What is Local Service Tax in Uganda?
Local Service Tax (LST) is a tax levied by local governments in Uganda on employees working within their jurisdiction. It is separate from PAYE (which goes to URA) and NSSF (which goes to NSSF Uganda). LST is collected by employers and remitted to the relevant local government authority — either Kampala Capital City Authority (KCCA) for Kampala employees, or the district local government for employees working in other districts.
Key fact: LST is an employer obligation — you must deduct it from your employees' salaries once per year (typically in the first quarter) and remit it to the relevant local authority. Failure to do so can result in fines.
LST Rates Uganda 2026
LST rates are set by each local government and may vary slightly by district. The standard KCCA rates for Kampala employees are:
| Annual Gross Salary | Annual LST | Monthly Equivalent |
|---|---|---|
| Below UGX 2,820,000/year (UGX 235,000/month) | Exempt | Nil |
| UGX 2,820,001 — 4,020,000/year | UGX 15,000/year | UGX 1,250 |
| UGX 4,020,001 — 4,920,000/year | UGX 25,000/year | UGX 2,083 |
| UGX 4,920,001 — 12,000,000/year | UGX 100,000/year | UGX 8,333 |
| Above UGX 12,000,000/year | UGX 100,000/year | UGX 8,333 |
When is LST Deducted?
Unlike PAYE which is deducted monthly, LST is typically deducted as a lump sum once per year — usually in the first quarter (January to March). Most employers deduct the full annual LST amount from the employee's January or February salary. Some larger employers spread it across two months.
How to Remit LST in Kampala
- Deduct the LST from all qualifying employees in Q1 of the year
- Complete the LST return form from KCCA (available at City Hall or online at kcca.go.ug)
- Attach a schedule showing each employee's name, salary band, and LST deducted
- Make payment to KCCA via bank transfer or KCCA payment counters at City Hall
- Retain the KCCA receipt as proof of remittance
LST for Employees in Districts Outside Kampala
For employees working in other districts, LST is paid to the district local government where the employee works — not where the employer is registered. If you have staff in Gulu, Mbarara, Jinja, or other districts, you must remit their LST to those specific district local governments. LST rates may differ slightly by district.
LST vs PAYE — Key Differences
| PAYE | Local Service Tax | |
|---|---|---|
| Paid to | Uganda Revenue Authority (URA) | KCCA or District Local Government |
| Frequency | Monthly | Annual (usually Q1) |
| Filing deadline | 15th of following month | 31 March each year |
| Rate basis | Progressive — income level | Flat bands — income level |
| Maximum annual | Varies — no cap | UGX 100,000/year |
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