corporate governance

Uganda’s Tax Exemption for Start-Ups: Key Insights for Entrepreneurs.

Mark Ruhindi is a corporate and tax lawyer. He is ranked as Highly Regarded in the ITR World Tax rankings and heads one of the leading tax practices in Uganda.

This fiscal year’s tax amendments included certain key amendments that have been hailed as a critical step in the right direction for tax administration, and particularly the tax exemptions provisions targeting start-ups and similar fledgling businesses.

The amendment introduced new tax law aimed at fostering and supporting well formalised entrepreneurship, in the form of an income tax exemption for Uganda Citizen owned businesses started after 1st July 2025, for three-years.

Its practical application however requires a precise understanding of how the Uganda Revenue Authority (URA) interprets “new business,”, “associated entities,” and “Compliance” among other tax nomenclature. Yes, as with all incentives, the opportunity lies in the detail. This article seeks to address this detail.

East Africa Trade: Uganda’s Tax Appeals Tribunal clarifies on EAC Intra-Trade VAT

The Tax Appeals Tribunal has delivered a landmark decision that strikes at the heart of URA’s aggressive enforcement and over-reach tendencies and restores the much-needed balance in the taxpayer-taxman relationship.

(TRADE WORTH ESTABLISHMENTS LTD V URA TAT APPLICATION 338 OF 2024)

In perhaps the strongest language yet from the Tribunal against the revenue body, TAT observed:

“On the whole, we find that the Respondent acted not only unlawfully but also with impunity and in total abuse of their powers and authority… Rather than doing this [refund VAT unlawfully collected], the Respondent orchestrated a phoney scheme to deny the Applicant their refund – a taxpayer, who is the very reason for the Respondent’s existence.”

Citing its earlier decision in Canaan Sites Limited v URA, TAT further emphasises the ethical and legal obligation of URA to return taxes not legally due: “Where the Respondent collects taxes that are not legally owed, it is generally expected to refund those amounts to the taxpayer… it has an ethical and legal obligation to return those funds to maintain trust in the tax system.”

Uganda Revenue Authority goes after the Digital Economy: Payments Systems and third-Party Transaction Information in Tax Administration.

Whereas the digital economy is mostly composed of digital companies and the web-based commercial marketplace, the brick-and-mortar businesses are also covered since most now take payment through digital payment systems.

What this means is that digital payment systems now permeate nearly every sector, blurring the line between the traditional and digital economy.

The internet marketplace and the digital economy are data-driven and therefore I anticipate the next stage of the government’s tech-driven tax compliance enforcement campaign to be deployment of big data analytics and artificial intelligence in building taxpayer profiles using third-party payments and financial services information to flag transactions that would otherwise have escaped the tax net.

Sectors such as E-commerce, Gaming, Financial Services (fintech), and Telecoms process hundreds of thousands and for some, even millions of daily transactions.

Unlike a few years ago when tax authorities had no means of scrutinising such an
overwhelming volume of transactions and to assess tax upon each and every one including the tiniest of transactions.

Currently, Tax Authorities are able to rely on advanced data analytics and the deployment of artificial intelligence tools to track tax on even the smallest of transactions.

Uganda VAT E-INVOICING(EFRIS) Enforcement: Compliance Insights for Landlords and Tenants.

While initially criticised as premature and fought by taxpayers especially those under the KACITA umbrella, it appears the system is here to stay and has increasingly become the backbone of Uganda’s tax administration.

For commercial property landlords, who fall within the VAT net, strict EFRIS compliance marks a significant shift and fundamentally alters governance and tax reporting obligations for entities, which in turn poses risk to investments controlled under those entities.

The reason is simple; VAT administration directly intersects with income tax and rental tax compliance in a manner many lay taxpayers do not yet appreciate. The increased VAT scrutiny through EFRIS has a direct bearing on the landlord’s other tax compliance obligations under income tax and rental tax.

Landlords and property managers must therefore consider adjusting operating models to align with URA’s strict stance, as informal practices will expose them to heavier tax risk through deduction disallowances, penalties, additional tax assessments and a heavier professional fees burden.

