Overview:
Their appeal comes as the government begins implementing amendments to the Income Tax (Amendment) Act, 2026 and the VAT (Amendment) Act, 2026, which introduce fresh incentives aimed at attracting investment into high-end hotels and tourism facilities.
Hotel owners have urged the government to simplify Uganda’s tax regime, arguing that newly introduced tax incentives in the 2026/27 budget will have limited impact unless the country’s broader tax burden on the hospitality industry is addressed.
Their appeal comes as the government begins implementing amendments to the Income Tax (Amendment) Act, 2026 and the VAT (Amendment) Act, 2026, which introduce fresh incentives aimed at attracting investment into high-end hotels and tourism facilities.
Among the key reforms is an extension of the period within which hotel developers can claim Value Added Tax (VAT) on construction inputs. Developers will now be allowed to claim Input Tax Credit for qualifying goods and services acquired within two years before a hotel’s commissioning, up from the previous one-year limit.
The incentive applies to Ugandan investors committing at least $5 million (about Shs18.5 billion) and foreign investors investing at least $10 million (about Shs37 billion). Eligible expenditures include civil works, feasibility studies, architectural designs, construction services, locally produced building materials, infrastructure, machinery, equipment, furnishings and fittings that are not available on the local market.
The tax credit becomes available once the hotel or tourism facility is commissioned.
Government says the measure is intended to lower the cost of establishing quality tourism infrastructure and encourage more investment in the sector.
The budget also introduced income tax holidays for investors undertaking large-scale hotel and ultra-luxury tourism projects, another incentive aimed at accelerating tourism sector growth.
However, the Uganda Hotel Owners Association (UHOA) says the incentives fail to address the industry’s biggest challenge—a complex tax structure that subjects hotels to numerous national and local taxes, levies and regulatory fees.
UHOA chairperson Suzan Muhwezi said hotel operators are not opposed to paying taxes but want government to harmonise the multiple charges into a simpler and more predictable system.
“We are not asking for tax exemptions. We are asking for a tax regime that is easier to administer and makes doing business competitive,” she said.
According to the association, hotels are subjected to as many as 25 different taxes, statutory deductions, licences and regulatory fees collected by both central and local governments.
These include the 30 percent corporation tax, 18 percent VAT, a six percent levy on accommodation, food and beverage services, six percent withholding tax on supplier transactions, Pay As You Earn (PAYE), National Social Security Fund contributions, local hotel tax charged per room per night, property tax, ground rent and local service tax.
Hotel operators also pay annual occupational safety and health fees, copyright levies for the use of protected media content, service charges on restaurant bills, import testing surcharges imposed by the Uganda National Bureau of Standards on selected hotel amenities, and national park night fees for guests using protected areas.
In addition, operators are required to obtain multiple operational licences, including trading licences, restaurant licences, liquor licences, swimming pool licences, entertainment licences, Uganda Tourism Board licences and pay the Tourism Development Levy.
Industry players argue that the cumulative effect of these taxes and fees significantly raises the cost of operating hotels, making Uganda less competitive than neighbouring tourism destinations.
UHOA says reducing and harmonising the taxes would encourage more investment, particularly outside Kampala where quality accommodation remains limited despite growing tourism potential.
The government’s new tax incentives complement other interventions targeting the hospitality sector. Among them is a Shs101 billion financing facility for hotel developers in the Bunyoro sub-region as Uganda prepares to co-host the 2027 Africa Cup of Nations (AFCON).
The facility will offer loans at a five percent interest rate to qualifying investors constructing or upgrading hotels to at least four-star standard, with the aim of increasing the country’s accommodation capacity ahead of the continental tournament.