Tag Archives: OECD MODEL CONVENTION 2025 UPDATE

Uganda’s Digital Services Tax Landscape in 2026 vs Pillar Two, Global Minimum Tax and the OECD’s Side-by-Side Package.

The international tax landscape continues to transform rapidly in response to the twin pressures of digitalisation and profit shifting by multinational enterprises (MNEs). Many low- and middle-income countries, including Uganda, have adopted unilateral Digital Services Taxes (DSTs) as an interim measure to ensure that digitalised businesses with minimal physical presence nonetheless contribute tax where economic value is created.

These unilateral measures emerged against the backdrop of stalled consensus on a coordinated global response to the taxation of digital activities under the Organisation for Economic Co-operation and Development (OECD) and G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS), Pillar Two.

However, as we enter 2026, the international tax policy environment has shifted again, notably with the recent agreement by over 145 jurisdictions on a revised global minimum tax package aimed at preserving taxing rights of jurisdictions where these MNEs operate through digitalised business models that require little or no physical presence. 

This agreement does not abandon Pillar Two; rather, it modifies its application through a “side-by-side” framework that allows certain jurisdictions, most notably the United States to operate parallel domestic minimum tax regimes while still achieving the policy objective of a 15 % global minimum tax.

This article explains where DST sits in this evolving framework, clarifies key positions from earlier DST debates, and assesses the implications of the side-by-side global minimum tax agreement for both DST regimes and broader international tax cooperation.

MRT Tax 2025 Year in Review: The Market and Key Tax Trends

As we draw the curtains on 2025, we reflect on a year defined by transformative shifts in the tax landscape, from local, regional and international standpoints.

2025 has also been a defining one for our firm across advisory, tax controversy, transactions practices, and we are grateful to our clients for the confidence placed in us through the sensitive and high‑stakes mandates we received, as you sought our guidance to help you navigate tax complexity with confidence.

We extend an equal amount of gratitude to our peers and collaborators–locally, regionally, and internationally.

A Year of Excellence, Collaboration, and Global Recognition

Our journey this year has been marked by significant milestones that reinforce MRT Tax’s position as a leading tax firm in Uganda.

Recognition and Rankings:

MRT Tax received nomination for the prestigious Tax Firm of the Year Award – Uganda at the ITR EMEA Tax Awards 2025 and was subsequently recognised in the ITR World Tax 2026 rankings as a Notable leading tax practice in Uganda.

The Founding Managing Partner, Mark Ruhindi received Individual Recognition as a Highly Regarded Practitioner-General Corporate Tax.

Strategic Alliances:

We entered into strategic collaborations with The Cragus Group, one of the GCC’s leading independent tax and transfer pricing firms, and Tax Consulting South Africa (TCSA), a market leader in taxation in South Africa.

These relationships significantly enhanced our ability to advise our clients in international trade on cross‑border structuring, transfer pricing, and international tax risk that crosses into those key trade and investment corridors and vice-versa.

2025 OECD Rules Update on Remote Workers: Tax Insights on Cross-Border Human Capital Management.

The 2025 OECD Model Convention Update on the International Taxation concept of Permanent Establishments(PE) has fundamentally redefined Human Capital and Workforce Management in the context of cross-border remote working. 

These changes, which African nations like Uganda are expected to localise as domestic tax law, widens cross-border tax risk exposure for Multi-National Enterprises(MNEs) beyond commercial presence through physical offices. The news rules recognise the notion of commercial presence through human capital and remote workers working from a home or a similar place in another jurisdiction.

This opinion critically analyses the PE concept and its application to cross-border remote working in the context of Uganda’s current PE law, and further discusses the likely implications of the update from two perspectives:

First, the implications for global and regional firms and technology start-ups scaling across borders, with emphasis on emerging human capital management complications likely to arise once African countries, including Uganda, localise the update into domestic tax law.
Secondly, the opinion discusses the advantages it offers to tax administrations(OECD Member nations and nations that eventually localise the update into domestic law), particularly on combating tax avoidance by multinational enterprises (MNEs).

For the non-technical readers, I will be returning to explain the concept of a PE in simple terms but below are the new changes in brief:

The New Test: A PE is now strongly indicated if an employee works from a home office in State A for 50% of their total working time for their Non-Resident employer in State B AND there is a commercial reason for their presence in state A (e.g, servicing local clients and time-zone alignment). The changes have explicitly rejected cost saving or employee convenience as sole justification for remote cross-border working.
Impact on Tax Administration: The update is a powerful anti-avoidance tool for Tax Authorities, allowing them to assert taxing rights based on functional substance rather than just legal form(e.g work-from-anywhere contract clauses permitting cross-border remote working), materially expanding the tax base beyond the current 183-day Service PE rule.

Headache for MNEs and Tech Start-ups: The new rules transform low-cost, agile market testing for tech start-ups into a high-cost compliance burden for start-ups and other regional businesses trying to enter new markets and to scale across-borders. 

The rules will likely result in immediate, non-negotiable Payroll, Social Security, and Immigration risk above Corporate Income Tax, aggressively eroding the limited cash runway of young scaling companies, and rope companies into a more complex compliance matrix.