In a move set to energize Uganda’s entrepreneurial ecosystem, the government has introduced a three-year income tax holiday for all newly registered, Ugandan-owned startups starting July 1, 2025. This initiative, announced by Finance Minister Matia Kasaija during the presentation of the Shs 72.4 trillion national budget for the 2025/26 financial year, is a game-changer for aspiring entrepreneurs.
The measure is designed to remove financial pressure from early-stage businesses, giving them room to innovate, grow and create jobs. Many small ventures in Uganda struggle to survive the first few years due to limited access to capital and a high cost of compliance. With this tax relief, the government hopes to make the business environment more welcoming and accessible, especially for young Ugandans and grassroots innovators.
“This initiative will support the growth of businesses and the economy,” said Kasaija, emphasizing that it’s part of a broader effort to raise Shs 538.6 billion through new tax policy changes while still nurturing local enterprise.
Empowering Local Entrepreneurs
The tax holiday specifically targets startups fully owned by Ugandan citizens. By lowering entry barriers, the government aims to encourage more people to move their ideas from informal setups into fully registered, sustainable businesses.
The move is expected to encourage innovation, formalisation of informal businesses and new job opportunities across sectors. Entrepreneurs who have hesitated to launch due to tax burdens may now find the courage and the financial breathing room, to start and scale.
More Supportive Reforms
Beyond the income tax holiday, several complementary reforms were introduced.
The government has removed capital gains tax on individuals transferring assets to companies they own and control. This encourages small business owners to structure their ventures more formally.
Stamp duty on mortgages and agreements has also been scrapped. This aims to lower the cost of credit and make business financing more affordable.
A waiver has been introduced on penalties and interest for taxpayers with outstanding liabilities, provided they pay their principal tax by June 30, 2026. This is expected to offer relief and help businesses and individuals return to normal operations.
The Electronic Fiscal Receipting and Invoicing System (EFRIS) has also seen adjustments. The fixed Shs 6 million fine per invoice for non-compliance has been replaced with a penalty equal to twice the tax due. This aims to enhance fairness and promote digital invoicing practices.
Sector-Specific Adjustments
The budget also includes targeted changes to support local industries.
In the textile sector, import duties on fabrics have been reduced from Shs 11,400 to Shs 7,600 per kilogram and on garments from Shs 13,300 to Shs 9,500 per kilogram, or 35%, whichever is higher.
To encourage more local value addition, a new Shs 38,000 per metric ton export levy has been introduced on wheat bran, cotton cake and maize bran.
Excise duty on beer made from locally malted barley has been removed, while beer made from at least 75% local raw materials will now be taxed at a higher rate to ensure parity.
Excise duty on cigarettes has been increased from Shs 55,000 to Shs 65,000 per 1,000 sticks for soft cap brands.
A 1% import declaration fee will now apply to taxable goods under the East African Community Common External Tariff, in line with regional trade policies.
Budget Financing and Vision
To fund the ambitious budget, the government plans to mobilise Shs 33.94 trillion from tax revenue, Shs 3.28 trillion from non-tax revenue, Shs 11.38 trillion through domestic borrowing, and Shs 13.41 trillion from external financing.
“These changes reflect our continued commitment to building a fairer and more predictable tax system that supports enterprise, encourages compliance and funds national priorities,” Kasaija concluded.
A New Chapter for Startups
With these reforms, Uganda is signaling a clear intent: local entrepreneurs are key to the country’s economic future. By easing the cost of doing business and encouraging formalisation, the government hopes to see a surge in innovation, productivity and job creation led by Ugandans themselves.
For many dreamers across the country, this tax holiday could be the difference between a business idea on paper and a thriving enterprise in reality.
