Presumptive Tax in Uganda (2026): What a Small Business Actually Pays

The regime most Ugandan businesses are actually in

Ask a shopkeeper in Kikuubo what rate of income tax they pay and you will usually hear "thirty percent". That is the rate that applies to a company's profit. It is almost certainly not the rate that applies to them.

Uganda taxes small businesses under a separate, much simpler regime. If your business turnover for the year is under UGX 150 million, the Income Tax Act does not send you to the ordinary rules at all. It sends you to a short schedule that charges tax on turnover rather than profit — and the rates in that schedule top out at 0.7%.

That difference is not a rounding adjustment. It is the difference between a tax bill measured in hundreds of thousands of shillings and one measured in millions.

Who is in it

The test in section 4(5) of the Income Tax Act is narrow and mechanical. You are in the presumptive regime if:

• you are a resident taxpayer;
• your gross turnover for the year of income from carrying on a business is less than UGX 150 million; and
• you have not elected out of it in writing (more on that below).

Note what the test does not look at. It does not look at your profit, your margin, your staff numbers or your sector. It looks at money in.

URA's own guidance describes the practical band as turnover between UGX 10 million and UGX 150 million a year — roughly UGX 27,500 of sales a day at the bottom end. The reason that lower figure matters is that the rate schedule charges nil where turnover does not exceed UGX 10 million. You are still inside the regime below that line; the tax is simply zero.

Who is shut out of it

Section 4(7) excludes a specific list, and if you are on it the regime is not available to you no matter how small your turnover is. It does not apply to a resident taxpayer in the business of providing:

• medical, dental, architectural, engineering, accounting or legal services, or other professional services;
• public entertainment services;
• public utility services; or
• construction services.

A one-person accounting practice turning over UGX 40 million is taxed on its chargeable income in the ordinary way. A one-person hardware shop turning over UGX 40 million is not. That is a deliberate policy choice, and it is the most common reason a business believes it is in the regime when it is not.

What you actually pay

The rate schedule has two columns, and which one applies to you depends entirely on whether you keep records.

Read the two columns side by side, because the gap between them is the point of the whole design.

• Turnover UGX 25 million. With records: 0.4% of 15 million = UGX 60,000. Without: UGX 80,000.
• Turnover UGX 45 million. With records: 80,000 + 0.5% of 15 million = UGX 155,000. Without: UGX 200,000.
• Turnover UGX 70 million. With records: 180,000 + 0.6% of 20 million = UGX 300,000. Without: UGX 400,000.
• Turnover UGX 120 million. With records: 360,000 + 0.7% of 40 million = UGX 640,000. Without: UGX 900,000.

At UGX 120 million of sales, a business that writes things down pays UGX 640,000 for the year. That is an effective rate of about 0.53%. The same business that does not write things down pays UGX 900,000 — around 40% more, for the sake of a notebook.

Records are not optional anyway

It is worth being blunt here, because the two-column schedule can read as though keeping records is a discount you may decline. It is not.

The Tax Procedures Code Act requires a taxpayer to maintain records — in English, on paper or electronically — sufficient to let their tax liability be readily ascertained, and to retain them for five years after the end of the tax period they relate to. A person who deliberately fails to keep proper records is liable to a penal tax equal to double the tax payable for the period concerned.

So the "without records" column is not a lawful alternative you choose. It is what URA charges when you have not done something you were already obliged to do, and it sits alongside a penalty rather than instead of one.

For a small trader, "records" does not mean audited accounts. A dated daily sales book, kept consistently and retained with the invoices and receipts behind it, is the substance of it.

The catch: it is a final tax

Section 4(5) is explicit about what you give up in exchange for the low rate. The presumptive tax is a final tax on your business income, and:

• no deduction is allowed for expenditure or losses incurred in producing that income; and
• no tax credits may be used to reduce it, except as the schedule itself allows — which is a credit for withholding tax already suffered on amounts inside your turnover, and a credit for provisional tax you have paid.

That last exception matters if your customers withhold tax from what they pay you: those amounts are not lost, but you have to claim them.

The consequence is that a loss-making or very thin-margin business still pays. Tax is charged on sales, and sales happen whether or not you made money. A trader who turned over UGX 100 million and lost money doing it still owes UGX 500,000, and gets no loss to carry forward against a better year.

When electing out is the better deal

You are allowed to leave. Section 4(5) lets you elect, by notice in writing to the Commissioner, for the ordinary rules in section 4(2) to apply instead — profit-based, with deductions allowed. Section 4(6) sets the deadline: the election must be lodged by the due date for your return for the year it relates to.

