Uganda’s wider tax net must come with practical support for businesses
As Government seeks to widen the tax base, business owners need to understand how their everyday transactions create tax obligations. Equally, the authorities must ensure that businesses have the knowledge and practical support to comply.
Uganda’s wider tax net must come with practical support for businesses
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By Sanyu Daisy Namayanjja
For a landlord collecting rent, a contractor completing a building or a restaurant owner serving customers, tax compliance can easily become something attended to after the business has made its money. Uganda’s expanding tax compliance framework requires these decisions to receive attention much earlier.
As Government seeks to widen the tax base, business owners need to understand how their everyday transactions create tax obligations. Equally, the authorities must ensure that businesses have the knowledge and practical support to comply.
The Ministry of Finance’s renewed emphasis on broadening the tax base is an important development. In its October 5 communication, the ministry highlighted formalization, improved compliance and better administration of existing taxes as avenues for increasing domestic revenue. It also acknowledged the limitations of continuously demanding more from the same taxpayers.
A wider tax base can distribute responsibility more fairly. Businesses that meet their obligations should not face persistent competitive disadvantages against those that operate outside the system. However, successful expansion requires careful implementation, particularly where businesses have limited accounting capacity.
One immediate issue is the extension of electronic invoicing beyond VAT-registered taxpayers.
This has practical significance for landlords, contractors, consultants, hotel operators and other service providers who may have assumed that EFRIS concerns only VAT-registered businesses.
Businesses should establish whether they fall within the requirements and applicable exceptions. They should also understand a crucial distinction: an obligation to issue electronic receipts does not, by itself, authorise a business to charge VAT.
The consequences extend to customers. URA’s notice reiterates that an income-tax deduction may be denied where an expense lacks an electronic invoice or receipt from a supplier required to use EFRIS. Procurement teams therefore have a role in compliance alongside accountants. Businesses must consider the documentation supporting a purchase when selecting and paying suppliers.
The wider compliance programme also places greater emphasis on the quality of information submitted.
URA’s September 2026 Compliance Improvement Plan identifies risks including differences between customs records and declared sales, stock inconsistencies, overstated expenditure, PAYE registration gaps, withholding-tax omissions and related-party transactions. Its approach uses taxpayer information and transaction data to identify compliance gaps.
The implication for management is straightforward: submitting a return on time is insufficient if the business cannot explain the figures.
Differences between records can have legitimate explanations. Timing, cancellations and accounting adjustments may all matter. The business must retain evidence that makes those explanations understandable.
Directors should consequently take a more active interest in tax. They should know which returns have been filed, what remains unpaid, which queries require responses and whether tax payments have been included in cash-flow forecasts. Delegating the preparation of returns should be accompanied by management oversight.
Government and URA also have responsibilities. Sector-specific guidance, accessible systems and practical demonstrations can help businesses comply correctly. Education should explain actual transactions: receiving a tenant’s payment, invoicing a construction client or purchasing supplies from a small enterprise.
Professional advisers, business associations and taxpayer forums can help bridge this knowledge gap. Their contribution should equip business owners to ask better questions and identify problems before they become expensive disputes.
Uganda needs sustainable domestic revenue, and businesses need a predictable environment in which to invest and grow. These objectives can reinforce each other when tax-base expansion combines fair administration, clear guidance and responsible business management.
The measure of success should include businesses that enter the system, understand their obligations and remain compliant as they grow.
The Writer is a Senior Tax Consultant – Bennett Advisory Limited