Uganda’s government has proposed to exempt local startups from taxes for the first three years of operations.
- •The proposal in the Income Tax Bill, 2025 is designed to encourage entrepreneurship and stimulate innovation.
- •If approved by parliament, the tax exemption will only apply to startups founded by Ugandan citizens.
- •Financial challenges, the regulatory environment and other challenges have hampered the survival and success rates of startups in Uganda.
Similar to other developing countries, small and medium-sized enterprises are the lifeblood of Uganda’s economy.
Among the foremost issues with the regulatory environment in Uganda and East Africa is the unpredictability in tax laws, which makes it difficult for enterprises to plan ahead. Burgeoning startups are especially vulnerable to this, especially given the other ecosystem challenges such as adequate capital for the early phases.
In 2024, for example, the country reinstated a 25% import duty on electric vehicles, electric motorcycles, and hybrid vehicles. While it also exempted locally manufactured vehicles from taxes, its net effect was to disrupt the uptake of electric mobility solutions since none are manufactured in-country.
- •The Minister of State for Finance Henry Musasizi has also proposed a tax exemption for the Bujagali hydro power project until June 2032.
- •Other proposed tax exemptions include zero rating aircraft supply, and exempting solar lanterns, deep cycle batteries, billets, and textile inputs from VAT.
