Every business understands the cost of delaying taxes. The moment a payment is late, penalties and interest begin to accumulate almost instantly. But what happens when the situation is reversed? What happens when the tax authority holds onto money that legally belongs to a business?
On April 27, 2026, the High Court’s Commercial Division answered that question in a landmark ruling involving East African Investments Limited and the Uganda Revenue Authority (URA). In a decisive judgment, the Court clarified when interest begins to accrue on delayed tax refunds, setting a powerful precedent for businesses across Uganda.
The dispute dates back to 2014, when East African Investments Limited applied for a VAT refund of over Shs. 1.2 billion. The claim related to input tax incurred during construction before the company’s VAT registration. After conducting an audit, the URA rejected part of the claim and approved only about Shs. 729 million.
Unconvinced, the company challenged the decision at the Tax Appeals Tribunal, which in 2020 ruled in its favor and ordered the URA to refund the remaining amount. However, the Tribunal stated that interest on the delayed refund would only start from the date of its ruling. In effect, this allowed the URA to hold the company’s money for years without compensating it for the delay.
The High Court overturned that position.
It ruled that under the VAT Act, interest on delayed refunds begins 30 days after a complete refund application is submitted, not when a final judgment is delivered. The law imposes a 2% monthly compounded interest on delayed refunds, intended to compensate businesses for being deprived of their working capital.
“The value of money does not wait for a court ruling.”
This means that once a valid claim is filed, the clock starts ticking. If the refund is delayed, the tax authority is required to compensate the business for that delay, regardless of how long the dispute takes to resolve.
However, the ruling also highlights an important condition. The interest only applies to complete applications. If additional information is requested and not provided promptly, the claim is treated as incomplete, effectively pausing the interest clock.
There is also a limit to how much can be recovered. While the 2% monthly compounded rate is significant, the total interest cannot exceed the principal tax amount owed, following amendments to the VAT law.
For businesses, this decision reshapes how tax refunds should be viewed. Delays are no longer just an administrative inconvenience; they carry a financial consequence for the authority holding the funds. It also reinforces the importance of proper documentation, as the strength of the initial application determines when that protection begins.
What was once seen as a frustrating wait is now clearly defined in financial terms. Time, in this case, has a cost.
And the law has made it clear who should pay it.
