Business 10 August 2026 Daily Monitor (Uganda)
Uganda Doubles VAT Threshold to Shs300 Million, Impacting Small Businesses
Uganda has doubled its Value Added Tax (VAT) registration threshold to Shs300 million, a move aimed at simplifying compliance for small enterprises and allowing the Uganda Revenue Authority (URA) to focus on larger taxpayers. While businesses below the new threshold can deregister from VAT, they will lose the ability to claim input VAT. Source: https://www.monitor.co.ug/uganda/business/prosper/vat-threshold-doubled-to-shs300m-what-changes-for-small-businesses--5553596
Uganda’s tax landscape has seen a significant shift with the Value Added Tax (VAT) registration threshold being doubled from Shs150 million to Shs300 million, effective July 1, 2026. This adjustment, approved by Parliament as part of the FY2026/27 budget, is projected to bring in an additional Shs349 billion in revenue.
The primary aim of this increase is to reduce the compliance burden on small and medium-sized enterprises (SMEs) and allow the Uganda Revenue Authority (URA) to better allocate its enforcement resources towards larger businesses. Data from URA indicated that as of June 2024, 90 percent of VAT-registered taxpayers were very small businesses, contributing only about 3 percent of the total VAT revenue, often filing nil returns which added to administrative workload without significant revenue generation.
For businesses with an annual turnover below the new Shs300 million threshold, the option to deregister from VAT presents a chance to cut costs and eliminate the obligation of monthly VAT filings. However, this decision comes with a trade-off: the inability to reclaim VAT paid on their business purchases (input VAT).
Experts advise businesses to carefully weigh the benefits of reduced compliance costs and improved cash flow against the loss of input VAT recovery. While deregistering from VAT, businesses must still adhere to invoicing and documentation rules, including the use of the Electronic Fiscal Receipting and Invoicing Solution (EFRIS) for generating receipts and invoices, as mandated by the Income Tax Act to support expenses.
This reform is seen as a potential catalyst for business formalization, encouraging enterprises that have surpassed the Shs300 million mark to register for VAT. Formal registration is crucial for growth, competitiveness, and accessing larger contracts often reserved for registered companies.
Businesses that remain VAT-registered must continue to meet obligations such as filing monthly returns, maintaining detailed records, and issuing EFRIS-compliant invoices. This can increase administrative costs and demands for robust accounting systems, while also impacting cash flows due to remittance deadlines.