Uganda Revenue Authority (URA) has paid more than Shs2.4 billion to a property developer after admitting that it wrongly collected Value Added Tax (VAT) on transactions involving unimproved land, which is exempt from the tax.
The payment follows a consent settlement reached between URA and Canaan Sites Limited, a real estate company, ending a protracted legal battle that had been before the Tax Appeals Tribunal and later the High Court.
According to the consent judgment, URA agreed to refund Shs1.2 billion that had been unlawfully collected from the company, pay an equivalent amount of Shs1.2 billion in accrued interest on the refund, and meet Shs36 million in legal costs.
“Whereas the Appellant (URA) lodged an appeal challenging the decision of the Tax Appeals Tribunal… by consent of both parties, it is hereby agreed that this appeal be fully settled on the following terms: the Appellant (URA) shall remit the full agreed sum of Shs2.4 billion within 30 days from the date of execution of this consent,” part of the consent judgment reads.
Court records indicate that the principal amount and interest were paid last month.
In a letter dated May 21, 2026, URA’s Commissioner for Legal Services and Board Affairs, Ms Catherine Donovan Kyokunda, confirmed that the payments had been effected.
“Following the conclusion of the reconciliation exercise, payment of the principal sum was effected on Monday, May 4, 2026, and interest on Friday, May 8, 2026. We trust that this brings the matter to a close,” Ms Kyokunda wrote.
The dispute stemmed from a 2024 decision by the Tax Appeals Tribunal, which found that URA had unlawfully collected VAT from Canaan Sites on the sale of unimproved land.
The company argued that transactions involving unimproved land are exempt supplies under the Value Added Tax Act and that the taxes collected by URA were therefore illegal. It sought a refund of the amounts paid together with interest and legal costs.
URA, however, opposed the claim, arguing that Canaan Sites had failed to prove that the tax was refundable.
The tax body maintained that while the company sought a refund of approximately Shs1.7 billion covering the period between January 2013 and February 2017, it only accepted liability for the period when the company was not VAT-registered.
URA further contended that the developer had not demonstrated that the VAT had been paid out of its own resources rather than being passed on to customers through land sale transactions.
“The lack of explicit language in the sale agreements indicating VAT exclusivity implies the process was VAT-inclusive,” URA argued before the Tribunal.
However, the three-member Tribunal chaired by Ms Proscovia Nambi sided with Canaan Sites after reviewing VAT returns, newspaper advertisements, sale agreements, and bank statements.
The Tribunal found that the company had demonstrated that it paid the disputed VAT from its own funds and profits.
“The Tribunal concludes that the Respondent’s (URA) retention of the unlawfully collected VAT amounts to unjust enrichment,” the panel ruled.
The other members of the panel were Ms Christine Katwe and Ms Grace Safi.
The panel further noted that URA had failed to provide evidence showing that the tax burden had been transferred to customers or that tax invoices had been issued.
“The absence of evidence demonstrating that the VAT was passed on to customers, or that tax invoices were issued, as well as the Respondent’s witness’s testimony that no customer has since claimed the refundable amounts, further fortifies this conclusion,” the Tribunal observed.
The Tribunal subsequently declared that URA’s collection of VAT on the sale of unimproved land was unlawful and ordered a refund.
In awarding interest, the Tribunal held that delayed tax refunds deprive taxpayers of the opportunity to use their money for investment, business expansion, or working capital.
“The result is an opportunity cost, the potential gains forgone due to the inability to utilise the funds promptly. This requires the Respondent to pay interest on delayed refunds and to compensate taxpayers for the delay,” the Tribunal ruled.
It ordered that interest be paid at a rate of two percent per month from the date the tax was collected until the refund was made, subject to the statutory cap.
Despite the payment of Shs2.4 billion, lawyers representing Canaan Sites say the matter may not yet be fully concluded.
Mr Elvis Ndikuno Nyanga of ELDA Advocates, who represented the company, said on Sunday that there remains an outstanding claim of more than Shs500 million, which, according to the taxpayer, relates to taxes erroneously collected between 2013 and 2015.
He said efforts to recover the balance are still ongoing.
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