The concept of tax amnesty is not new in Uganda. Tax amnesty programs have been used worldwide as a tool to boost revenue collection while offering taxpayers a break from the punitive aspects of tax law.
Tax amnesty is a temporary measure that allows taxpayers both individuals and businesses to pay their overdue taxes without the financial strain of penalties and interest. Governments worldwide use such programs to encourage tax compliance, reduce outstanding liabilities, and enhance fiscal stability. In Uganda, the authority to introduce tax amnesty comes from the Ministry of Finance, Planning, and Economic Development (MoFPED), which proposes such measures to Parliament.
The tax amnesty is implemented by the Uganda Revenue Authority (URA) once it is legislated.
In an attempt to stimulate economic growth, enhance compliance, and recover outstanding tax liabilities, the Government of Uganda has reintroduced a tax amnesty program for the 2025/2026 fiscal year. This proposal follows the success of the previous amnesty introduced in the 2024/2025 financial year, which saw a remarkable increase in voluntary tax compliance.
Now, with the legislative backing firmly in place, businesses once again have a chance to resolve their tax issues and make a fresh start, without the looming burden of accrued interest or penalties. This move, approved by Parliament in May 2025, awaits presidential assent, provides businesses with a unique opportunity to clear outstanding tax liabilities without incurring interest or penalties, provided the principal taxes are settled by 30th June 2026. With Uganda’s national budget now projected to rise to Shs 72 trillion, this tax amnesty is a crucial part of the government’s strategy to bolster revenue collection while supporting businesses struggling with tax arrears, especially following the economic disruptions caused by the COVID-19 pandemic.
The proposed tax amnesty for the 2025/2026 financial year will waive interest and penalties on principal taxes due as of 30th June 2024, provided taxpayers pay their outstanding principal tax amounts by 30th June 2026. If businesses can only pay a portion of their tax liabilities, they will still benefit from a proportional reduction in the penalties and interest. This flexible approach is designed to assist businesses of all sizes, particularly small and medium-sized enterprises (SMEs), which have faced substantial financial strain due to the ongoing economic challenges.
2024/2025 fiscal year was hailed as a success as the waiver of interest and penalties allowed thousands of businesses to voluntarily settle their tax arrears, resulting in a significant boost to the national revenue pool. According to data from the Uganda Revenue Authority (URA), more than 1,500 businesses participated in the tax amnesty, collectively settling over UGX 3 trillion in outstanding taxes. This surge in voluntary payments not only eased the financial burdens on businesses but also provided much-needed liquidity to the government’s coffers, supporting key economic activities.
It further led to substantial administrative cost savings for URA. By reducing the need for costly enforcement actions, audits, and legal proceedings, the amnesty allowed URA to streamline its operations and reallocate resources to other critical functions. Additionally, the program helped foster a more cooperative relationship between businesses and the tax authority, as it offered a clear, transparent path for businesses to resolve their tax issues.
The introduction of this new tax amnesty aligns with the government’s fiscal goals for the 2025/2026 financial year. With the national budget now estimated at Ugx 72 trillion, the government faces a growing need to meet its revenue targets while managing increasing budgetary demands. The tax amnesty is viewed as a vital tool to close the revenue gap by encouraging businesses to settle their tax liabilities voluntarily, rather than waiting for the government to pursue costly enforcement actions.
Statistics show that Uganda’s tax compliance rate has traditionally been lower than the regional average, and the government views this amnesty as an essential tool for improving compliance levels. Providing businesses with an opportunity to clear their outstanding tax debts without the financial burden of penalties and interest, the government hopes to achieve several objectives like enhancing tax compliance across the business community, helping to bridge the fiscal deficit and therefore, the revenue raised through this amnesty will play a crucial role in ensuring that the government can meet its budgetary commitments without relying too heavily on external borrowing. The amnesty will also aid at reducing the administrative burden on URA. Tax recovery actions can be time-consuming and costly, particularly for businesses that have large tax arrears. The waiver of interest and penalties gives businesses a chance to settle their obligations quickly, reducing the need for expensive and time-intensive tax enforcement activities.
To take advantage of the tax amnesty, businesses must meet a few simple requirements. They must have outstanding tax liabilities as of 30th June 2024, which can include VAT, PAYE, corporate tax, excise duties, or other applicable taxes. The business must then voluntarily pay their outstanding principal taxes by 30th June 2026 to benefit from the waiver of interest and penalties.
The government has also made provisions for businesses that may not be able to settle the entire amount upfront. If a business can only pay a portion of its outstanding taxes, it will still benefit from a pro-rata reduction in penalties and interest. This flexibility is designed to accommodate businesses of all sizes, ensuring that even those with limited financial capacity can still participate in the amnesty and resolve their tax issues.
As the government moves forward with the implementation of the 2025/2026 budget, which totals a substantial Ugx 72 trillion, businesses must recognize the importance of participating in the tax amnesty program. This initiative offers a one-time opportunity to clear outstanding tax obligations on favorable terms, ensuring that businesses can continue to operate without the fear of penalties or interest accumulating.
The reintroduction of the tax amnesty is a critical element of the government’s broader strategy to enhance revenue collection, improve tax compliance, and support business recovery. Businesses that choose not to take advantage of this opportunity risk facing harsher enforcement measures once the amnesty period ends.
The writer is a Chartered Tax Accountant and an International tax Advisor.
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