What is PAYE?
Pay As You Earn (PAYE) is a tax deduction system in Uganda where employers are legally required to deduct income tax from their employees' salaries and remit it to the Uganda Revenue Authority (URA) on their behalf. Every employer with salaried staff in Uganda must comply with PAYE regulations under the Income Tax Act.
Failure to deduct and remit PAYE on time attracts penalties from URA — including interest of 2% per month on the outstanding amount and potential criminal liability for directors. Understanding how to file PAYE correctly is therefore not just good practice — it is a legal obligation.
Who must file PAYE? Every employer in Uganda who pays salaries, wages, directors' fees, allowances, or any other employment income must register for PAYE and file monthly returns with URA — regardless of company size.
Step 1: Register for PAYE with URA
Before you can file PAYE, your organisation must be registered with URA as an employer. Here is how:
- Visit efris.ura.go.ug or go to your nearest URA office in Kampala (Nakawa) or any regional office
- Complete the employer registration form — you will need your Tax Identification Number (TIN), certificate of incorporation, and details of directors
- URA will assign you an employer reference number which you will use for all PAYE filings
- Registration is free and typically takes 1–3 working days
Step 2: Calculate PAYE for Each Employee
Uganda's PAYE is calculated using a progressive tax band system. The rates for the 2025/2026 tax year are as follows:
| Monthly Income (UGX) | Tax Rate | Tax Payable |
|---|---|---|
| 0 — 235,000 | 0% | Nil |
| 235,001 — 335,000 | 10% | 10% of amount over 235,000 |
| 335,001 — 410,000 | 20% | 10,000 + 20% of amount over 335,000 |
| 410,001 — 10,000,000 | 30% | 25,000 + 30% of amount over 410,000 |
| Above 10,000,000 | 40% | 30% rate + 40% on amount over 10M |
Example: An employee earning UGX 1,500,000/month would pay: UGX 25,000 + 30% of (1,500,000 - 410,000) = UGX 25,000 + UGX 327,000 = UGX 352,000 PAYE per month.
Note that PAYE is calculated on gross pay including all allowances, housing, transport, and other taxable benefits — not just basic salary.
Step 3: Deduct NSSF Before PAYE
Before calculating PAYE, you must first deduct the employee's NSSF contribution of 5% of gross salary. NSSF contributions reduce the taxable income — meaning PAYE is calculated on salary minus the employee's 5% NSSF contribution.
- Employee NSSF contribution: 5% of gross salary
- Employer NSSF contribution: 10% of gross salary (this is an employer cost — not deducted from employee)
- PAYE is calculated on: Gross salary minus employee NSSF (5%)
Step 4: File the PAYE Return on URA Portal
PAYE returns must be filed by the 15th of the following month. Filing is done entirely online through URA's eTax portal:
- Log in to efris.ura.go.ug using your employer TIN and password
- Navigate to Returns → Employment Income Returns
- Select the tax period (month) you are filing for
- Enter each employee's gross pay, NSSF deduction, and calculated PAYE amount
- Review the total PAYE payable for all employees
- Submit the return — you will receive a Payment Reference Number (PRN)
Step 5: Make the PAYE Payment
After filing the return, pay the PAYE amount using the PRN generated. Payment can be made via:
- MTN MoMo Pay — pay bill to URA using the PRN
- Bank transfer — to URA's designated accounts at Stanbic, dfcu, Centenary Bank, or other URA partner banks
- URA payment gateway — online card payment via the eTax portal
Payment must be made by the 15th of the month — the same deadline as filing. Late payment attracts 2% interest per month on the outstanding amount.
Common PAYE Mistakes Ugandan Employers Make
- Not including all taxable allowances — housing, transport, and other allowances are taxable unless specifically exempt
- Filing but not paying — a filed return with no payment still attracts penalties and interest
- Using wrong tax bands — URA updates bands periodically. Always confirm current rates on ura.go.ug
- Not registering new employees — every new hire must be added to your PAYE schedule from their first pay month
- Missing the 15th deadline — even by one day triggers penalties. File early, pay early
Basket Advisory tip: Outsource your payroll processing to eliminate PAYE errors entirely. Our Basket Payroll platform calculates PAYE automatically for all employees, generates URA-ready returns, and sends payment reminders before the 15th of every month.
PAYE for Expatriate Employees
Expatriates working in Uganda under valid work permits are also subject to PAYE on their Uganda-sourced income. If an expatriate is paid partly in Uganda and partly overseas, only the Uganda portion is subject to Ugandan PAYE. Basket Advisory's human capital team can advise on expatriate tax structuring and work permit compliance.
Penalties for Non-Compliance
| Offence | Penalty |
|---|---|
| Late filing of return | UGX 200,000 per month of default |
| Late payment | 2% interest per month on outstanding amount |
| Failure to deduct PAYE | Employer personally liable for the tax plus interest |
| Fraud / deliberate non-compliance | Criminal prosecution and potential imprisonment |
Need help with PAYE compliance?
Basket Advisory handles complete payroll outsourcing for businesses and NGOs across Uganda — including PAYE calculation, filing, and payment. Let us keep you compliant every month.
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