Uganda’s Real Estate Sector Faces Heightened Tax Scrutiny

Commercial activities in Uganda’s Real Estate sector have not been subjected to the same level of tax scrutiny as other lucrative industries, largely due to the informal character of the bulk of transactions and real estate activities generally.

We now expect more audits in the Real Estate Sector and transactions that have since been concluded and those to be concluded going forward.

And so Taxpayers in real estate may now need to take steps to fully formalize their activities for compliance purposes under the different tax heads.

A CORPORATE GOVERNANCE MASTERCLASS FOR ENTREPRENEURS FROM THE HUMPHREY NZEYI v BoU CASE.

While shareholders own the company, they DO NOT own the assets of the company. The assets they own are the shares allotted to them. The company owns its assets. Conversely, the shareholders are not the managers of the company. They must first become directors in law for them to exercise managerial roles.

The directors(the Managers) owe a fiduciary duty to the company as ‘a whole’. This fiduciary duty requires directors to act in good faith and in the long-term interests of the entity, balancing the interests of both shareholders and creditors.

This is because the total assets of a company are composed of shareholder equity+liabilities (i.e. creditor interests). For the section of my readership without an accounting background, in law this is the starting point of the accounting equation. The company as a legal entity is therefore subject to these two competing legal(or equitable) claims.

The directors’ duty to act in the company’s best interests logically includes the obligation to weigh and balance these interests at all times.

When a company enters financial distress, the law demands that the board begin to prioritize the interests of creditors alongside those of shareholders and certain transactions are outright void at law in extreme circumstances where this principle is breached.

Good Corporate governance and Board composition matters. A competent, diverse board is better equipped to navigate financial stress and generally, the intricate market and regulatory dynamics in which the company operates. Ensure you have a blend of directors with expertise in risk, tax, legal, and operations as opposed to just investors, friends or family members.

STAMP DUTY IN ELECTRONIC TRANSACTIONS; DIGITAL ECONOMY TAX RISK TO LOOK OUT FOR

The obligation to pay stamp duty arises every time two parties execute an agreement to create, transfer, extend or extinguish a legal right or a liability.

The transaction is evidenced by an instrument which may be a physical document such as a loan agreement, a sale agreement or a memorandum of acknowledgement of a debt and in the case of e-commerce transactions, by an electronic data message or series of electronic data messages which collectively form the agreement instrument.

Money Lending Regulation: Key Insights for Lenders and Borrowers

Institutions or money lenders are now under a mandatory obligation to allow borrowers at least five working days after signing a lending contract, to revoke or terminate the contract by written notice delivered to the institution or money lender.

The revocation termination is effective if the borrower repays the full amount of the loan at the time of cancellation of the contract and any other administrative charges, or fees which have been reasonably incurred in arranging the loan and these must not exceed two percent of the value of the loan.

STAMP DUTY IN E-COMMERCE CONTRACTS; WHAT YOU NEED TO KNOW.

The obligation to pay stamp duty arises every time two parties execute an agreement to create, transfer, extend or extinguish a legal right or a liability.

Obviously failure or refusal to comply with a tax obligation has nothing to do with the authenticity of a transaction document, at least between the parties to a transaction. The law simply punishes the taxpayer by refusing to permit a party to rely upon the transaction document in a court of law to enforce a bargain until the tax is paid. The transaction document therefore remains authentic and valid, but of no evidential value in court proceedings unless the tax is paid. The bargain may still be enforced by relying upon other species of evidence.

Brand Marketing and Advertising Services in Cross Border Trade; Where and How does consumption Occur for VAT Purposes?

Marketing and advertising services aim to build brand goodwill, which is an intangible asset tied to specific territories. It is obvious that brand visibility and consumer engagement occur within the market targeted by the advertisements and brand marketing, in this case, Uganda.

Goodwill, in law, is territorial and can be quantified financially but this is tied down to the territory in which the reporting entity operates because again in law, goodwill only exists with the existence of trading activities in a particular market.

This means the economic benefit sought when buying marketing services is goodwill enhancement. This economic benefit is therefore realized in the market where goodwill is enhanced as a result of the brand marketing and advertising targeting that market. In this case Uganda and most certainly not in the United States.