New tax transparency era: Uganda’s path to curb illicit flows

___________________

OPINION

By Myra Iris Ochwo

In order to combat offshore tax evasion and illicit financial flows, Uganda launched the Automatic Exchange of Information (AEOI) on September 1, 2025, positioning itself at the forefront of tax transparency globally.

This milestone reflects strategic reforms, legislative action, and technological innovation spearheaded by URA for more than a decade.

A decade of determined progress

Uganda’s progress towards AEOI started in 2012 when it joined the Global Forum on Transparency and Exchange of Information for Tax Purposes, a body under the OECD that encourages international cooperation on tax issues.

In 2016, Uganda ratified the Convention on Mutual Administrative Assistance in Tax Matters (MAAC), allowing the country to begin exchanging tax information on request.

By 2021, Uganda had officially committed to implementing AEOI, joining over 120 jurisdictions that pledged to share financial account data annually under the Common Reporting Standard (CRS). This commitment was formalised through the MAAC (Implementation) Act, which came into effect on July 1, 2023, establishing the legal framework for AEOI and defining the responsibilities of Reporting Financial Institutions (RFIs).

What is AEOI?

AEOI is the systematic and periodic bulk exchange of financial data from the source country to the residence country, where the taxpayer is liable for tax. The information shared includes dividends, interest, royalties, salaries, and pensions. This global initiative is designed to curb offshore tax evasion and aggressive tax planning by facilitating the secure transmission of taxpayer information between countries.

Under Uganda’s Income Tax Act, Cap 340, gross income includes earnings from all geographical sources. Failure to report such income constitutes non-compliance and attracts penalties under the law. AEOI strengthens URA’s ability to detect and address such cases, ensuring that all income—domestic or foreign—is taxed fairly and transparently.

Financial Institutions at the Forefront; Under the AEOI framework, Reporting Financial Institutions (RFIs) are mandated to conduct due diligence to determine account holders’ tax residency, collect self-certifications from all account holders, review pre-existing accounts for non-resident status, and report financial data of non-residents to URA by May 31, annually.  This data is securely exchanged with over 127 partner jurisdictions, enabling URA to identify offshore assets and income held by Ugandan residents.

A historic launch

A historic launch of the inaugural exchange was celebrated at URA Tower in Nakawa, officiated by Commissioner General John Musinguzi. “This is not merely a compliance milestone,” he declared. “It is a declaration of our resolve to eliminate undeclared offshore assets and income. AEOI levels the playing field where compliant taxpayers are no longer disadvantaged by those who conceal wealth abroad.”

The Commissioner for Tax Investigations lauded Uganda’s successful completion of the OECD Confidentiality and Data Safeguards assessment in December 2024, and the decision to build the AEOI platform in-house, saving significant procurement costs. The Commissioner for IT & Innovation emphasised the strategic importance of the launch and the need for robust cybersecurity to protect sensitive financial data.

Why AEOI Matters?

With a tax-to-GDP ratio of 13.8%, Uganda faces an urgent need to broaden its revenue base. According to UNCTAD, Africa loses $88.6 billion annually through capital flight. AEOI equips Uganda with powerful tools to detect hidden offshore assets, improve tax compliance, expand the taxpayer register, curb illicit financial flows, and promote fairness and equity in the national tax system.

Voluntary Disclosure Programme: A Pathway to Compliance to complement AEOI, URA has launched a Foreign Assets Voluntary Disclosure Programme (VDP), offering taxpayers with undisclosed offshore assets a chance to regularise their affairs. Key benefits include a full waiver of penalties and interest, tax liability limited to a three-year retrospective period, and immunity from prosecution for disclosed information.

Looking ahead, Uganda becomes the seventh African nation to implement AEOI. URA’s immediate focus is to operationalise incoming data, enhance audit capabilities, and translate CRS information into tangible revenue gains. By embedding AEOI into national legislation, investing in secure IT infrastructure, and fostering international cooperation, Uganda has laid the groundwork for a fairer, more transparent, and sustainable tax regime. This bold step not only strengthens Uganda’s fiscal integrity but also affirms URA’s leadership in modern tax administration.

The writer is the Assistant Commissioner, Tax Education, URA