outcome that must be proved through primary corporate records, including evidence of asset transfer, share consideration, register-of-members position and voting power immediately after completion.

In Kuku Foods v URA, the Tribunal confirmed that a qualifying change in underlying ownership may trigger a deemed realisation at market value by the Ugandan operating company, even where the local company is not the commercial seller and receives no sale proceeds. The decision also emphasised that valuation must be tied to the statutory trigger date and the relevant assets and liabilities, not simply to enterprise value or the offshore share price.

For buyers, sellers, founders, investors and group companies, the lesson is clear: tax structuring must be built into deal design, not added at completion.

3. Interest deductibility and group financing disputes

The Micro-Haem v URA decision narrows the application of Uganda’s interest limitation rule where the borrowing is genuine third-party debt from outside the group. But it is not a blanket taxpayer victory. Group status, common ownership, dormancy, exemption claims and the commercial evidence behind debt remain live issues.

We expect URA to continue reviewing interest deductibility, especially for companies with common shareholders, guarantees, shareholder loans, related-party support, thin margins, carried losses or cross-border financing.

4. VAT refund and exemption disputes

The Portman Square v URA decision clarifies that VAT wrongly charged on exempt supplies may be recoverable as tax paid in error, even where the taxpayer was not making an ordinary input VAT claim. This is commercially important for hotel developers, infrastructure projects, donor-funded projects, real estate developers, contractors and taxpayers operating under special exemption regimes.

The expected controversy will centre on whether supplies were truly exempt, whether VAT was lawfully charged, whether the correct refund route was used and whether documentation supports the claim.

5. Infrastructure, project finance and foreign-currency cost-base disputes

In Bujagali Energy v URA, the Tribunal held that foreign-currency accounting does not override statutory conversion rules for Uganda tax purposes. The practical lesson is that infrastructure and capital-intensive projects should maintain a Uganda-shilling tax cost-base ledger from the beginning of construction, with transaction-level exchange-rate evidence.

This will matter for power, roads, rail, oil and gas, industrial parks, water, mining, PPPs and large externally financed projects.

6. Offshore income, foreign assets and AEOI-driven reviews

Uganda’s automatic exchange of information framework is now part of URA’s enforcement toolkit. Under the MAAC/CRS framework, offshore financial footprints, foreign investment income, accounts and beneficial ownership information are increasingly visible. The practical question for taxpayers is no longer whether URA can see the offshore footprint. It is whether the taxpayer can explain it, reconcile it and prove the Ugandan filing position attached to it.

High-net-worth individuals, diaspora taxpayers, returning residents, family offices, investment-holding structures and professionals with foreign accounts should review tax residence, foreign-source income, historic filings and source-of-wealth documentation.

7. Digital economy and platform taxation

Digital commerce remains firmly within the enforcement horizon. Uganda’s DST framework applies a 5% levy on income derived by non-residents from providing digital services to customers in Uganda, covering areas such as online advertising, digital content, data services, intermediation platforms, cloud computing and online gaming.

As global rules continue to evolve around Pillar Two and the 15% global minimum tax, Uganda’s digital tax framework is likely to remain an important domestic revenue measure and a point of friction for non-resident platforms, local payers and withholding agents.

The first quarter of FY 2026/27 should be treated as a tax readiness window. We recommend the following immediate actions:

1. Run a July payroll review. Confirm PAYE tables, payroll software, employee communications and July deductions.
2. Conduct an EFRIS and invoicing audit. Confirm that all branches, sales points and relevant teams can issue compliant e-invoices or e-receipts.
3. Review VAT registration status. Businesses near the revised VAT threshold should decide whether to remain registered, deregister or voluntarily register, taking into account input VAT recovery, customer profile and supply-chain expectations.
4. Reconcile URA ledger balances. Identify waiver-eligible exposure, principal tax balances, penalties, interest and historical filing gaps.
5. Model indirect tax pass-through. Fuel, logistics, construction, sugar, cooking oil, plastics, gaming, worn clothing, motorcycles and other affected categories should be reviewed for margin and pricing impact.
6. Review contracts. Tax gross-up, change-in-law, price-adjustment, withholding, payment timing and tax indemnity clauses should be checked in supply, financing, construction, government procurement and cross-border agreements.
7. Build transaction tax files before signing. M&A, restructurings, asset transfers, share sales, roll-over relief claims and group reorganisations should have legal and tax completion checklists.
8. Prepare audit-ready reconciliations. VAT-to-income-tax variances, unbilled revenue, foreign-currency positions, cost-base schedules, withholding tax accounts and exempt-supply treatment should be documented contemporaneously.
9. Review offshore and foreign-income positions. Individuals and companies with foreign accounts, offshore assets, diaspora income, cross-border employment or foreign investment income should prepare coherent residence, source and filing analyses.
10. Align tax due dates with cash flow. Government contractors and businesses with slow receivables should build a receivables-tax calendar to avoid liquidity-driven non-compliance.

5. Closing reflections

For business, the winning strategy will be preparation. Tax should be embedded into governance, payroll, pricing, financing, contracting, transaction planning, project documentation and digital systems from the outset.

We thank you for your continued trust and look forward to supporting your business through the new financial year.

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