Category Archives: TAX RISK

VAT Zero-Rating and Excise Duty Remission in Uganda: Managing Export Trade Tax Risk

VAT zero-rating and excise duty remission are often central to the pricing, cash flow and margins of export transactions, but those reliefs are only as strong as the taxpayer’s proof of export.

Uganda’s Tax Appeals Tribunal has recently handed down an important decision that touches these key issues in export trade, particularly export VAT zero-rating and excise duty remission relief for exporters. In this commentary, we use the Leaf Tobacco v URA decision as the anchor for a broader discussion on export trade tax risk.

The decision reinforces a practical controversy point for cross-border trade: an exporter’s tax position is not secured merely because an export process was initiated, documented, or outsourced to a clearing agent. The taxpayer must be able to prove that the declared goods, in the declared quantities, actually left Uganda.

The decision reinforces a practical controversy point for cross-border trade: an exporter’s tax position is not secured merely because an export process was initiated, documented, or outsourced to a clearing agent. The taxpayer must be able to prove that the declared goods, in the declared quantities, actually left Uganda.
The decision is particularly significant for manufacturers and exporters of excisable goods. Under the VAT Act, qualifying exported supplies may be zero-rated where the statutory export condition is met and supported by documentary proof acceptable to the Commissioner General. Under the Excise Duty Act, manufactured excisable goods create duty exposure on removal from the manufacturer’s premises; export becomes relevant to remission where the Commissioner is satisfied that the goods were exported.

The questions beneath the ruling are practical ones for cross-border commerce: what evidence proves export for VAT and excise purposes; how far a taxpayer may rely on customs documents, clearing agents and border-process records; what an exporter should do when the export chain is mishandled; and how the objection should be framed where the failed step was controlled by a third party.

Uganda FY 2026/27 Year on the Horizon: Tax Outlook and the Data-Driven Tax Controversy Era

The past year confirmed a trend we highlighted in our 2025 year-in-review and 2026 outlook notes: tax enforcement is becoming more data-driven, transaction-sensitive and consequential. URA’s ability to compare VAT returns, income tax returns, EFRIS data, financial statements, bank information, customs records, withholding tax records and third-party disclosures is now central to the enforcement environment.

For businesses, this means tax controversy increasingly begins long before an assessment is issued. It begins at the invoice, contract, board resolution, share register, payroll configuration, import entry, loan agreement, EFRIS record, valuation report or reconciliation schedule.

The 2026 tax amendment package reinforces that shift. The amendments widen collection points, strengthen withholding mechanisms, preserve targeted incentives, increase the VAT registration threshold, introduce or expand sector-specific taxes, and continue the move toward e-invoicing and recurring reporting.

Uganda M&A Tax Structuring: High Court Clarifies the Interplay Between Roll-over Relief and Withholding Tax Rules in URA v Tunga Nutrition

The High Court has allowed URA’s appeal and set aside the Tax Appeals Tribunal’s decision that had earlier interpreted(in the taxpayer’s favour), key Income Tax Act provisions governing roll-over relief in M&A transactions.

The decision matters for M&A because it treats tax-neutral restructuring as a legal outcome that must be supported by the transaction documents and deal-close file. 

An asset-for-share transfer may form part of a merger, joint-venture contribution, pre-completion reorganisation or group restructuring. But where the taxpayer claims section 76 roll-over relief, the record must show that the conditions set by the Income Tax Act were satisfied when the assets moved.

The immediate practical implication for Ugandan M&A transactions is that tax planning must be integrated and built into the legal completion steps. The deal file should show the assets transferred, the consideration given, the shares issued, the register-of-members position, the voting power immediately after completion, the valuation basis, the land-transfer treatment and the withholding-tax analysis.

KEY TAKEAWAYS:

1. This is an M&A completion-risk decision: The dispute arose from an asset exchange between Unga Millers Uganda Limited and Tunga Nutrition (U) Limited. For the High Court, the issue was not the commercial label attached to the transaction, but whether the statutory conditions for roll-over relief were proved.

2. Roll-over relief qualification must be proved: A taxpayer claiming section 76 roll-over relief must show, among other things, that business assets were transferred, that shares were issued as consideration, and that the transferor had at least 50% voting power in the transferee immediately after the transfer.

3. Completion corporate records: The Court placed weight on the absence of primary corporate records, including the register of members and formal share-allotment evidence. In an M&A transaction, these records are not mere administration. They may determine whether the intended tax treatment survives a URA review.

