The Commercial Division of the High Court has ruled that the Uganda Revenue Authority (URA) cannot lawfully collect taxes retrospectively when those taxes arise from a new interpretation or reassessment of the law.
The decision was delivered by Susan Odongo, based on an appeal filed by Britania Allied Industries Limited, a local manufacturer of biscuits, confectionery, fruit juices, and sauces.
For several years, Britania imported mango and guava fruit pulp. URA assessed these imports at a tax rate of 10 per cent and repeatedly approved and cleared them under this classification. This arrangement remained in place for nearly a decade.
Later, URA reviewed its position and concluded that the fruit pulp had been wrongly classified. According to the Authority’s new interpretation, the imports should have been subject to a 25 per cent tax rate instead of 10 per cent. Based on this change, URA reassessed Britania’s past tax obligations and demanded additional payments covering earlier financial years.
In May 2023, the Tax Appeals Tribunal ruled in URA’s favour and ordered Britania to pay a total of 1.246 billion Shillings. This included taxes for the period July 2020 to June 2021, as well as arrears covering the 2017/2018 to 2019/2020 financial years.
The Tribunal reasoned that Britania was liable for all unpaid taxes resulting from the earlier classification, even though URA itself had approved that classification at the time. Britania challenged the Tribunal’s decision, arguing that URA’s demand was unfair and unlawful because it applied a new tax interpretation retrospectively. The company also maintained that the reassessment ignored customs procedures governing duty remission and long-standing administrative practice.
In overturning the Tribunal’s decision, Justice Odongo held that while URA has the legal authority to interpret tax laws and correct its mistakes, that power must be exercised fairly and reasonably. A change in interpretation does not automatically make the previous interpretation illegal.
The court found that Britania had consistently engaged with URA and relied on approvals issued by URA officers over many years. This created a clear and legitimate expectation that the imports were correctly taxed at 10 per cent. Penalising the company retrospectively for a position previously endorsed by the tax authority was found to be manifestly unfair.
Justice Odongo further noted that there was no convincing evidence that Britania had acted dishonestly or misled URA. On the contrary, URA’s own officers had vetted, approved, and cleared the goods under the same tax codes for a long period. As a result, the court held that URA’s attempt to change the tax rate and apply it retrospectively was unlawful.
On the technical question of whether mango or guava pulp should be treated as juice, a raw material, or another product for customs purposes, the judge declined to make a definitive ruling. She instead referred the matter to the World Customs Organisation, noting that the issue requires specialised technical expertise beyond the court’s mandate.
The Court allowed Britania’s appeal and ordered URA to pay the costs of the suit, reinforcing the principle that tax authorities cannot punish taxpayers retrospectively for interpretations of the law that the authorities themselves previously adopted and applied.
-URN
