The Uganda Revenue Authority (URA) has won a major legal battle after the High Court overturned a Tax Appeals Tribunal decision in a dispute over interest payments involving rice importers. The case, which carries significant financial implications, revolved around the interpretation of settlement agreements and whether the interest terms accepted by both parties could later be replaced with a different calculation method.
The legal fight involved URA and seven rice importers, including David Natweta, who had reached agreements with the tax authority to resolve disputes over tax refund claims. Rather than continue fighting over the claims, the parties agreed on settlement terms that included interest calculated at 6% simple interest. This arrangement differed from the 2% compound interest rate associated with certain statutory tax refund outcomes.
The agreements appeared to offer a way out of a potentially lengthy legal dispute. As part of the broader settlement, the importers received payment of principal claims exceeding UGX 14.54 billion, while URA agreed to the negotiated interest terms. Both sides therefore had financial interests in ensuring that the settlement was implemented according to the conditions they had accepted.
However, the matter took a different turn when the Tax Appeals Tribunal set aside the agreed interest arrangement and substituted an alternative approach. The change had serious financial implications for URA, with the potential additional interest liability estimated at approximately UGX 13.09 billion. The authority subsequently took the matter to the High Court, challenging the tribunal’s decision.
URA’s argument was that the settlement agreements represented a negotiated compromise rather than an ordinary determination of a tax refund claim. The authority maintained that the agreed interest rate was an important part of the bargain and could not simply be discarded while leaving the other benefits of the settlement intact. In its view, replacing the agreed terms would undermine the certainty that negotiated agreements are meant to provide.
The High Court ruled in URA’s favour in Uganda Revenue Authority v David Natweta & 6 Others, Civil Appeal No. 0117 of 2026, overturning the tribunal’s decision. The outcome supported the position that the 6% simple interest rate formed part of the negotiated settlement and should not automatically be replaced by the statutory compound interest arrangement associated with certain other refund outcomes.
The decision has broader implications for the handling of tax disputes in Uganda. It highlights the importance of distinguishing between outcomes determined through statutory procedures and settlements reached through negotiations. It also reinforces the need for parties to consider the complete terms of an agreement before accepting its benefits, because changing one provision can affect the financial balance that made the settlement possible in the first place.
For URA, the ruling removes the additional interest exposure arising from the tribunal’s substituted arrangement, although the estimated UGX 13.09 billion should not automatically be treated as cash recovered or a final calculation of savings. More importantly, the judgment strengthens the authority’s position on the enforceability of negotiated settlements and sends a message that agreements reached to resolve financial disputes should be respected in accordance with their terms.
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