By Mulengera Reporters
Uganda Revenue Authority (URA) Commissioner General John Musinguzi Rujoki has clarified how different forms of income and payments are treated for tax purposes, including court-awarded damages, YouTube earnings, Local Council allowances and inherited land.
The guidance was published in New Vision on Thursday, July 30, 2026, as part of the weekly “Ask URA Commissioner General” feature, in which Musinguzi responds to questions from taxpayers.
Court damages may attract tax
Musinguzi said compensation awarded through court proceedings is taxed depending on what the payment represents.
Where compensation relates to lost employment earnings, for example, the amount takes the character of employment income and is subject to tax.
He gave the example of an employee who successfully sues an employer for unlawful dismissal and is awarded compensation for lost earnings. In such a case, the employer is required to deduct Pay As You Earn (PAYE) from the taxable amount and remit it to URA.
However, damages awarded for emotional distress, physical pain and suffering are not subject to tax, according to the Commissioner General.
URA explains what constitutes smuggling
The authority also used the column to clarify the meaning and penalties associated with smuggling.
URA defines smuggling as the illegal import, export, movement or transfer of goods into or out of a country to evade customs duties or taxes, or to bypass customs laws, restrictions and regulations.
The authority said smuggling is an offence under the East African Community Customs Management Act.
A person convicted of smuggling may face imprisonment for a period of up to five years or a fine equivalent to 50% of the value of the goods involved.
URA cited its 2024 interception of 64 boxes of smuggled cigarettes worth about Sh140 million in Ssenge Village, Naluvule Parish in Wakiso District, as an example of efforts to combat the illegal movement of goods.
Failure to file returns attracts penalties
Musinguzi also warned taxpayers that making a tax payment does not remove the obligation to file the corresponding return.
A person who fails to file a tax return by the prescribed deadline is liable to a penal tax of 2% of the tax payable or Sh200,000 per month, whichever is higher, for the period the return remains outstanding.
Taxpayers were therefore advised to file their returns on time to avoid accumulating penalties.
LC allowances are taxable
Local Council officials receiving allowances from the Government are also required to account for tax on those payments.
Musinguzi said allowances paid to councillors are subject to income tax, with the Local Council required to withhold and remit the applicable tax to URA.
Inherited land attracts stamp duty on transfer
Taxpayers inheriting property were also given guidance on the taxes involved when transferring land into their names.
Musinguzi said the transfer of land is subject to stamp duty at 1.5% of the value of the land, based on the valuation determined by a government valuer.
This applies where an individual seeks to transfer inherited land, such as property passed down from a deceased relative, into their own name.
YouTubers may have tax obligations
The Commissioner General also clarified that income generated from a YouTube channel can attract tax once the activity amounts to a business.
Upon starting a business, a person is required to register and account for the applicable taxes with URA.
For a YouTube business, Income Tax may apply to profits generated. Where the channel is operated by an individual, income may be taxed under individual income tax rates, while a company may be subject to corporation tax.
PAYE may also apply where the business employs staff. If the business is operated as a company, directors receiving salaries may account for tax through the PAYE system.
URA said employers are required to account for PAYE monthly and remit the tax by the 15th day of the following month.
The guidance is part of URA’s ongoing taxpayer education aimed at helping individuals and businesses understand their tax obligations and comply with the law. (For comments on this story, get back to us on 0705579994 [WhatsApp line], 0779411734 & 041 4674611 or email us at mulengeranews@gmail.com).
