The Mubiru family is one of those classic Ugandan entrepreneurial households, united, visionary, and deeply connected by business.
Hope, the eldest, runs Hope’s Harvests, a fruit-processing company in Kiruhura. Her sister Rebecca owns RebTrans Logistics, which transports produce across East Africa. Their brother Mukola manages Muko Packaging Solutions, a packaging materials supplier, while the youngest, Huzaifa, is the tech brain behind HuzaTech Analytics, offering accounting and sales tracking systems.
Like most close-knit families, they keep things “in-house.” Hope buys packaging from Mukola at low cost. Rebecca transports her sister’s juice at discounted “family rates.” Huzaifa manages everyone’s tech systems for free, saying, “Family first, money later.”
It all worked perfectly, until the Uganda Revenue Authority (URA) came calling.
When auditors reviewed the family’s books, they saw a pattern: related-party transactions that didn’t reflect market prices. Hope’s profits were abnormally high, Mukola’s were too low, and there were no written agreements to support the pricing. What felt like family loyalty began to look, in tax terms, like profit shifting, and that’s where Transfer Pricing comes in!
Transfer Pricing (TP) is the method of setting prices for the sale of goods, provision of services, or transfer of intangible assets between related parties. The concept is built on the Arm’s Length Principle, which requires that: Transactions between related parties must be priced as if they were between independent entities operating in an open market.
This principle is internationally recognized under the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (2022) and domesticated in Uganda under the Income Tax (Transfer Pricing) Regulations, 2011, issued pursuant to Section 90 of the Income Tax Act, Cap 340. Section 90 empowers URA to re-allocate income and expenses among related entities if their arrangements don’t reflect arm’s length conditions.
Put simply: the URA can “correct” your prices if it believes your internal transactions don’t reflect true market behavior, ensuring that profits (and taxes) remain where real value is created.
If Hope’s Harvests buys packaging from Muko Packaging at UGX 1,000 per unit, while other similar businesses pay UGX 3,000, URA may adjust Hope’s expenses upward or Mukola’s income downward to reflect the true market value. This adjustment prevents understated income, underpaid tax, or artificial loss creation.
Transfer Pricing is therefore both a compliance requirement and a fairness safeguard, ensuring businesses don’t manipulate prices to gain tax advantages.
When assessing transfer pricing, the Uganda Revenue Authority (URA) goes beyond invoices and accounting figures; it examines the entire economic relationship between related entities. This involves conducting a Functional Analysis (FAR) to understand the functions each party performs, the assets they employ (such as capital, technology, or infrastructure), and the risks they assume, whether financial or operational. These elements help determine which entity should rightfully earn what level of profit. In line with Regulation 5 of the Income Tax (Transfer Pricing) Regulations, 2011, URA applies internationally recognized pricing methods, including the Comparable Uncontrolled Price, Resale Price, Cost Plus, Transactional Net Margin, and Profit Split Methods, to benchmark related-party transactions against comparable dealings between independent entities. This ensures that pricing remains fair, transparent, and reflective of real market behavior.
Many Ugandan companies fall short on transfer pricing compliance, not out of malice, but due to ignorance, informality, or poor documentation. Common mistakes include failing to maintain written transfer pricing policies, using internal or “family” prices without justification, and charging management fees or royalties without clear evidence of the services provided. Others simply replicate global pricing models that do not reflect Uganda’s market realities or overlook proper benchmarking studies. As a result, when documentation is missing or insufficient, Regulation 12 of the Income Tax (Transfer Pricing) Regulations, 2011 empowers the Uganda Revenue Authority (URA) to re-determine taxable profits based on its own estimates, often leading to reassessments, penalties, and costly disputes that could easily have been avoided with proper compliance and transparency.
The most effective approach to Transfer Pricing lies in strategic discipline, economic substance, and transparency. Companies must embed Transfer Pricing within their business models, supported by clear intercompany agreements, consistent documentation, and reliable benchmarking that reflects Uganda’s market realities. Every related-party transaction should be backed by economic evidence showing that functions performed, assets used, and risks assumed justify the profits earned. Under Regulation 8 of the Income Tax (Transfer Pricing) Regulations, 2011, maintaining contemporaneous documentation and demonstrating the arm’s length principle are not optional; they are safeguards against costly adjustments. In practice, this means pricing based on substance, proving management fees or royalties through tangible value, and engaging URA proactively. In today’s global environment shaped by OECD’s BEPS reforms, Transfer Pricing excellence is not about clever tax minimization; it is about credible pricing, corporate integrity, and long-term investor confidence.
URA has adopted electronic fiscal devices (EFDs), digital tax stamps, and data analytics for cross-referencing company transactions. Transfer Pricing reviews will increasingly rely on AI-assisted analysis, flagging mismatched margins or profit patterns. Regionally, East Africa is moving toward information exchange frameworks, making it harder for multinationals to hide profits. Uganda is also aligning with OECD’s BEPS Action 13, demanding Country-by-Country Reporting for large groups.
In the next decade, Transfer Pricing will not just be a compliance issue; it will be a pillar of corporate governance, linking financial transparency to investor confidence and social responsibility.
Transfer Pricing is not about punishment, it’s about principle. It ensures that taxes follow value, not convenience. It rewards transparency and penalizes manipulation. If families like the Mubirus can learn to trade fairly, every company can too.
Uganda’s economy grows stronger when its businesses balance family values with fiscal integrity.
As a practitioner, my advice is simple: “Don’t wait for URA to tell your story. Document it, justify it, and price it fairly.” Because at the end of every transaction, whether in Kiruhura or Manhattan, fair pricing keeps the family strong, the business compliant, and the nation richer.
The writer is a Chartered Accountant and a Chartered Tax Advisor.
