Hoteliers want sh18.5b refundable VAT incentive reduced

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Stakeholders have asked the government to revise the proposed investment threshold required for major hotel and tourism investors to qualify for Value Added Tax (VAT) refunds on costs incurred while developing new facilities.

The secretary general of the Uganda Hotel Owners Association, Cephas Birungi, made the plea on April 15, 2026, during an engagement with Members of Parliament on the Finance Committee under the stewardship of Amos Kankunda (Rwampara County, NRM).

It should be noted that a provision within the Value Added Tax (Amendment) Bill, 2026, tabled by finance minister Matia Kasaija, seeks to amend Section 28 of the principal law to allow VAT credits for a taxable foreign investor who commits at least $10 million (equivalent to sh36.95b) and $5 million (equivalent to sh18.48b) for a local investor towards the development of a hotel or tourism facility.

Furthermore, the Bill provides that these expenses must have been incurred not more than two years before the date of commissioning of the facility.

The expenses relate to civil works, feasibility studies, design and construction services, as well as locally produced materials used in construction. They also include infrastructure such as machinery, equipment and fittings not available on the local market.

Justification

Submitting on the matter, Birungi said that while the proposal is a step in the right direction and is aimed at boosting investment in the tourism sector, the provision appears stringent.

Amos Kankunda Finance committee Chairperson and MP Rwampara County, and Dickson Kateshumbwa, the Member of Parliament for Sheema municipality during the finance committee of parliament on April 15, 2026. (Photo by Maria Wamala)

“We know that there are some hoteliers in this room, whether they are on this or the other side, but we know that from our survey as hotel owners, we don’t reach the $5 million cap. So, who is this incentive intended for, if you know in high jump all of us can jump up to six feet, and you say you only qualify after eight feet, then nobody will qualify,” Birungi argued.

“You know we have hotels; we have invested $1 million (Sh3.7 billion) with a lot of struggle…” he wondered.

Rather than have an incentive that few can access, Birungi urged committee members to reasonably revise the figure downwards.

“The reasonable position is $500,000, that is about sh2 billion,” he implored.

MPs react

Reacting to the matter, Sheema Municipality MP Dicksons Kateshumbwa concurred with the hoteliers.

“If you say that someone is going to build a hotel, say in Kasese, he could actually invest $500,000 to put a very good hotel for starters. But the proposal that is here doesn’t seem to recognise that, actually, you need this kind of investment. At the same time, if someone puts up a 200-bed hotel, perhaps he would be in the range of Sh15 billion or so. At the current occupancy rate, and I thought the president of UTA would have perhaps thrown in some numbers, it is unlikely that you would even break even in seven years,” Kateshumbwa pointed out.