Uganda’s proposed tax amendments for the financial year 2026-2027 are drawing mixed reactions, with players in the insurance sector warning that some of the measures, while aimed at boosting revenue, could stifle growth, discourage investment, and inadvertently increase the cost of doing business.
The reforms, tabled by the Ministry of Finance, Planning and Economic Development (MoFPED), seek to expand the tax base and improve the country’s tax-to-gross domestic product (GDP) ratio through changes to key laws including the Income Tax Act, Stamp Duty Act and Excise Duty Act.
However, industry stakeholders say that revenue mobilisation must be carefully balanced with the need to sustain private sector growth. Tax experts note that many of the proposals are influenced by evolving jurisprudence from the Tax Appeals Tribunal (TAT), reflecting the government’s attempt to close legal gaps and enhance compliance.
According to John Jet Tusabe, director of tax and regulatory services at BDO East Africa, some of the amendments, particularly those affecting the insurance sector, require refinement.
Good news on withholding tax
One of the most welcomed proposals is the move to make the 10% withholding tax (WHT) on commissions paid to insurance agents a final tax. Currently, agents are required to file annual income tax returns and reconcile their tax obligations, despite having already paid WHT.
Tusabe explained that turning the tax into a final liability would ease compliance burdens. “Insurance agents have long struggled with tracking expenses and filing returns. This amendment simplifies their obligations and provides much-needed relief,” he said.
This position is supported by the Uganda Insurers Association (UIA). According to the association’s chairperson, Jonan Kisakye, the lack of clarity in the current law has created disputes between agents and Uganda Revenue Authority (URA), with agents being asked to produce historical expense records that are difficult to track.
Kisakye noted that many agents had initially assumed the 10% WHT, introduced in 2020, was a final tax, only to later face compliance challenges.
He argued that making it explicitly final, and backdating its application, would restore certainty and improve insurance penetration by allowing agents to focus on sales rather than tax administration.
Moses Joshua Muyomba, chairman of Uganda Insurance Agents Association (UIAA), said the agents support the application of withholding tax, and further noted that it has helped improve compliance and formalisation within the sector, ensuring that tax obligations are met without placing excessive administrative burdens on the over 4,000 individual agents.
In their view, a well-structured withholding tax system provides predictability and reduces the risk of tax evasion, while also simplifying the process of tax collection for the government.
However, they emphasise that the withholding tax regime should be refined to avoid overburdening agents with cash-flow constraints. Proposals include ensuring timely reconciliation and crediting of withheld amounts, as well as setting rates that reflect the realities of commission-based earnings.
Muyomba said insurance agents largely operate on earned commissions rather than fixed salaries and added that any additional tax burden on these earnings risks discouraging agents, who are the primary link between insurers and the public.
“A slowdown in agent activity could, in turn, weaken insurance penetration in Uganda, which remains relatively low compared to regional and global benchmarks. The agents are therefore urging policymakers to adopt reforms that support rather than constrain distribution channels that are critical to the industry’s growth,” Muyomba said.
Key concerns for insurers
However, not all proposed amendments have been received positively. A key concern for insurers is the proposed introduction of a minimum tax on companies that report losses for more than seven years.
Under the amendment, such businesses would be required to pay tax equal to the higher of 0.5% of gross income or 30% of chargeable income.
Ruth Namuli, the chairperson of UIA, warned that this could disproportionately affect the insurance sector, particularly life insurance firms, which often operate at a loss in their early years due to high claims and operational costs.
“Imposing tax on gross income means that even companies without profits will be taxed, which contradicts the fundamental principle that corporate tax should be based on income,” Namuli noted.
Namuli added that Uganda’s life insurance sector is still in its infancy, characterised by low market penetration and long-term investment cycles.
External shocks such as Covid-19 claims and loan defaults following donor funding cuts have further strained the sector, making it difficult for firms to turn profitable quickly.
The association is therefore proposing that the amendment be rejected altogether, or at the very least, that life insurance companies be exempted from the minimum tax requirement.
Regulator speaks out
Protazio Sande, director of planning, market research and development at the Insurance Regulatory Authority of Uganda (IRA), said life insurance businesses are structurally different from most industries in that they incur significant upfront costs and may take many years before reaching profitability due to the long-term nature of their products.
Therefore, he also reiterated that “Imposing a minimum tax regardless of profitability risks penalising a business model that is inherently long-term.”
“Such a move could discourage new entrants, slow sector growth and innovation, and ultimately reduce insurance penetration, which is still relatively low in Uganda,” he said.
While the intention to broaden the tax base is understandable, Sande said a blanket approach may be inequitable.
“There is a need for sector-specific considerations or longer grace periods for industries like life insurance. If applied uniformly, the policy risks unintended consequences for sectors that operate on fundamentally different models, such as life insurance,” he warned.
On the other hand, Emmanuel Sanyu Safali, director of Promise Esaf Insurance Promoters Uganda Ltd, said applying a minimum tax on gross income risks penalising compliant businesses rather than targeting tax avoidance.
“For non-life insurers, claims volatility, from accidents, medical inflation, climate risks and court awards, means firms can record losses even with strong premium volumes. Taxing them in such periods could weaken capital buffers and, ultimately, drive up premiums,” he said.
Additionally, he said the situation is worsened by the existing VAT imbalance where life insurance is exempt but non-life products are taxed, making covers like motor and medical insurance more expensive. According to him, adding new taxes without addressing this gap will only discourage uptake.
“While revenue mobilisation is important, tax policy must recognise the capital-intensive and risk-pooling nature of insurance. Otherwise, we risk slowing penetration, weakening financial inclusion, and undermining long-term resilience,” he said.
Stamp duty on motor vehicle and motorcycle
Another contentious issue is the proposed stamp duty on motor vehicle and motorcycle registration and transfer. The amendment introduces a charge of UGX 200,000 (close to US$53) for motor vehicles and UGX 50,000 (about US$13) for motorcycles.
While the government views this as a new revenue stream targeting Uganda’s growing vehicle fleet, insurers argue it amounts to double taxation. Currently, motor vehicle insurance policies already attract a stamp duty of UGX 35,000 (approximately US$9.2).
Kisakye emphasised that imposing stamp duty both on insurance policies and on vehicle registration or transfer would unfairly burden taxpayers. He proposed that the law be adjusted so that stamp duty is only applied once, either at registration or on the insurance policy, but not both.
“There is a real risk that this could discourage compliance with vehicle transfers and increase informality in the sector,” he cautioned.
Excise duty on fuel
The proposed increase in excise duty on fuel has also raised alarms within the insurance industry and beyond. Government plans to raise the levy on petrol from UGX 1,550 (about 42 US cents) to UGX 1,750 (close to 47 US cents) per litre, and diesel from UGX 1,230 (about 33 US cents) to UGX1,430 (approximately 39 US cents).
According to Kisakye, this would have a ripple effect across the economy, driving up transport costs and, ultimately, insurance premiums. He pointed out that fuel is a key input in nearly all sectors, and higher costs could dampen economic activity.
“Energy costs affect everything, from logistics to claims processing. Increasing fuel taxes at a time of global instability could make Uganda less competitive,” he said, urging the government to reconsider the timing of the proposal.
Personal income tax
On personal income tax, insurers say the proposed adjustment of tax brackets, raising the tax-free threshold from UGX 235,000 (about US$63.51) to UGX 335,000 (close to US$90.54), falls short of reflecting the true cost of living.
Kisakye argues that inflation-adjusted thresholds should be higher, proposing a tax-free band of at least UGX 500,000 (about US$135.14) and a revision of the top tax bracket to apply at UGX 18 million (approximately US$4,737).
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