The study aimed at taxation and performance of small and medium enterprises in Nakawa divisionKampala district and it was guided by the following objectives; To determine the relationship between tax compliance and the performance of SMEs in Nakawa Division, Kampala, to establish the relationship of tax rates and the performance of SMEs in Nakawa Division, Kampala, to examine the relationship of tax incentives and the performance of SMEs in Nakawa Division, Kampala, to evaluate the relationship between taxation and the performance of small and medium enterprises of SMEs in Nakawa Division, Kampala. The study population would be concentrated on SME owners with in Nakawa Division, Kampala. The study area is limited to Nakawa division since the majority of the SMEs are established in urban areas. Nakawa division has a population of 318,447 (JMP, 2017) and 1000 registered SMEs (UBOS). The study findings revealed that the majority of the respondents agreed (mean = 4.39; SD = 0.867) that tax incentives for SMEs have lowered the operational costs associated with the payment of taxes for small and medium enterprises. Tax incentives, investments, and performance of SMEs are closely linked. This was confirmed by most of the respondents as highlighted by the mean score of 4.53 and standard deviation of 0.641. During the study, it was found out that in order to promote the performance of SMEs in Nakawa Division, Kampala. Uganda’s, primary consideration should be given to strengthening the system of taxation through having a simplified system of taxation that can support SME tax payers to meet their tax duties and thus reduce the burden of tax compliance within SMEs.