Wakilii

Verma Company Limited v Uganda Revenue Authority [2026] UGTAT 18

Tribunal · 2026 Application Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application challenging additional VAT assessments issued by Uganda Revenue Authority following a tax audit
Decision
Additional VAT assessments set aside; 30% deposit to be refunded with interest

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Tribunal (majority) held that inter-branch stock transfers within a single legal entity do not constitute taxable supplies for VAT purposes. The Applicant discharged its evidential burden by producing verifiable primary records reconciling stock movements with declared sales. The Respondent failed to identify specific undeclared transactions or produce transaction-level exceptions. The additional VAT assessments of Shs. 7,752,542,817 for October 2021 to January 2022 were set aside. One member dissented, finding the Applicant failed to provide sufficient original physical documentation to verify the electronic records.

Outcome

Additional VAT assessments set aside; 30% deposit to be refunded with interest

Facts

Verma Company Limited, a distributor of motorcycles and spare parts operating through 11 branches, was audited by Uganda Revenue Authority for the period October 2021 to January 2022. URA issued additional VAT assessments totaling Shs. 7,752,542,817, alleging undeclared sales of Shs. 43,069,682,318. The assessment was based on comparing stock issued from the Applicant's stock movement ledgers to VAT returns. The Applicant objected, arguing that URA had mischaracterised inter-branch stock transfers as sales. The Applicant maintained that it operated a centralised accounting system where VAT was declared only upon sale to final customers, not upon internal transfers between branches. Following objection and reconciliation meetings where the Applicant provided stock movement reports, goods received notes, delivery registers, and EFRIS transaction data, URA maintained its assessment. The Applicant then filed this application with the Tax Appeals Tribunal.

Issues

  1. Whether the Applicant is liable for the assessed tax of Shs. 7,752,542,817
  2. What remedies are available to the parties

Orders

  • The additional VAT assessments of Shs. 7,752,542,817 for October 2021 to January 2022 are set aside.
  • The Respondent is directed to refund the 30% deposit with interest in accordance with Section 123 of the Income Tax Act.
  • Costs are awarded to the Applicant.

Rules and key headnotes

VAT — Taxable Supplies — Inter-branch Stock Transfers
Inter-branch transfers of stock within a single legal entity do not constitute taxable supplies for VAT purposes until the goods are sold to final customers.
Tax Assessment — Burden of Proof — Discharge of Evidential Burden
Where a taxpayer produces primary books and EFRIS-linked documents tracing stock movements into declared sales, and the assessing authority is unable to produce a coherent transaction-level counter schedule for the assessed months, the taxpayer has discharged its evidential burden to show that an assessment is excessive or incorrect.
Tax Assessment — Audit Methodology — Quantification and Precision
In reconciliation-driven tax assessments, precision and stability in quantification are essential. An assessment cannot be sustained where the assessing authority's figures oscillate significantly and no definitive transaction-level exception schedule is produced.
EFRIS Compliance — Retrospective Application of Requirements
EFRIS requirements for reporting stock transfers cannot be applied retrospectively to impose compliance obligations for periods before the requirements came into force. Where enforcement began on 1 June 2022, the absence of EFRIS records for transfers in October 2021 to January 2022 cannot be used to re-characterise those movements as taxable supplies.
Tax Assessment — Shifting Basis of Assessment
Where an assessment is pleaded on the basis of undeclared sales, the assessing authority cannot retrospectively broaden the dispute by pivoting to an 'expected sales' computation or including new categories of goods without proper reassessment and particularisation.
Documentary Evidence — Electronic Records vs Physical Documentation (Dissent)
Electronic formatted reports and registers require cross-referencing with primary physical documents such as goods delivery notes and stock control records for verification purposes in tax audits. Keeping records in electronic form does not rule out the use of physical documentation to verify actual transactions.

Legislation cited (9)

Cases cited (2)

  • Uganda v Gurindwa & 5 Others (HCT-OO-AC-0070 of 2012)
  • Uganda Revenue Authority v Balondemu David (Civil Appeal No. 0002 of 2023)

Full judgment

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Verma Company Limited v Uganda Revenue Authority 2026 UGTAT 18 (10 April 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.