KAMPALA, April 21, 2026 — Parliament has passed the Value Added Tax [ VAT ] Amendment Bill, 2026, adopting a series of reforms aimed at easing compliance for small businesses, improving tax administration and attracting investment, following a report presented by Mbale Industrial Division Member of Parliament Karim Masaba.
The House approved the Bill with amendments after scrutiny by the committee, which argued that the changes would modernise the VAT system while addressing long standing concerns from taxpayers and the private sector.
At the centre of the reforms is the increase in the VAT registration threshold from Shs 150 million to Shs 250mln, a move lawmakers say will reduce the compliance burden on small and medium enterprises.
“The increase in the VAT threshold will shift focus of tax administration to higher earning businesses, making it easier for the Uganda Revenue Authority to administer VAT,” the committee report states.
Legislators noted that many businesses within the current threshold contribute only a small share of total VAT collections but face high compliance costs, including filing monthly returns and maintaining accounting systems.
The Bill also removes VAT withholding where a taxpayer issues an electronic invoice or receipt, allowing suppliers to receive the full 18 percent VAT and easing cash flow constraints.
“With the proposed amendment, a supplier will now have the full 18 percent VAT, thereby addressing the prevailing cash flow challenges,” the report notes.
However, debate on the floor revealed concerns over key provisions, particularly the treatment of software under the proposed amendments.
Kampala Central MP Muhammad Nsereko raised reservations over the proposal to impose VAT on software, warning that it could undermine Uganda’s digital transformation agenda.
“I have a huge passion for technology,” Nsereko told the House, describing it as an equaliser for unemployed but innovative young people and a driver of growth in emerging economies.
He argued that software is central to innovation and cautioned against policies that could slow technological progress.
“Software infrastructure is central to innovation. Without it, progress in technology and digital transformation would be limited,” he said.
Nsereko further noted that software is already embedded in critical systems across the economy, including government platforms such as electronic receipting systems, warning that taxing it could affect service delivery.
“Software is embedded in everyday systems across the economy, including government platforms like EFRIS,” he added.
Concerns were also raised over the broader VAT framework, with Erute South MP Jonathan Odur questioning both the tax rate and structural changes proposed in the Bill.
Odur noted that Uganda’s VAT rate of 18 percent remains higher than in some East African countries and said government had not presented sufficient justification for maintaining it.
“Some countries in the region apply lower rates including 16 percent and even 8 percent, but no report has been presented to guide this House,” he said.
He also questioned the rationale for raising the VAT registration threshold and criticised provisions that create different conditions for citizens and foreign investors in accessing tax credits.
“Amounts equivalent to millions of dollars are far beyond the reach of most Ugandan citizens. These are not easy conditions for an ordinary person investing in this country to meet,” Odur argued.
Despite the concerns, Parliament adopted the committee recommendations, including expanded tax credits for developers of hotels and tourism facilities, aimed at lowering investment costs and boosting the sector.
Lawmakers said the changes will allow investors to recover more VAT on construction inputs, making large scale projects more viable.
“This change ensures that VAT does not become an extra cost to a VAT registered business, reducing the overall cost of building hotels and making Uganda more attractive to investors,” the committee observed.
The Bill also introduces incentives to promote electronic receipting by lowering the threshold for VAT refunds to non-registered taxpayers from Shs 5mln to Shs 2mln within 30 days.
“This amendment is intended to encourage the use of electronic fiscal receipting and invoicing and improve transparency in tax collection,” the report states.
Other provisions include revising rules on interest for delayed VAT refunds, granting the Finance Minister powers to determine tax payment timelines for the mining sector and extending tax exemptions to selected international organisations.
The committee drew input from a wide range of stakeholders including the Ministry of Finance, the Uganda Revenue Authority, the Private Sector Foundation Uganda and the Uganda Manufacturers Association among others.
The Bill, which is expected to generate an additional Shs 353 billion annually, was passed after Parliament considered it clause by clause in the Committee of the Whole House.
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