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Zee Investments Limited v Uganda Revenue Authority [2026] UGTAT 1

Tribunal · 2026 Application Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application challenging tax assessments issued by Uganda Revenue Authority following an audit for income tax and PAYE for the period January 2019 to December 2020
Decision
Income tax assessment upheld; PAYE assessment set aside; costs awarded to Respondent

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Tribunal upheld the income tax assessment of Shs. 396,332,755 arising from understated purchases, finding that the Applicant failed to discharge its burden of proof by not providing sufficient evidence to demonstrate errors in the Respondent's variance analysis. However, the Tribunal set aside the PAYE assessment of Shs. 79,335,900, holding that PAYE can only be imposed on actual salary payments, not on assumed or deemed income, and that the Respondent's adjustments based on what ought to have been paid rather than what was actually paid were unjustified. One member dissented on the PAYE issue.

Outcome

Income tax assessment upheld; PAYE assessment set aside; costs awarded to Respondent

Facts

Zee Investments Limited operates pharmacies in Mbarara and Kabale. In 2021, Uganda Revenue Authority conducted an audit for the period January 2019 to December 2020 and found that purchases declared in the financial accounts were understated relative to purchase ledgers by Shs. 13,531,278,864 and Shs. 229,539,233 for 2019 and 2020 respectively, resulting in an income tax assessment of Shs. 396,332,755. URA also found that salaries declared in PAYE returns were understated, particularly for directors and pharmacists, and issued a PAYE assessment of Shs. 79,335,900. The Applicant objected, arguing that URA included transactions from sister companies (Zee Pharmaceuticals Ltd and Zarin Pharmaceuticals Ltd) and considered information outside the audit period. The Applicant also contended that the PAYE assessment was based on assumed salaries rather than actual contractual payments, and that directors' salaries were shared among three companies under a 2017 Memorandum of Understanding.

Issues

  1. Whether the Applicant is liable to pay the income tax assessed arising from alleged understated purchases.
  2. Whether the Applicant is liable to pay the PAYE assessment arising from alleged understated salaries of directors, pharmacists, and finance manager.

Orders

  • The income tax assessment arising from variances in purchases is upheld.
  • The PAYE assessment is set aside.
  • The Respondent is awarded 80% of the costs of this application.

Rules and key headnotes

Tax Law — Income Tax Assessment — Burden of Proof — Taxpayer's Obligation to Rebut Assessment
Where a tax authority issues an income tax assessment based on variances between purchase ledgers and financial accounts, the taxpayer bears the burden of proving that the assessment is excessive by providing sufficient evidence, including workings and financial statements, to demonstrate errors in the authority's variance analysis; mere assertions of correct accounting without supporting documentation are insufficient to discharge this burden.
Tax Law — PAYE — Basis of Assessment — Actual Income versus Deemed Income
PAYE can only be imposed on actual salary payments made to employees, not on what ought to have been paid according to regulatory guidelines or industry standards; in the absence of express statutory provision for deemed income, tax authorities cannot assess PAYE based on assumed or hypothetical salaries that differ from contractual obligations and actual payments.
Tax Law — PAYE — Employment Income — Regulatory Guidelines versus Contractual Obligations
While regulatory bodies such as the National Drug Authority may provide guidelines on minimum professional remuneration, for tax purposes only actual income earned and paid pursuant to employment contracts is taxable; issues concerning adequacy of remuneration are matters for the Industrial Court, not the tax authority, unless the statute expressly provides otherwise.
Tax Law — Tax Assessment — Scope of Audit — Sister Companies
Where a taxpayer alleges that a tax assessment improperly included transactions from sister companies that are separate legal entities with distinct tax identification numbers, the taxpayer must produce evidence demonstrating how information from those entities was used in arriving at the assessment; absent such proof, the allegation that the assessment went beyond its lawful scope fails.
Tax Law — Directors' Remuneration — Shared Salary Arrangements — Memorandum of Understanding
Where directors of related companies enter into a memorandum of understanding to share remuneration costs among multiple entities, a tax authority must evaluate such arrangements based on their substance rather than dismissing them entirely on grounds of form; in the absence of proof that a taxpayer paid or accrued salaries beyond what was agreed in such arrangements, PAYE cannot be assessed on assumed higher payments.
Evidence — Burden of Proof — Tax Appeals — Corroborative Documentation
In tax appeals where a revenue authority questions the credibility of declared salaries, the taxpayer is required to produce corroborative evidence beyond employment contracts, such as payrolls, bank statements, transactional ledgers, or pay slips, to demonstrate what was actually paid; employment contracts alone do not discharge the burden of proof where declared salaries fall below regulatory expectations.

Legislation cited (7)

Cases cited (4)

  • Argosy Co. Ltd v Inland Revenue Commissioner [1971] 1 WLR 514
  • Nile Breweries Ltd v Uganda Revenue Authority (TAT Application No. 15 of 2018)
  • Guarantee Trust Bank Limited v Uganda Revenue Authority (TAT Application No. 20 of 2024)
  • Finn Church Aid Uganda Limited v Uganda Revenue Authority (TAT Application No. 366 of 2024)

Full judgment

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

Zee Investments Limited v Uganda Revenue Authority 2026 UGTAT 1 (20 January 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.