Paying taxes without breaking the business

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OPINION

By Joshua Kato, CA.

For many Ugandan businesses, the greatest fear is not the obligation to pay tax, but the manner and timing in which that obligation is enforced. Each year, domestic tax arrears run into trillions of shillings, with Uganda Revenue Authority (URA) data consistently showing that the private sector accounts for the largest portion of unpaid taxes. Behind these figures are thousands of businesses under financial strain, willing to comply, but unable to raise large lump-sum payments without paralysing operations.

Small and medium enterprises, which form the backbone of Uganda’s economy, are particularly exposed. Many operate on thin margins and depend on daily or monthly cash inflows. When a substantial tax assessment arises, often from audits, delayed filings, reconciliations, or accumulated penalties, the immediate demand for full payment can trigger severe distress. In recent years, enforcement actions such as bank account attachments and business closures have highlighted how tax compliance challenges can quickly turn into business-ending events.

It is within this context that URA’s Public Notice issued on 1 February 2026, operationalising online installment payment arrangements, becomes highly significant.

The public notice formally informs taxpayers that URA has activated a structured, digital process allowing eligible taxpayers to apply to settle outstanding tax liabilities in installments. While the legal basis has always existed under the Tax Procedures Code Act, the notice marks a clear administrative shift: installment payments are no longer informal negotiations but a standardised, accessible option available through the URA online system.

In practical terms, the notice signals that URA is encouraging early engagement rather than confrontation. It invites taxpayers to come forward, disclose their liabilities, and propose realistic payment plans, before enforcement action is triggered.

Installment payments simply mean paying tax in parts over time instead of in one lump sum. The total tax remains payable, but settlement is spread across agreed periods to reflect the taxpayer’s cash-flow capacity.

This option applies across key tax heads, including:

• Value Added Tax (VAT)
• Corporate Income Tax
• Pay As You Earn (PAYE)
• Withholding Taxes, and
• Other assessed domestic tax liabilities.

For many taxpayers, this distinction is critical. It turns tax from an immediate financial shock into a planned obligation that can be managed alongside normal business expenses.

One of the most important aspects of the installment arrangement is the freedom it gives taxpayers to propose their own payment plans. Through the URA e-services platform, a taxpayer selects the liability, proposes an upfront payment, chooses the number of installments, and sets payment amounts based on expected cash flows.

This is a major shift from the traditional approach where taxpayers were simply told how much to pay and when. Now, the taxpayer takes an active role in designing a plan that is realistic, practical, and sustainable.

For example, a contractor awaiting delayed payments may structure installments around expected receipts. A seasonal trader may propose higher payments during peak months and lower ones during off-season periods. A manufacturing business may align payments with production and sales cycles.

This flexibility is what makes the arrangement truly effective.

Installment arrangements work best when they are proactive, not reactive. Once enforcement measures such as agency notices or account attachments are issued, the taxpayer’s negotiating position weakens significantly.

Applying early helps in demonstrates good faith and willingness to comply, reduces the risk of enforcement action, allows URA to assess the proposal calmly and objectively and protects the taxpayer’s business reputation and banking relationships

In contrast, ignoring assessments or delaying engagement only increases penalties, interest, and enforcement risk.

Consider a wholesaler assessed sh400 million in VAT following an audit. Paying immediately would mean selling stock at a loss and defaulting on suppliers. Through an installment plan, the business pays sh100 million upfront and settles the balance over ten months. Operations continue, staff remain employed, and URA recovers the full tax.

A professional firm with accumulated PAYE arrears structures monthly payments aligned to billing cycles, clearing historical liabilities while strengthening payroll controls going forward.

In each case, the installment arrangement preserves both compliance and business continuity.

While installment payments offer flexibility, they demand strict discipline once approved. The arrangement is a formal commitment. Missing payments can lead to immediate cancellation of the plan and enforcement of the full outstanding balance.

Interest may continue to accrue unless remitted, and any misrepresentation in the application can worsen the taxpayer’s compliance profile. Taxpayers must therefore ensure that payment proposals are conservative and achievable.

Installments should be treated like loan repayments, planned, prioritised, and honoured without excuse.

From a policy and technical perspective, installment payment arrangements reflect a modern approach to tax administration rooted in the Tax Procedures Code Act. URA secures revenue over time while preserving the tax base. Taxpayers remain operational, compliant, and economically productive.

This cooperative compliance model benefits the wider economy by reducing business closures, preserving jobs, and improving long-term revenue mobilisation.

The installment payment window is not a tax holiday or a waiver. It is a practical compliance tool designed to balance revenue collection with commercial reality. Taxpayers should seek professional advice, prepare realistic cash-flow projections, and engage URA early.

Handled responsibly, installment payments transform tax from a crisis into a manageable obligation—allowing businesses to survive, stabilise, and grow, while still contributing their fair share to national development.