Hoteliers want the government to do more on the tax regime that they are subjected to beyond tax holidays, if it wants to facilitate the development of the hotel industry. This comes as the government is due to start implementation of the new tax amendments and the provisions of the 2026/27 budget, that saw adjustments in the Income Tax (Amendment) Act of 2026 and the VAT (Amendment) Act, 2026.
Under the new reforms, a hotel developer will now be able to access the Input Tax Credit, which is a claim of VAT on inputs into the hotel development over the two years running up to the commissioning of the hotel. Until now, the claim has been available for the previous one year only, which hoteliers and analysts saw as too short a period to make meaningful cost recovery.
This is available to a hotel investor investing at least 5 million dollars if a Ugandan and 10 million if a foreigner, according to the Act, provided that the services or goods in question are supplied more than two years before the date of commissioning of the hotel or tourism facility.
These include civil works, services to conduct a feasibility study, design, construction services, locally produced materials for construction of premises, infrastructure, machinery and equipment or furnishings and fittings not available on the local market. The law provides that the credit shall arise on the date of commissioning the hotel or tourism facility.
In suggesting this reform, the Ministry of Finance, Planning and Economic Development reasoned that removing these levies would make it easier for investors to establish high-quality facilities. The reforms also saw the introduction of a tax holiday for investors in hotels and other ultra-luxury tourism facilities, also aimed at attracting investments and accelerating growth in the tourism sector.
The minister, while presenting the National Budget 2026/26, said the incentive would target investors undertaking largescale tourism projects. Foreign investors qualify for the tax holiday if they invest at least 10 million dollars (about 37 billion shillings), while for domestic investors, the requirement is 5 million dollars (about 18.5 billion shillings).
However, the Uganda Hotel Owners Association, says the tax holidays will do little to boost the growth of the industry, arguing that the main problem facing them is the complex tax regime with its multiple taxes that go up to 25. The payments include central government and local council taxes, licensee fees, and statutory contributions. Suzan Muhwezi, the Chairperson of UHOA, says that while the industry is not opposed to paying taxes, it would be better it the taxes were harmonised into a package for easy processing.
The current tax regime increases the cost of doing business and affects Uganda’s competitiveness in the region as a tourism destination, she says. The taxes include central statutory and business taxes include the 30% Corporation Tax, the 18% VAT, a 6% on accommodation, food, and beverage services; and a 6% Withholding Tax deducted from various supplier and operational transactions.
They also cite deductions like Pay As You Earn and the National Social Security Fund contributions to staff pension. The investors alsogrudgingly pay Local Hotel Tax per-room, per-night; an annual Ground Rent; Property Tax; and Local Service Tax.
Other regulatory and operational fees include the annual Occupational Safety and Health Fee; Copyright Levies for the use of protected media products in their hotels; a 5 percent Service Charge on total restaurant bills; a 15 percent UNBS Import Surcharges on testing imported hotel amenities, and National Park Night Fees for their guests.
They also allege duplicative operational licenses. These include annual Trading License, Restaurant License, Bar and Liquor Licenses, Swimming Pool License, Entertainment License, Uganda Tourism Board (UTB) Licenseand the Tourism Development Levy.
UHOA has suggested that reducing the taxes, which are also the highest in the region, would do more to ensure people invest in hotels, including in upcountry areas.
These incentives add to separate provisions by the government, including the 101-billion-shilling pool for lending to hotel developers in Bunyoro ahead of the 2027 Africa Cup of Nations tournament. These funds will be accessed by qualifying investors at a 5% interest rate, for those investing in facilities classified 4-star or above-URN. Give us feedback on this story through our email: kamwokyatimes@gmail.com
