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McLeod Russell Uganda Limited v Uganda Revenue Authority [2026] UGTAT 26

Tribunal · 2026 Application Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application challenging tax assessments following customs post-clearance audit and disallowed objection
Decision
Withholding tax assessment upheld; customs duty assessment and penalty set aside; interest on admitted taxes remains payable

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that withholding tax on brokerage commissions paid to non-resident Kenyan brokers constitutes Ugandan-source income under s.78(d)(ii) of the Income Tax Act where paid by a resident person, notwithstanding that services are performed in Kenya and payments routed through EATTA. The Applicant as resident entity and effective payer is liable to withhold tax under s.137 and personally liable under s.142 for failure to withhold. Assessment of Shs. 434,296,272 upheld. Customs duties on agricultural inputs including harvesting trays, pruning blades, mist blowers and chainsaws set aside as items qualify for exemption under s.114 EACCMA and Fifth Schedule Part B paragraph 15. Penalty for non-filing of quarterly returns set aside as Regulation 7(4) requires conviction before imposition of fine.

Outcome

Withholding tax assessment upheld; customs duty assessment and penalty set aside; interest on admitted taxes remains payable

Facts

The Applicant, a tea cultivation and sales company, was subjected to a customs post-clearance audit by the Respondent covering January 2019 to June 2023. The Respondent raised assessments including Shs. 434,296,272 as withholding tax on brokerage commissions paid to Kenyan brokers for tea sales through the Mombasa auction system operated by the East African Tea Trade Association (EATTA); Shs. 108,985,763 as customs duties on imported agricultural inputs cleared under CPC 492; and Shs. 7,594,855 as penalty for failure to file quarterly returns. The Applicant sells tea exclusively through EATTA-approved brokers at Mombasa auctions. Under EATTA rules, brokerage fees are deducted by EATTA from gross sale proceeds before remitting the balance to the Applicant. The Applicant objected to the assessments arguing it had no control over brokerage payments, that the income was not Ugandan-sourced, and that imported items qualified as agricultural inputs. Following TAT-guided mediation, the Applicant agreed to and paid certain assessments but disputed the three items above.

Issues

  1. Whether the Applicant is liable to pay withholding tax of Shs. 434,296,272 on brokerage commissions paid to non-resident brokers in Kenya for tea sales conducted through the Mombasa auction system.
  2. Whether the Applicant is liable to pay customs duties of Shs. 108,985,763 on imported agricultural inputs cleared under CPC 492.
  3. Whether the penalty of Shs. 7,594,855 for failure to file quarterly returns was lawfully imposed.

Orders

  • The assessment of Shs. 434,296,272 in respect of withholding tax on brokerage fees is upheld.
  • The assessment of Shs. 108,985,763 in respect of agricultural inputs is set aside.
  • The penalty of Shs. 7,594,855 for non-filing of quarterly returns is set aside.
  • The Applicant is liable to pay interest on the principal tax paid.

Rules and key headnotes

Withholding Tax — Non-Resident Service Providers — Ugandan-Source Income
Income derived by a non-resident person constitutes Ugandan-source income under s.78(d)(ii) of the Income Tax Act where it is a fee for the provision of services paid by a resident person, regardless of where the services are physically performed, provided the payment is not an expenditure of a business carried on outside Uganda through a permanent establishment.
Withholding Tax — Payment Through Intermediary — Effective Payer
A resident taxpayer remains the effective payer for withholding tax purposes under s.137 of the Income Tax Act where payments to non-resident service providers are routed through an intermediary or auction settlement mechanism, provided the payments are deducted from the taxpayer's income, the taxpayer recognises the expense in its books of account, and the intermediary acts in a delegated capacity on behalf of the taxpayer.
Withholding Tax — Legislative Amendment — Expanded Scope of Source Rules
The Income Tax (Amendment) Act 2015 widened the scope of s.78 by replacing the previous s.78(c) with s.78(d)(ii), introducing a catch-all provision under which it does not matter where services are rendered; as long as a payment originates from Uganda and is to a non-resident person for services rendered wherever, the Ugandan resident person is required to withhold tax.
Customs Duties — Agricultural Inputs — Exemption Under EACCMA
Harvesting trays, pruning blades, mist blowers and chainsaws used directly in the cultivation and harvesting of tea qualify as agricultural inputs imported for use in the agricultural sector and are exempt from customs duty under s.114(1) of the East African Community Customs Management Act read with paragraph 15 of Part B of the Fifth Schedule.
Penalties — Conviction Requirement — Duty Remission Regulations
Where Regulation 7(4) of the East African Community Customs Management (Duty Remission) Regulations provides that a person who fails to submit returns commits an offence and shall be liable on conviction to a fine, the imposition of a penalty in the absence of prosecution and conviction is irregular and unlawful.
Interest on Tax — Admitted Liability — Automatic Accrual
Interest imposed under the tax laws is compensatory and automatically accrues upon late payment of tax. Where a taxpayer admits and pays principal taxes following mediation, interest on those admitted taxes remains lawfully due and payable.

Legislation cited (10)

Cases cited (3)

  • ABSA Bank Uganda Limited v Uganda Revenue Authority (TAT Application No. 57 of 2021)
  • Rwenzori Commodities Ltd v Uganda Revenue Authority (TAT Application No. 36 of 2025)
  • Uganda Tea Corporation v Uganda Revenue Authority (TAT Application No. 98 of 2025)

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

McLeod Russell Uganda Limited v Uganda Revenue Authority 2026 UGTAT 26 (22 May 2026)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.