TAT’s tax decision that restores fairness to Uganda’s tax system

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OPINION

The 30% Rule in the Aggreko International Services Ltd v URA

By Joshua Kato, CA.

Just like many corporate tax frustrations do, a company staring at a URA ledger balance it could not explain, unsure how money it had already paid suddenly appeared as arrears. The finance team searched through bank slips, reconciliations, and old returns, yet the figures just wouldn’t match. Their tax had been paid, but URA’s system told a different story. This was not different like many other companies when it came to Aggreko International Services Ltd.  What started as a routine reconciliation turned into a legal question that would redefine the 30% rule for all taxpayers in Uganda.

When Aggreko confronted URA over the reallocation of its tax payments, the company expected a straightforward correction. Instead, URA insisted that Aggreko could not be heard unless it first deposited 30% of the “disputed” tax, a requirement rooted in Section 15 of the Tax Appeals Tribunals Act (TAT Act)

But this time, the dispute was not about an assessment. It was about how URA had posted the company’s payments, which led to artificial balances arising from interest and penalties it believed had long been settled. The disagreement triggered a legal question that had remained unanswered for years: does the 30% rule apply even when URA NEVER issued an assessment?

Chronologically, the matter unfolded in a way that exposed a long-standing ambiguity in Uganda’s tax system. Aggreko had voluntarily filed and paid its taxes through self-assessments, as required under the Tax Procedures Code Act (TPCA). URA later allocated part of those payments to clear old interest and penalties, altering the taxpayer ledger and creating a liability.

Aggreko challenged these reallocations before the Tribunal, pointing out that URA’s postings, not any unpaid tax, caused the discrepancy. URA responded by raising a preliminary objection, arguing that Aggreko could not proceed without paying 30% of the “disputed” balance. This objection and the simple question behind it is what took the case before the Tribunal.

The Tribunal carefully examined the architecture of tax assessments under Section 26 of the TPCA and established a clean foundation: the 30% rule applies ONLY when a taxpayer is objecting to an assessment issued by the Commissioner. A taxpayer’s own voluntary self-assessment cannot be treated as an assessment capable of objection. More importantly, a tax ledger, no matter how detailed, is not an assessment. It is merely a running record of payments, filings, penalties, credits, offsets, and adjustments. The Tribunal emphasised that one cannot object to oneself. Therefore, the 30% requirement cannot be imposed where URA did not issue a formal assessment.

This clarity overturned the long-standing practice where URA treated nearly all disputes as assessment disputes, even when the issue arose from payment allocation, system errors, or administrative adjustments. The Tribunal held that because Aggreko’s disagreement was purely about URA’s allocation of tax payments, and not a challenge to a specific assessment, the company was entitled to be heard without first paying 30%. This ruling restored the original intention of Section 15 of the TAT Act: the 30% deposit is NOT a general barrier to justice, but a requirement tied strictly to formal assessments issued by URA.

What makes this decision particularly transformative is its relevance beyond Aggreko. Across Uganda, a significant portion of disputes originates from reconciliations, interest postings, ledger errors, and offsets, not from new assessments.

URA’s own annual reports show that reconciliation-related disputes form over half of the queries taxpayers raise. For years, many taxpayers paid the 30% simply because they believed it was unavoidable. Others abandoned their right to dispute entirely due to cash-flow constraints. The Aggreko ruling has now reset the law to its original position: no assessment, no 30%.

The case ideally strengthens financial fairness. Businesses often struggle with cash flow, and a blanket 30% rule creates unnecessary strain, especially when the dispute is not about unpaid tax but how URA has internally applied payments. The Tribunal stressed that if URA believes tax is genuinely unpaid, it must issue a formal assessment. Assessments bring certainty, open the objection window under Section 25 and 26 of the TPCA, and establish whether the 30% rule applies. Without an assessment, taxpayers cannot be forced to deposit money before being heard.

From a legal perspective, the Aggreko ruling has become a cornerstone in interpreting tax justice. It draws a clean boundary between administrative disagreements and assessment disputes. It restores proportionality, ensures that taxpayers are not punished for procedural misunderstandings, and protects access to justice. It also signals to URA that administrative actions, like reallocations, ledger postings, or internal system adjustments, cannot be treated as assessments by default.

Businesses should no longer fear challenging URA over payment allocations or ledger discrepancies. They should evaluate whether an assessment exists before assuming the 30% is due. They should request formal assessments where URA claims liability but has not issued one, and they should proceed confidently to the Tribunal where disputes are administrative in nature. This ruling reinforces the principle that tax justice must remain accessible, balanced, and legally anchored.

“This ruling is a timely reminder to all taxpayers: always confirm whether URA has issued a formal assessment before paying the 30%, where none exists, the law does not compel that deposit, and your right to be heard remains fully intact.”

The writer is a Chartered Accountant and a Chartered Tax Advisor