The study aimed at taxation and business performance of small and medium sized enterprises in uganda; a case study of Rubaga division, kampala and it was guided by the following objectives; To examine the relationship between tax compliance and the business performance of SMEs in Rubaga division, Kampala, to assess the relationship between tax rates and the business performance of SMEs in Rubaga Division, Kampala and to analyze the relationship between tax incentives and the business performance of SMEs in Rubaga Division, Kampala. The study population concentrated on Managers and employees of SMEs in Rubaga Division. The study area was limited to this one SME in Kampala since the majority of the SMEs are established in urban areas. The correlation coefficient (.827) reveals that the study variables have a strong positive relationship with the performance of SMEs. Thus, the study variables explain 68.4% of the performance of SMEs in Rubaga Division, Kampala, Uganda. The findings revealed that tax incentives (Beta= .459, Sig. < .000) was a better predictor of the performance of SME’s and this was followed by tax rates (Beta = .311, Sig. < .005), and lastly tax compliance with (Beta= .171, Sig. < .031). This implied that strengthening and improving the existing taxation policies relating to tax compliance, tax rates and tax incentives, the performance of SMEs will improve in Uganda. The study recommends that the government of Uganda should design an effective tax rate in such a way that it is not based on the taxable profits as demarcated in the law but on an economic measure which includes the impact of the tax base. This will lower the cost of production for the goods and services which will eventually ensure favorable prices for the goods and services being provided to the customers and thus increase sales turnover and the performance of SMEs in Uganda.