4. Transaction/deal advice that integrates legal and tax: A live M&A transaction may involve roll-over relief, land-transfer rules, stamp duty, VAT, international tax, transfer pricing, shareholder taxation, sector approvals or other deal-specific risks that cut across both legal and tax.

VAT and Income Tax Reporting Variances: Uganda Corporate Tax Controversy Insights from Ericsson AB v URA

The Tax Appeals Tribunal has recently handed down a key VAT decision in a dispute arising from URA’s examination of Ericsson AB’s tax returns for the 2013-2017 years, spanning VAT and branch profit / income-tax components. The dispute narrowed to the VAT treatment of an unreconciled turnover variance and the lawfulness of agency notices, AND brought four central questions of law before the Tribunal:

1. Turnover Variances: When may URA treat a VAT-to-income-tax turnover variance as VAT-exclusive rather than VAT-inclusive?

2. Shifting Assessment Bases: Can URA materially alter the underlying basis of an assessment during mediation without issuing a fresh tax decision?

3. Unbilled Revenue Timing: Does the mere accounting recognition of unbilled revenue prove that a statutory VAT obligation has accrued?

4. Enforcement Timelines: Can URA enforce recovery through third-party agency notices while a taxpayer’s statutory objection rights remain active?

The ruling delivers crucial controversy lessons for corporate taxpayers navigating complex audits.

The Tribunal confirmed that VAT-to-income-tax turnover variances and accounting recognition of unbilled revenue are not automatic proxies for VAT liability—URA must still establish a strict statutory trigger.

Furthermore, the decision exposes the procedural unlawfulness of enforcing agency notices during an active objection window. Read our full analysis to understand how this pivotal ruling shapes corporate tax defence and the commercial necessity of proactive reconciliation files.

Uganda’s Interest Expense Deductibility Rules and Corporate Financing Insights from Micro-Haem v URA

Uganda’s Tax Appeals Tribunal has recently handed down a key decision on interest expense cap rules under the Income Tax Act, which reinforces the practical shift introduced by the High Court in Moil Uganda Ltd v Uganda Revenue Authority: belonging to a corporate group does not, by itself, trigger the section 25(3) interest expense cap where the financing involves genuine third-party debt from outside the group structure.

Key Commentary Takeaways:

Persistent Tax Risk: Uganda’s interest-limitation rule under section 25(3) of the Income Tax Act remains a material tax-risk provision for companies operating within commonly owned corporate structures.

Limitation on Group Theory: Micro-Haem confirms that corporate group status alone cannot justify applying the section 25(3) cap where the disputed borrowing is genuine third-party debt sourced from outside the group.

A Narrow Taxpayer Victory: The taxpayer’s success was carefully confined: the assessment was set aside on the third-party debt point, while group ownership, dormancy and exemption remained live issues requiring strict evidentiary proof.

Commercial Takeaway: For corporate financing, the origin, structure and evidentiary support for debt now matter as much as the company’s ownership map.

Uganda’s FY 2026/27 Budget and Tax Amendments: Revenue Mobilisation and the Business Resilience Test.

The FY 2026/27 Budget for Uganda focuses on full monetisation and growth through enhanced domestic revenue mobilisation, digital compliance, and targeted tax amendments, while aiming for fiscal self-reliance.

The Budget emphasizes job creation, sector-specific support, and infrastructure investment. However, the implications for businesses and taxpayers include a shift towards a more digitised and compliance-heavy tax environment, with selective relief measures that may not cushion broader economic pressures.

Challenges such as increased costs for fuel, construction materials, and the contemplated higher regulatory compliance costs necessitate proactive strategies from businesses to navigate this demanding fiscal landscape and ensure resilience amid changing tax dynamics.

Deemed Disposals Capital Gains Taxation in Uganda: Residence and Control Changes(M&A), Insights from Kuku Foods(KFC) v URA

The Tax Appeals Tribunal (TAT) recently issued a landmark ruling in Kuku Foods Uganda Limited v Uganda Revenue Authority, reshaping how indirect corporate restructurings and ownership changes are taxed in Uganda.

The dispute arose from a Uganda Revenue Authority (URA) Capital Gains Tax (CGT) assessment of approximately UGX 4.235 billion levied against Kuku Foods Uganda Limited — the local operating entity of the KFC franchise following an offshore shareholding reorganization.

Key Commentary Bottom-line:

Uganda taxes changes in tax nexus through statutory realisation rules. The rules put in place deemed disposal or deemed realisation events, where Capital Gains Tax liabilities will arise, even where no ordinary commercial sale of an asset has occurred.

