Not a threat, but a test: inside Uganda’s new tax reality
Why URA audits are opportunities, not enemies
In Uganda’s business corridors—whether it’s a small Kampala retail shop or a major logistics firm in Namanve—there is one letter that rarely sparks celebration: a notification from the Uganda Revenue Authority (URA).
Often slipped under office doors or pinged into inboxes, the letter begins simply: You are hereby notified… But for many business owners, it might as well read: You are hereby in trouble. Tax audits, in the minds of most Ugandan entrepreneurs, are synonymous with punishment.
They provoke anxiety, raise suspicions, and frequently lead to finger-pointing. But this widespread fear, say legal and financial experts, is not only outdated—it’s counterproductive. Disagreements with the URA are not necessarily signs of non-compliance or wrongdoing.
Instead, they are increasingly the hallmark of a maturing tax administration—one where dialogue, clarification and legal interpretation are essential tools of enforcement.
AUDITS: A LEGAL AND NECESSARY TOOL
A tax audit is an official examination of a taxpayer’s financial records, returns and supporting documents to ensure taxes have been accurately declared and paid in accordance with the law.
Under the Tax Procedures Code Act (TPCA)— specifically Sections 38 and 45—URA is empowered to carry out audits spanning up to five years. These audits may take several forms: desk audits, field audits, issue-based audits, or comprehensive reviews.
They typically assess compliance across key tax heads, including Income Tax, VAT, PAYE, and Withholding Tax, and may involve scrutiny of bank statements, invoices, payrolls, contracts and third-party confirmations.
The purpose is not punitive—it’s to identify underreporting, ensure compliance, and collect any unpaid taxes, penalties, or interest. Based on its findings, the URA may issue assessments, approve refunds, or clear the taxpayer.
A SHARPENING TAX SYSTEM
Tax disputes in Uganda have grown—not necessarily because more taxpayers are non-compliant, but because URA’s enforcement tools have become more advanced. With the rollout of digital systems like EFRIS, enhanced data analytics, and more third-party data matching, URA can now detect mismatches and anomalies with greater precision.
As a result, more assessments are being issued, audit coverage has expanded, and disputes are on the rise. But rather than viewing this evolution as adversarial, businesses must recognize it as an opportunity, a call to professionalize, streamline operations, and engage strategically with the tax framework. This is not a passing phase—it is the new normal, both domestically and globally.
AUDITS ARE NOT ACCUSATIONS
When URA announces an audit, it doesn’t mean the taxpayer is guilty. In most cases, the audit simply seeks clarification, correction of inconsistencies, or assurance of statutory compliance.
Section 45 of the TPCA mandates that taxpayers maintain accurate records for at least five years, and this is the standard that audits follow. Audits present a valuable opportunity for businesses to showcase transparency and institutional maturity.
Companies that keep reconciled ledgers, proper documentation, and clear interpretations of tax law tend to navigate audits more efficiently. Audit readiness isn’t about perfection— it’s about professionalism, and it is achievable through consistent, structured accounting practices.
A GROWING DOCKET OF TAX DISPUTES
According to the 2023/2024 data from the Tax Appeals Tribunal (TAT) and the Judiciary’s Annual Performance Reports, tax disputes in Uganda are steadily increasing across multiple legal forums.
The TAT received more than 315 new tax-related cases in the financial year ending June 2024, up from 282 the previous year. Of these, approximately 58 per cent involved corporate taxpayers challenging assessments related to Income Tax and VAT. Out of all the cases filed, 134 were resolved at the tribunal level, while 27 were escalated to the High Court for further adjudication.
Meanwhile, the Commercial Division of the High Court reported a backlog of 81 tax-related cases, having managed to dispose of only 22 during the year. The Court of Appeal heard eight tax appeals, and the Supreme Court issued judgments in two landmark tax-related matters.
WHY THIS TREND MATTERS
These statistics reveal several important trends. First, tax litigation in Uganda is both real and on the rise. Second, the majority of disputes are resolved at the Tax Appeals Tribunal (TAT)—often the first formal stage of adjudication.
Most notably, these figures highlight that litigation is not the only route available to taxpayers. Mediation and negotiated settlements are gaining traction. In 2023 alone, the Uganda Revenue Authority (URA) reported that over 160 cases were resolved through its Alternative Dispute Resolution (ADR) mechanism—avoiding lengthy, costly litigation.
This is an encouraging sign that tax disagreements can be resolved swiftly, affordably and respectfully. The implication is clear: most tax disputes do not need to end up in court.
When businesses are proactive, organized and well-advised, they stand a much better chance of resolving issues at an early stage—either through formal objection or ADR.
Consider, for instance, the common cases involving Withholding Tax (WHT) credit mismatches. Taxpayers who maintained proper WHT certificates and submitted accurate reconciliations often had their assessments reduced—or entirely overturned—at the TAT.
By contrast, those who failed to object within the 30-day statutory window under Section 99 of the Tax Procedures Code Act (TPCA) often lost their cases by default. In most cases, it’s simply a matter of timely legal compliance. There are critical lessons for taxpayers navigating Uganda’s evolving tax landscape.
First, it is essential to respond promptly to a URA assessment by submitting a Notice of Objection within the statutory timeframe. Delays can result in automatic forfeiture of the right to contest an assessment.
Second, businesses must maintain accounting systems that align with the provisions of the Income Tax Act— especially when it comes to properly classifying expenses under Section 22 and accurately tracking capital allowances as outlined in Sections 27 to 31.
Third, taxpayers should not wait until a matter escalates into a crisis before seeking expert advice. Complex issues such as transfer pricing, permanent establishments, or deferred income recognition require the early involvement of experienced tax professionals.
Finally, businesses should consider using URA’s Alternative Dispute Resolution (ADR) platform. From firsthand experience as a practicing tax professional, I’ve seen ADR help reduce penalties, facilitate amicable settlements, protect reputations, and resolve disputes within 30 to 90 days—far more efficiently than lengthy litigation.
It is equally important for taxpayers to understand the legal roadmap beyond URA. If an objection is rejected, Section 100 of the TPCA allows for an appeal to the Tax Appeals Tribunal.
If the taxpayer is dissatisfied with the Tribunal’s ruling, they may appeal to the High Court under Section 101, and further to the Court of Appeal or the Supreme Court under Section 101A.
While these processes may be technical and time-consuming, they have yielded landmark rulings—clarifying key areas such as VAT refund entitlements, tax residency, and the limits of URA’s retrospective assessments. In this light, tax disputes are not traps.
They are opportunities—for operational improvement, risk management, and legal clarity. They compel businesses to assess internal controls, update accounting procedures, and train staff in proper tax documentation. In a country where tax compliance is rapidly digitizing, the question is no longer if you will be audited, but when.
The goal should never be to fear audits—but to always be ready for them. A smart taxpayer does not view URA audits as threats, but as part of a structured and maturing tax ecosystem. Instead of avoiding assessments or delaying responses, engage constructively.
Comply with timelines, respond with clarity, and uphold a professional standard in all communication. As a taxpayer, it is your responsibility to understand both your rights and obligations under the law.
Where disagreements arise, do not react emotionally. Escalate appropriately, armed with evidence, legal counsel, and a commitment to transparency.
The writer is a chartered tax accountant and a certified tax advisor.
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