The arithmetic decides it, and it usually decides it the same way:

• Profitable businesses should almost always stay put. At UGX 120 million of turnover with, say, UGX 40 million of profit, presumptive tax is UGX 640,000. On the ordinary basis you would be taxed on the 40 million. There is no contest.
• Loss-making or barely-breaking-even businesses should do the sum. If there is no profit, the ordinary basis may produce little or no tax and lets you carry a loss forward. Presumptive tax charges you regardless.

If you are close to the line, that is worth an hour with a tax adviser before the return deadline rather than a guess after it.

Filing and paying

Uganda's year of income runs to 30 June. A return of income is due not later than six months after the end of that year — so 31 December for the year just ended. You need a TIN, and you file through URA's portal.

Missing the deadline is charged under section 48 of the Tax Procedures Code: a penal tax of 2% of the tax payable under the return, or ten currency points per month, whichever is higher, for as long as the return is outstanding. A currency point is UGX 20,000, so the floor is UGX 200,000 a month.

Look at that against the table above. A business with UGX 25 million of turnover owes UGX 60,000 in tax for the whole year — and can run up UGX 200,000 a month for not filing the return that reports it. The penalty for silence is far larger than the tax. Businesses in this regime lose money to late filing far more often than to the tax itself.

When you grow out of it

Cross UGX 150 million of turnover and the presumptive regime stops applying. You move onto the ordinary rules: taxed on chargeable income, with deductions allowed, and with the record-keeping and filing that goes with that.

VAT is a separate question with its own threshold, and that threshold changed with effect from 1 July 2026 — it was raised, and it now sits above the UGX 150 million presumptive ceiling rather than level with it. Reported figures for the new threshold differ, so confirm the current number with URA directly before assuming you are under it. The structural point is the one to carry away: passing out of presumptive tax and becoming liable to register for VAT are no longer the same moment.

Plan for the crossing before you reach it. The businesses that struggle are the ones that discover the change after a year of trading without the records to support it.

Frequently asked questions

Is presumptive tax the same as trading licence fees? No. A trading licence is a local government charge; presumptive tax is national income tax administered by URA. Paying one does not settle the other.

I have a salary and a side business. How does that work? They are taxed separately. Your employment income is dealt with through PAYE — see our guide to how PAYE and your salary work in Uganda — while your business turnover is assessed under the presumptive rules. Rental income is a third, separate regime again, covered in our guide to rental income tax for landlords.

Does the UGX 150 million test use profit or sales? Sales. Gross turnover. A business with UGX 140 million of sales and UGX 5 million of profit is inside the regime; a business with UGX 160 million of sales and no profit at all is outside it.

What counts as "records"? Enough to let your liability be worked out readily, kept in English and retained for five years. In practice, a consistently maintained record of daily sales, with the supporting invoices and receipts, is the core of it.

If I make a loss, do I still pay? Yes, unless you elect out in time. The tax is charged on turnover, not profit, and it is final.

Can I switch back after electing out? The Act provides for the election year by year, lodged by the return due date. Treat it as a decision you make each year rather than one you make once, and confirm your position with URA or an adviser before the deadline.

Where should I keep the money I set aside for it? Somewhere separate from the trading float, so it is still there in December. A money market fund or an interest-bearing account is the usual answer — our guide to unit trusts and money market funds in Uganda covers what protects the money in each.

Sources

• Income Tax Act, section 4(5), (6) and (7), and the Small Business Taxpayers Tax Rates schedule, Part I — as published in the Uganda Revenue Authority's Compendium for various Domestic Tax Laws (July 2021 edition), URA's most recent published consolidation of the domestic tax laws.
• Tax Procedures Code Act, sections 48 and 49, the record-keeping provisions, and Schedule 1 (one currency point = UGX 20,000) — same compendium.
• Income Tax Act, section 2 ("year of income") and section 92A (return due six months after year end) — same compendium.
• Uganda Revenue Authority, "Small Business Taxpayer" (ura.go.ug), consulted 6 September 2026.
• Income Tax (Amendment) Bill, 2026 and Value Added Tax (Amendment) Bill, 2026, Uganda Gazette Bills Supplement No. 2, 27 March 2026 — confirming that the 2026 income tax amendments do not touch section 4 or the small business rate schedule, and that the VAT registration threshold was amended.

Last reviewed: September 2026. General information, not tax advice. Rates, thresholds and deadlines are set by law and administered by the Uganda Revenue Authority — confirm your own position with URA or a qualified tax adviser before acting.