Uganda Introduces Key Extractive Industry Tax Reforms to Improve Cash Flow & Reduce Compliance Costs
New tax measures affecting the petroleum and mining sectors aim to strengthen investment attractiveness, improve VAT recovery, and reduce operational tax burdens.
Uganda has introduced significant tax reforms affecting the extractive industry as part of broader efforts to improve investment attractiveness, reduce compliance costs, and strengthen operational cash flow within the petroleum and mining sectors.
The changes, which became effective beginning 1 July 2025, impact Value Added Tax (VAT) treatment, withholding tax obligations, and compliance requirements for contractors, licensees, and non-resident service providers operating within Uganda’s extractive sector.
Reverse-Charge VAT on Imported Services
Under the revised framework, reverse-charge VAT incurred on imported services consumed by recognized contractors or licensees within the petroleum and mining industry is now allowable for input VAT credit, provided the services relate to taxable VAT activities.
Previously, reverse-charge VAT often created a significant cash flow burden because contractors were required to remit VAT to the Uganda Revenue Authority (URA) before seeking refunds. The revised approach now allows such VAT to be claimed as recoverable input tax, reducing the financial burden on operators.
Reduced Withholding Tax for Non-Resident Contractors
Amendments to the Income Tax Act have also reduced the withholding tax rate applicable to non-resident contractors providing services to extractive industry licensees.
The withholding tax rate has been reduced from the previous statutory rate of 15% to 10%, a move expected to improve competitiveness and facilitate engagement of specialized foreign expertise within Uganda’s mining and petroleum projects.
EFRIS Compliance Requirements
Businesses seeking to claim input VAT credits, including reverse-charge VAT, must ensure that transactions are properly documented through the Electronic Fiscal Receipting and Invoicing Solution (EFRIS).
Proper EFRIS compliance remains a critical requirement for validating input VAT claims, improving transaction transparency, and strengthening tax administration oversight.
Proposed 2026/2027 VAT Amendments
Uganda’s proposed Value Added Tax (Amendment) Bill, 2026, expected to take effect on 1 July 2026, seeks to further modernize tax compliance processes within the economy.
Among the proposals under consideration is the removal of the 6% withholding tax on transactions already captured within the EFRIS system. The proposal is intended to improve supplier cash flow and reduce unnecessary tax withholding where electronic compliance records already exist.
Business Implications
The reforms are expected to have significant implications for mining companies, petroleum contractors, foreign service providers, and investors operating within Uganda’s extractive industry.
Organizations should review their VAT recovery processes, withholding tax obligations, EFRIS compliance procedures, contractual arrangements, and overall tax planning strategies to ensure alignment with the evolving regulatory framework.
“Modern and efficient tax frameworks remain essential for supporting investment, operational sustainability, and long-term growth within the extractive sector.”