Where a taxpayer enters residence, the Income Tax Act protects both the taxpayer and the revenue authority by fixing the opening cost base of relevant assets at market value.

Where a taxpayer exits residence, the Act may impose an exit charge by deeming a disposal at market value.

Where a company located in Uganda undergoes a qualifying change in ownership, the Act may deem the company itself to have realised its assets and liabilities at market value.

TAT Clarifies VAT Refund Rules: Overpaid Tax and Recovery of VAT Wrongly Charged on Exempt Supplies

The Uganda Tax Appeals Tribunal has delivered an important decision on VAT refunds that settles a critical operational friction point between taxpayers and the Uganda Revenue Authority (URA).

The decision concerns key VAT principles and questions that have not been substantially litigated before in Uganda: whether a VAT refund application for VAT paid in error, on supplies which were supposed to be exempt, is valid; and whether a taxpayer who was unregistered for VAT purposes and not a VAT taxable person during the period in issue can make such a VAT refund application.

Case Citation: Portman Square Limited v Uganda Revenue Authority, TAT Application No. 179 of 2025.

The dispute centered on a Shs. 4,064,860,158 VAT refund claim arising from tax mistakenly charged by suppliers on VAT exempt hotel construction services and materials towards the Four Points by Sheraton hotel project situated in Kololo, Kampala.

This decision provides definitive clarity on the legal remedies available when VAT is paid in error on exempt supplies. Crucially, it establishes that a taxpayer’s registration status does not extinguish their statutory right to recover unlawfully collected tax, and it reprimands the tax authority’s tendency to shift administrative reconciliation burdens onto commercial entities.

Bujagali Energy v URA: TAT Clarifies Foreign Currency Conversion Rules for Infrastructure Taxation in Uganda

Uganda’s Tax Appeals Tribunal has delivered a land-mark ruling with far reaching Tax and commercial implications for East Africa’s infrastructure, project finance and the general public-private partnerships market.

In Bujagali Energy Limited v Uganda Revenue Authority, TAT Application No. 4 of 2024, the Tribunal was asked to determine the reckoning event when foreign currency denominated project costs should be converted into Uganda Shillings for purposes of computing the historical cost base of depreciable assets, for purposes of ascertaining the capital deduction allowances for those assets. 

The application challenged administrative additional income tax assessments arising principally from the interpretation of section 56(2) of the Income Tax Act, which governs the conversion of forex amounts into Uganda Shillings for tax reporting purposes, where the taxpayer has with the commissioner’s permission kept books of accounts in a foreign currency for tax reporting purposes.

The Tribunal favored the “date the amount is incurred” as the primary reckoning event for cost-base construction, where currency conversion tax rules are in purview. 

The decision is important because many infrastructure SPVs in Uganda and across East Africa are externally financed, maintain books in foreign currency, incur heavy capital expenditure over long construction periods, and can only claim capital tax deductions upon commissioning.

Important bottom-line:

The Tribunal’s view is that foreign currency accounting may explain the commercial architecture of a project, but it does not override the statutory conversion rules under the Income Tax Act. 

The Tribunal’s view that commercial architecture (keeping books in USD) does not dictate statutory tax rules, highlights the necessity of maintaining a “shadow” asset cost-base ledger in local currency from Day 1 of construction for capital intensive projects where accounting in foreign currency is mandated as part of project financing contractual obligations.

This is because the implication of the ruling is that a capital intensive project’s tax model must now reflect local currency conversion at every expenditure point where accounting is not in local currency.

Uganda’s 2026 Tax Amendment Bills: A Practical Guide to the Main Changes and Their Commercial Impact.

Uganda’s 2026 tax amendment bills are best read together, not in isolation. Taken as a package, they point to a set of key policy tweaks that includes: widening the tax base, moving collection closer to the point of payment, hardening digital compliance, and preservation of only a limited set of targeted incentives. 

Across income tax, VAT, excise duty, stamp duty, tax procedure, gaming, and road-use regulation, the direction is broadly the same: expand the effective tax net, improve collection at source, tighten compliance administration, and preserve only a limited number of targeted incentives.

The commercial significance of this package lies not only in tax rates. It lies just as much in timing, cash-flow impact, and compliance structure. Several of the proposals move tax collection closer to the payment event itself. Others raise transaction costs directly. Others still make the digital compliance framework harder to ignore.

Taken together, the package will matter to employers, lenders, investors, contractors, telecom operators, gaming businesses, developers, manufacturers, importers and high-net-worth individuals.