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Tax incentives for hotel developers: Positioning Uganda’s tourism sector for AFCON and beyond
Sebbi says the proposed incentive aligns with recent positive trends in the sector. According to the Budget Committee Report on the Annual Budget Estimates for FY 2026/27, tourism earnings rose from USD 423.61 million in the first quarter of FY 2024/25 to USD 462.08 million in the first quarter of FY 2025/26.
Badru Sebbi
By: Admin ., Journalist @New Vision
By Badru Sebbi
Uganda’s tourism and hospitality sector is poised for growth following proposed amendments to the Income Tax Act that seek to exempt income earned by qualifying hotel and tourism facility developers.
These changes come at a critical time as Uganda, alongside Kenya and Tanzania, prepares to co-host the Africa Cup of Nations (AFCON), an event expected to significantly increase demand for accommodation, conference facilities, and broader tourism infrastructure.
The proposed incentive aligns with recent positive trends in the sector. According to the Budget Committee Report on the Annual Budget Estimates for FY 2026/27, tourism earnings rose from USD 423.61 million in the first quarter of FY 2024/25 to USD 462.08 million in the first quarter of FY 2025/26.
While gradual, this growth reflects sustained efforts to position Uganda as a competitive tourism destination. With continued policy support and targeted private investment, stronger gains are expected.
Legislative framework for the exemption
The Income Tax (Amendment) Act, 2026 will exempt income earned by developers of hotels or tourism facilities, subject to specific conditions. The exemption applies to developers with a minimum investment of USD 10 million for foreign investors and USD 5 million for Ugandan citizens.
Crucially, the incentive is structured to promote inclusive growth. Subject to availability, developers must use at least 70 percent locally sourced materials and employ at least 70 percent Ugandan citizens, whose wages must account for no less than 70 percent of the total wage bill.
These requirements are intended to ensure that the benefits of the exemption extend beyond investors to the broader economy through job creation, skills development, and stronger domestic supply chains.
Tourism policy, growth, and infrastructure needs
Legislative framework for the exemption
The Income Tax (Amendment) Act, 2026 will exempt income earned by developers of hotels or tourism facilities, subject to specific conditions. The exemption applies to developers with a minimum investment of USD 10 million for foreign investors and USD 5 million for Ugandan citizens.
Crucially, the incentive is structured to promote inclusive growth. Subject to availability, developers must use at least 70 percent locally sourced materials and employ at least 70 percent Ugandan citizens, whose wages must account for no less than 70 percent of the total wage bill.
These requirements are intended to ensure that the benefits of the exemption extend beyond investors to the broader economy through job creation, skills development, and stronger domestic supply chains.
Tourism policy, growth, and infrastructure needs
The proposal aligns with Uganda’s broader tourism strategy, which targets annual receipts of USD 4 billion and aims to double international arrivals to 2.4 million visitors within five years.
Achieving these targets will require substantial investment in hospitality infrastructure, particularly hotels, lodges, and conference facilities that meet international standards. Capacity constraints especially outside Kampala have long limited sector growth. By improving project viability and returns during the early, capital-intensive years, the proposed exemption directly addresses this challenge.
Preparing for AFCON
Uganda’s role as a co-host of AFCON heightens the urgency for investment. Major sporting events attract teams, officials, media, sponsors, and fans, making adequate accommodation a national priority.
The proposed exemption particularly the lower investment threshold for citizen developers creates a conducive environment for private sector participation ahead of the tournament. It signals the Government’s intent to use AFCON as a catalyst for long-term tourism infrastructure development, rather than a one-off opportunity.
Balancing incentives with accountability
The Budget Committee has emphasised the importance of implementation timelines, recommending a five-year completion window for qualifying projects. This provides certainty for investors while ensuring that incentives are tied to actual delivery.
The inclusion of local content and employment thresholds further strengthens accountability by ensuring that Ugandans directly benefit through jobs and economic participation.
Conclusion
The proposed income tax exemption for hotel and tourism facility developers represents a well-timed fiscal intervention. By lowering entry thresholds for citizen investors, embedding strong local content requirements, and aligning with national development objectives, the measure balances competitiveness with inclusivity.
Against the backdrop of rising tourism earnings, ambitious policy targets, and Uganda’s upcoming role as an AFCON host, the incentive has the potential to unlock new investment, expand hospitality capacity, and sustain tourism-led growth beyond the tournament. For investors and policymakers alike, it sends a clear signal: Uganda’s tax policy is increasingly aligned with its tourism ambitions.
The writer is a Tax Manager, Ernst & Young
Achieving these targets will require substantial investment in hospitality infrastructure, particularly hotels, lodges, and conference facilities that meet international standards. Capacity constraints especially outside Kampala have long limited sector growth. By improving project viability and returns during the early, capital-intensive years, the proposed exemption directly addresses this challenge.
Preparing for AFCON
Uganda’s role as a co-host of AFCON heightens the urgency for investment. Major sporting events attract teams, officials, media, sponsors, and fans, making adequate accommodation a national priority.
The proposed exemption particularly the lower investment threshold for citizen developers creates a conducive environment for private sector participation ahead of the tournament. It signals the Government’s intent to use AFCON as a catalyst for long-term tourism infrastructure development, rather than a one-off opportunity.
Balancing incentives with accountability
The Budget Committee has emphasised the importance of implementation timelines, recommending a five-year completion window for qualifying projects. This provides certainty for investors while ensuring that incentives are tied to actual delivery.
The inclusion of local content and employment thresholds further strengthens accountability by ensuring that Ugandans directly benefit through jobs and economic participation.
Conclusion
The proposed income tax exemption for hotel and tourism facility developers represents a well-timed fiscal intervention. By lowering entry thresholds for citizen investors, embedding strong local content requirements, and aligning with national development objectives, the measure balances competitiveness with inclusivity.
Against the backdrop of rising tourism earnings, ambitious policy targets, and Uganda’s upcoming role as an AFCON host, the incentive has the potential to unlock new investment, expand hospitality capacity, and sustain tourism-led growth beyond the tournament. For investors and policymakers alike, it sends a clear signal: Uganda’s tax policy is increasingly aligned with its tourism ambitions.
The writer is a Tax Manager, Ernst & Young