Tax audits are official examinations of a taxpayer’s financial records, returns, and supporting documents to ensure taxes are accurately declared and paid.
Mandated under the Tax Procedures Code Act (TPCA), particularly Sections 38 and 45, URA is empowered to carry out audits covering up to five years, including desk audits, field audits, issue-based, or comprehensive audits. These audits assess compliance across various tax heads like Income Tax, VAT, PAYE, and Withholding Tax, and may involve reviewing bank statements, invoices, payrolls, contracts, and third-party confirmations.
The objective is to detect underreporting, enforce compliance, and collect any unpaid taxes, penalties, or interest. Based on findings, URA may issue assessments, approve refunds, or clear the taxpayer.
In Uganda’s evolving tax landscape, receiving a letter or notice from the Uganda Revenue Authority (URA) often sends shivers down the spine of many business owners. Whether it’s a request for clarification, a desk audit notification, or a full-scale field audit, the initial reaction is usually fear.
To many, such communication feels like an accusation or punishment. But this interpretation is both outdated and unhelpful in the modern economic world. Disagreements with URA are not signs of non-compliance or failure. They are hallmarks of a maturing tax administration system where dialogue, clarification, and legal interpretation are integral to enforcement.
Across the country, tax disputes have grown, not because taxpayers have suddenly become non-compliant, but because URA has kept on sharpening its tools.
With improvements in data analytics, digital reporting like EFRIS, and third-party matching, the authority is now better equipped to spot mismatches, trends, and anomalies. This has led to more assessments, increased audit coverage, and ultimately, a rise in disputes.
But rather than viewing this trend as antagonistic, taxpayers must begin to see it as an opportunity, a call to professionalize, streamline, and strategically engage with the tax system. This is the trend, this is the new normal in both domestic and international taxation.
When the taxman communicates an audit, it doesn’t mean the taxpayer is guilty. Often, it is simply seeking clarity, verifying inconsistencies, or enforcing statutory compliance as mandated under the Tax Procedures Code Act (TPCA), particularly Section 45, which requires taxpayers to maintain accurate records for at least five years.
An audit presents a chance for businesses to demonstrate transparency and maturity. Businesses that are audit-ready, those that maintain reconciled ledgers, proper documentation, and clear statutory interpretations, usually handle audits smoothly. Audit readiness is not perfection. It is process. It is professionalism.
According to the 2023/2024 data from the Tax Appeals Tribunal (TAT) and the Judiciary Annual Performance Reports, tax disputes in Uganda are steadily rising across different legal forums.
The TAT received over 315 new tax-related cases during the financial year ending June 2024, a notable increase from about 282 cases in the prior year. Of these, nearly 58% involved corporate taxpayers disputing Income Tax and VAT assessments.
Out of the total cases filed, about 134 were resolved at the tribunal level, while 27 were escalated to the High Court. Meanwhile, the Commercial Division of the High Court reported a backlog of 81 tax-related cases, managing to dispose of only 22 within the financial year.
The Court of Appeal heard eight tax appeals, and the Supreme Court issued judgments in two landmark tax-related matters.
These statistics reveal several things. Firstly, tax litigation is real and growing. Secondly, a majority of disputes are resolved at the TAT level, often the first layer of formal adjudication.
More importantly, these figures show that formal court proceedings are not the only route available to taxpayers. Mediation and negotiated resolution are gaining traction. In 2023 alone, URA reported that more than 160 cases were resolved through its Alternative Dispute Resolution (ADR) mechanism, avoiding lengthy and costly litigation. This is an encouraging sign that tax disagreements can be resolved swiftly, affordably, and respectfully.
The implication is therefore clear: most tax disputes do not need to end in court. When businesses are proactive, organized, and well-advised, they stand a better chance of resolving issues at early stages, either through objection or mediation.
Consider, for instance, the common cases involving Withholding Tax (WHT) credit mismatches.
Taxpayers who kept proper WHT certificates and submitted accurate reconciliations often had their assessments overturned or reduced at TAT.
On the other hand, taxpayers who failed to object within the 30-day statutory window under Section 99 of the TPCA lost cases by default. It is typically a matter of the law.
There are critical lessons for taxpayers here. First before anything, always respond promptly to a URA assessment with a Notice of Objection.
Second, maintain accounting systems that reflect the Income Tax Act’s provisions, such as the proper classification of expenses under Section 22 or tracking of capital allowances under Sections 27–31.
