Government Sets Stricter Rules for Tax Waivers Amidst Shs27.8 Billion Requests

The Ugandan government is tightening the rules for tax waiver applications, introducing a more rigorous process for companies seeking financial relief from their tax liabilities. Finance Minister Henry Musasizi announced that tax remissions will now only be considered after all other avenues for tax recovery have been exhausted, as stipulated by the Tax Procedures Code Act.

This policy update comes as Parliament reviews requests for tax waivers totaling Shs27.78 billion for two companies: Fresh Cuts Uganda, seeking a waiver of Shs8.92 billion, and New Plan Uganda, requesting Shs18.86 billion. The significant sums have prompted questions from Members of Parliament (MPs) regarding the transparency and justification behind these waiver requests.

State Minister for Planning Amos Lugoloobi explained that Fresh Cuts applied for a waiver last year due to financial difficulties, particularly concerning Value Added Tax (VAT) liabilities. The government’s primary goal remains efficient and fair tax collection, but it acknowledges that certain businesses may encounter circumstances that hinder their ability to pay.

Before a tax waiver is recommended, the Uganda Revenue Authority (URA) must explore alternatives such as installment payments, recovery from non-essential assets, or offsetting tax credits. Taxpayers must also provide substantial, verifiable evidence of their financial situation, including insolvency or asset information. The URA Commissioner General will then assess if recovery is impossible due to hardship, impossibility, or excessive costs.

For businesses, the URA will evaluate liquidity, cash flow, access to finance, existing obligations, business viability, and the potential impact of enforcement on employment. Individual hardship criteria include serious illness, permanent incapacity, or loss of livelihood. The Deputy Speaker has urged MPs to conduct physical inspections of companies seeking waivers to verify their operational status before approving any relief.

This framework aims to ensure that tax remissions serve the public interest and sound tax administration, rather than becoming a loophole for tax avoidance. The government is seeking to prevent viable businesses from collapsing due to tax enforcement, while maintaining fiscal integrity.