Uganda Parliament Rejects 8% Tax on Imported Software, Approves VAT Amendment Bill

Uganda’s Parliament has enacted the Value Added Tax (Amendment) Bill, 2026, following the rejection of a government plan to levy an 8% tax on imported software.

Lawmakers argued that the tax would harm the Digital Uganda Vision, raise expenses for public systems like IFMIS, and burden private firms. MP Muhammad Nsereko highlighted the risks, noting that hardware relies on software and that renegotiating contracts could inflate taxpayer costs.

The ICT sector drives 9% of GDP, employs over 2.3 million people, and grows at 14.8% yearly, per GSMA data. Minister Henry Musasizi withdrew the clause, and Speaker Anita Among’s vote confirmed its removal, ensuring VAT input credits remain claimable on business inputs.

Debate centered on Clause 4(a), extending input tax credit claims for hotel and tourism developers. It now covers costs up to two years before commissioning for projects with minimum investments of $10 million for foreigners or $5 million for locals.

This addresses long construction timelines, preventing VAT from becoming a sunk cost. The finance committee suggested lowering the local threshold to $1.5 million, while MP Karim Masaba pushed for $500,000 in rural areas to support indigenous businesses.

MP Nandala Mafabi sought longer credit periods, but the government prioritized high-impact investments. Tourism accounts for 3.64% of GDP and 1.56 million jobs.

The bill awaits presidential approval and will apply from the 2026/27 fiscal year.

Source: The Observer (Uganda)