Understanding new tax amnesty

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OPINION

By Edward Balaba

The tax amnesty has been (re) introduced with effect from July 1, 2025. Taxpayers in Uganda stand to benefit from a waiver of the interest and penalties outstanding as of June 30, 2024, where the associated principal tax is paid by June 30, 2026.

The payment of the outstanding principal tax component of the tax liability is what triggers a waiver of interest and penalties thereon.

Unlike previous tax amnesties, the tax amnesty also covers the waiver of any additional interest that continues to accumulate on the qualifying principal tax from the “cut-off date” of June 30, 2024, until the actual payment date (being not later than June 30, 2026).

Where a taxpayer makes a partial payment or settles the principal tax in installments, only a corresponding portion of the interest will be waived as determined on a pro rata basis.

In all, the expected outcome is that as long as the entire principal tax amount which was due and unpaid by June 30, 2025 stands as fully settled not later than June 30, 2026 (whether as a lumpsum or in installment payments), the full interest amounts due as at the date of completion of payment should also stand fully waived.

The amnesty is available and accessible for the 12-months’ period from July 1, 2025, to June 30, 2026 and covers waivers of interest and penalties related to employment tax (PAYE), personal income tax, corporate income tax, withholding taxes, value added tax, excise duties and gaming tax.

The amnesty is a more readily accessible route than the longstanding option of waiver of unpaid taxes, interest and penalties by the finance ministry, at the recommendation of Uganda Revenue Authority (URA), and with approval of the Parliament of Uganda.

The minister-with-parliamentary approval option is only available on a case-by-case basis and requires proof that the unpaid taxes cannot be effectively recovered from the taxpayer by reason of hardship, impossibility, undue difficulty or excessive cost of recovery.

If properly implemented by URA, the amnesty promises to be an impactful tax measure for taxpayers, the URA and by extension government of Uganda.

The taxpayers with unpaid tax arrears will voluntarily pay them because of the reduced tax expense arising from the waiver of interest and penalties.

In fact, the offer of amnesty is a recognition that accumulated interest, and penalties can deter timely payment or cause delayed or non-payment of taxes. URA will increase its tax collections without incurring the excessive administrative costs associated with enforced collection of tax arrears. Tax arrears from both detected and undetected tax liabilities will be recovered in a faster and friendlier manner.

However, the objectives of the programme can only be fully achieved if URA adopts a facilitative approach to enable taxpayers to access the tax amnesty, without undue technicalities and delays.

In the previous programmes, the interest amounts to be waived were contested by taxpayers in many cases because of the controversial application of the automated tax ledger records system, order of payment-allocation rules, among other issues.

The access criteria, administrative requirements and computation methodology for the waiver of interest and penalties should be simple, clear and less burdensome.

Any cumbersome procedural requirements within the program keep-away qualifying taxpayers and in turn, keep out the expected government revenue from collection and recovery of longstanding tax arrears.

The writer is a tax partner, MMAKS Advocates (ALN Uganda)