UGANDA, Kampala | Real Muloodi News | Landlords and tenants could soon breathe easier if government approves fresh proposals to reform how Rental Income Tax and Property Rates are levied under the Income Tax Act and Property Rates Act. The reforms—expected in the upcoming Income Tax Bill and Budget Call Circulars—seek to eliminate double taxation, improve compliance, and attract more investment into the housing sector.
A senior Ministry of Local Government official described the package as a “win-win for property owners and government,” noting that a simpler regime, paired with modern compliance tools, will strengthen housing development and municipal services.
What’s Changing
Key measures under discussion include:
- Reducing the individual rental tax rate from 12% to 10%.
- Allowing companies to deduct up to 75% of eligible expenses.
- Formally recognizing property rates paid to Local Governments and interest on construction loans/mortgages as tax-deductible.
Officials say these steps would make it easier for developers to build much-needed rental units and help close Uganda’s 2.4 million housing deficit.
Ending Double Taxation
For years, landlords have complained of double taxation—paying Rental Income Tax to the Uganda Revenue Authority (URA) while also paying Property Rates to Local Governments, plus VAT, stamp duty, capital gains tax, and ground rent. In some cases, total tax burdens have approached 50% of rental earnings and are often passed on to tenants.
The reform package is designed to harmonize national and local obligations.
Standardizing Property Rates
The proposals also seek to:
- Standardize the rateable value at 5% across all Local Governments.
- Limit exemptions while expanding the base to include vacant land and industrial property.
- Empower Local Councils to enforce compliance, including temporarily sealing properties when owners refuse to pay.
According to the Ministry of Local Government, these measures will be implemented by trained personnel, supported by digital systems.
Tackling Low Compliance
Currently, fewer than 40% of landlords are fully compliant, with many under-declaring income or avoiding registration. This starves Local Governments of predictable own-source revenue and increases reliance on central transfers.
To improve compliance while lowering friction for honest taxpayers, authorities are emphasizing data-driven tools:
- EFRIS (Electronic Fiscal Receipting and Invoicing System) provides authenticated e-receipts and e-invoices that improve transaction visibility for URA and taxpayers.
- rTCS (Rental Tax Compliance System) complements such efforts with rental-specific intelligence—integrating multi-source datasets, geospatial signals, and analytics to uncover undeclared and under-declared rental income, reconcile taxpayer profiles, and streamline assessments.
EFRIS can strengthen transaction-level evidence, while rTCS-type analytics can identify landlord non-compliance, turning sporadic drives into sustained, auditable compliance.
Unlocking Housing Investment
Uganda’s housing deficit continues to grow as limited private investment pushes residents toward poorly planned settlements. Experts warn that a complex, duplicative tax regime discourages affordable rental housing.
By cutting rates, clarifying deductions, and removing double taxation—supported by EFRIS and rTCS data intelligence—the reforms aim to lower effective burdens on honest landlords and encourage new construction.
A Local Government technical lead estimates that, once fully implemented, companies’ effective rental tax rates could drop from 46% to 27% over the next five years.
While government may initially lose an estimated USh46 billion, officials expect improved compliance to bring more landlords into the tax net. This means that over time, Local Governments should be able to raise more own-source revenue locally instead of relying almost entirely on central government transfers.
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