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The Ugandan government has announced major tax relief measures for start-up businesses, hoping to bolster local domestic entrepreneurship.
The new measures were announced in the FY2025/26 budget presented today by Finance Minister, Hon. Matia Kasaija, at Kololo Independence Grounds.
These are aimed at fostering innovation, supporting local industries, and stimulating the country’s economic growth.
Tax Holiday for Start-up Businesses
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One of the most notable announcements from the Finance Minister is the introduction of a three-year income tax holiday for businesses established by Ugandan citizens from 1st July 2025.
The initiative is designed to ease the burden of high initial investment costs that often hinder the growth of start-ups.
This tax incentive, Kasaija said, is intended to foster innovation, support the formalisation of small and medium-sized enterprises (SMEs), and improve business survival rates.
By allowing new businesses to grow without the immediate burden of income tax, the government hopes to encourage entrepreneurship, enhance job creation, and improve access to finance.
“This is a deliberate policy intervention aimed at nurturing local businesses, creating employment, and stimulating growth,” Hon. Kasaija explained.
In addition to the income tax exemption, the government has removed the capital gains tax on transactions where an individual transfers assets to a company they own and control.
This will encourage more businesses to transition from informal entities to formal corporate structures, allowing them to access better financial opportunities and strengthen governance.
Minister Matia Kasaija
Local Beer Tax Cuts and Textile Import Duty Reduction
In a bid to support local industries, the government has made key adjustments to excise duties.
Effective July 2025, the excise duty rate on beer produced from locally grown and malted barley will be eliminated.
Previously set at 30 percent or Shs 950 per litre (whichever was higher), the duty was deemed redundant by government officials.
Additionally, beer manufactured using local raw materials will see its excise duty adjusted to 30 percent or Shs 900 per litre, from the previous rate of Shs 650 per litre.
These changes are designed to ensure a fair and equal tax burden for local manufacturers, regardless of whether they are taxed using a specific rate or an ad valorem rate.
The adjustments are expected to benefit Uganda’s local brewing industry by making locally produced beer more competitive.
Budget speech 2025
Textile imports
For the textile industry, the government has also responded to calls from traders by reducing the import duty on fabrics.
Starting 1st July 2025, the import duty will drop to USD 2 per kilogram or 35 per cent, whichever is higher, down from the previous USD 3 per kilogram.
In addition, the duty on imported garments will decrease to USD 2.5 per kilogram or 35 per cent, down from USD 3.5 per kilogram.
These reductions are expected to help traders who engage in value addition and stimulate further growth in the textile sector.
The total resource envelope for FY2025/26 amounts to Shs 72.37 trillion, with Shs 37.55 trillion coming from domestic revenue, including Shs 33.94 trillion in tax revenue.
Domestic borrowing is projected at Shs 11.38 trillion, with external financing for projects estimated at Shs 11.33 trillion.
These resources will be allocated across various sectors to drive Uganda’s development and support key initiatives like the tax incentives for start-ups and local industries.
The government has made it clear that these tax cuts and incentives are part of a broader strategy to stimulate the economy, create jobs, and enhance Uganda’s position as an attractive destination for investment.