How Withholding Tax Affects Your Bond Returns in Uganda

If you've ever looked at the advertised yield on a Treasury Bill and wondered why your actual return felt lower, the answer is almost certainly Withholding Tax (WHT).

What Is Withholding Tax?

Withholding Tax is a tax that the Bank of Uganda deducts at source before paying you your interest. You don't file it separately — it's taken out automatically. This means the yield you see advertised is the gross yield, not what you actually take home.

The Two Rates You Need to Know

Uganda applies different WHT rates depending on the type of security:

This difference is significant and should factor into every investment decision you make.

A Worked Example

Let's say you invest UGX 100,000,000 (100 million) in each:

T-Bill at 11.5% (91 days)

• Gross return: 100M x 11.5% x (91/365) = UGX 2,866,438
• WHT (20%): UGX 573,288
• Net return: UGX 2,293,150
• Effective net yield: 9.20%

T-Bond at 16.0% (5 years)

• Annual gross coupon: 100M x 16.0% = UGX 16,000,000
• WHT (10%): UGX 1,600,000
• Net annual return: UGX 14,400,000
• Effective net yield: 14.40%

Why This Matters

The 10% difference in WHT rates between Bills and Bonds means that bonds retain more of their advertised yield after tax. A Bond yielding 16% gross gives you 14.4% net, while a Bill yielding 11.5% gross gives you only 9.2% net.

When comparing investments, always compare net yields, not gross yields.

Key Takeaways

1. Always calculate net yield before making investment decisions
2. Bonds have a tax advantage — 10% WHT vs 20% for Bills
3. WHT is deducted at source — no additional filing needed
4. Use the Zidi Calculator to instantly compute your net returns for any security

The WHT difference doesn't mean bonds are always better — Bills offer shorter lock-up periods and more liquidity. But the tax impact should always be part of your analysis.

Want to see how different securities compare? Try our Net Yield Calculator or run a scenario in the What-If Simulator.