Imagine moving your own stock from a central warehouse to a branch, only for the taxman to later call it a “sale” and demand billions in tax. That is exactly what happened in a recent case between Verma Company Limited and the Uganda Revenue Authority (URA).
On April 10, 2026, the Tax Appeals Tribunal ruled in favor of Verma, cancelling a massive UGX 7.75 billion tax assessment. The case has become one of the clearest warnings yet for businesses managing inventory across multiple locations.
The Core Issue: Internal Transfers vs Sales
Verma distributes motorcycles across 11 branches in Uganda. Like most businesses, it regularly transfers stock from its main warehouse to regional outlets.
During a VAT audit covering October 2021 to January 2022, the URA reviewed Verma’s stock records and identified thousands of motorcycles marked as “issued.” Instead of treating these as internal transfers, the URA classified them as undeclared sales, creating a variance of over UGX 43 billion and demanding UGX 7.7 billion in VAT.
Verma’s response was simple: “You cannot sell goods to yourself.” A transfer from warehouse to branch is not a sale. VAT only applies when the product is sold to the final customer.
Why the Tribunal Ruled in Verma’s Favor
The Tribunal agreed with Verma and made two important findings.
First, an internal transfer is not a taxable supply. Verma provided detailed records showing that the motorcycles were later sold and properly declared in VAT returns.
Second, the URA overreached by relying on the EFRIS system. The authority argued that the transfers were not recorded in EFRIS, but the Tribunal noted that enforcement for tracking goods in transit only began in June 2022—after the audit period. A company cannot be penalized for rules that were not yet in force.
The URA’s case also weakened due to inconsistent figures. The number of allegedly “missing” motorcycles kept changing, raising doubts about the reliability of the assessment.
The Warning Sign: A Strong Dissent
Despite the victory, a dissenting opinion from Tribunal member Christine Katwe raised a serious concern.
She argued that Verma relied too much on digital records like Excel summaries, without presenting enough original physical documents. Her position was clear: electronic records are valid, but they must be backed by raw, verifiable documentation such as signed delivery notes and physical stock records.
Her warning is simple but powerful: polished reports are not enough in a tax audit. The taxman still trusts original paperwork.
What This Means for Businesses
This case highlights a growing reality. The URA is paying close attention to supply chains and inventory movement.
For businesses, three lessons stand out:
Internal transfers must be clearly documented. Treat them with the same discipline as sales transactions.
Do not rely only on digital records. Keep original documents like delivery notes and goods received notes well organized.
Understand and comply with EFRIS. Today, stock movement between branches must be properly captured in the system.
The Bottom Line
The Verma case shows how easily internal operations can be misinterpreted as taxable events. A simple stock transfer can turn into a billion-shilling dispute if records are unclear.
In today’s environment, good documentation is not just an administrative task. It is your first line of defense.
