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Rwenzori Commodities Limited v Uganda Revenue Authority [2025] UGTAT 19

Tribunal · 2025 Application Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application challenging URA's capping of interest expense under section 25 of the Income Tax Act
Decision
Application dismissed; Applicant liable to pay assessed tax

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Tribunal held that section 25 of the Income Tax Act requires the 30% EBITDA interest deduction cap to be applied to gross interest expense, not net interest expense. The plain language of the statute refers to 'interest incurred' and 'deductible interest', with no provision for netting interest income against interest expense. OECD BEPS Action Plan 4 recommendations cannot override clear domestic legislation. The Respondent correctly applied the law and the application was dismissed.

Outcome

Application dismissed; Applicant liable to pay assessed tax

Facts

Rwenzori Commodities Limited, a tea grower and manufacturer, was assessed additional corporate income tax of Shs. 521,475,118 for the years 2019-2021. The Uganda Revenue Authority's International Tax Department found that the Applicant had claimed interest expenses of Shs. 1,738,250,300 that exceeded the 30% EBITDA cap under section 25(3) of the Income Tax Act. The Applicant objected, arguing that the Respondent should have used net interest expense (interest paid minus interest income earned) rather than gross interest expense in applying the cap. The Applicant contended this approach aligned with international best practice under OECD BEPS Action Plan 4 and avoided double taxation. The Respondent rejected the objection, maintaining that the statute requires gross interest to be used. The Applicant challenged the assessment before the Tax Appeals Tribunal.

Issues

  1. Whether the Applicant is liable to pay the tax assessed.
  2. Whether the Respondent correctly applied section 25(3) of the Income Tax Act by using gross interest expense rather than net interest expense in computing the 30% EBITDA cap.

Orders

  • Application dismissed.
  • The Applicant is liable to pay the tax assessed.
  • Costs awarded to the Respondent.

Rules and key headnotes

Tax Law — Interest Deductibility — EBITDA Cap — Gross Interest vs Net Interest
Section 25(3) of the Income Tax Act caps deductible interest at 30% of tax EBITDA based on gross interest expense incurred, not net interest expense. The statutory language 'interest incurred' and 'deductible interest' refers exclusively to actual interest expense paid by the taxpayer and does not permit netting of interest income against interest expense.
Statutory Interpretation — Plain Meaning Rule — Tax Statutes
Where the language of a tax statute is plain and unambiguous, courts must apply its literal meaning. The words 'interest incurred' in section 25(1) and 'deductible interest' in section 25(3) of the Income Tax Act mean exactly what they say, with no basis for implying a netting concept not expressed in the statute.
Tax Law — International Guidelines — OECD BEPS — Domestic Legislation Prevails
OECD BEPS Action Plan guidelines, while persuasive, have no force of law in Uganda and cannot override clear statutory provisions. Where Parliament enacted section 25 of the Income Tax Act in 2018 after BEPS Action Plan 4 was published in 2015 without incorporating net interest recommendations, the deliberate exclusion indicates Parliament did not intend to adopt that approach.
Tax Law — Accounting Principles — Relationship to Taxation
While section 38(1) of the Income Tax Act requires taxpayers to conform to generally accepted accounting principles in maintaining records, accounting principles cannot override express provisions of a taxing Act. Accounting and taxation serve different purposes and taxation does not always follow accounting treatment.

Legislation cited (8)

Cases cited (5)

  • Ambitious Construction Ltd v Uganda Revenue Authority (TAT 219 of 2023)
  • Cape Brandy Syndicate v Commissioner of Inland Revenue [1921] 1 KB 64
  • Unilever Kenya Ltd v The Commissioner of Income Tax
  • New Vision Printing & Publishing Corporation v Uganda Revenue Authority (HCCA No. 78 of 1999)
  • Paul Mwiru v Igeme Nabeta & Others (Election Petition No. 6 of 2011)

Full judgment

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

Rwenzori Commodities Limited v Uganda Revenue Authority 2025 UGTAT 19 (30 July 2025)
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.