A Praxima client operating in Uganda approached us seeking clarity on how to treat subsistence allowances for employees travelling in the course of their duties. The concern was whether a standard “subsistence allowance” could be paid tax-free, and how this should be reflected in payroll.
Unlike some jurisdictions, Uganda does not recognise a defined or fixed “subsistence allowance” for tax purposes. This often creates confusion for employers, particularly those operating across multiple countries where subsistence allowances are common and clearly prescribed.
Under Section 19(2)(d) of the Ugandan Income Tax Act (ITA Cap 338), certain payments made to employees do not constitute employment income and are therefore exempt from tax. These include allowances, reimbursements, or direct payments that:
In practice, this means that only actual costs, reasonably estimated costs, or reimbursements of expenses incurred qualify for exemption.
“Uganda does not recognise a standard subsistence allowance, but rather actual or justifiable travel-related expenses can be treated as tax-exempt.”Speak to a Specialist
We advised the client to base payments on actual or justifiable travel-related expenses. This ensured compliance with Ugandan tax law while still supporting employees appropriately during work-related travel. In Uganda, tax efficiency depends on how allowances are structured. Without a formal subsistence allowance framework, employers must rely on accurate expense tracking and reimbursement processes to remain compliant.
If this article raised questions or highlighted areas you’d like to understand better, let’s talk.Our team can walk through the details, implications, and practical considerations for your business.
