Uganda vs Rwenzori Commodities Ltd., July 2025, Tax Appeals Tribunal, Application No. 36 OF 2024

Category: Disallowed Deduction, Financial Transactions, Legality - Legitimacy - Constitutional | Tag: , , , , , ,
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Rwenzori Commodities Limited’s challenge to the Uganda Revenue Authority’s application of the interest deductibility limitation in section 25(3) of the Income Tax Act.

The Revenue Authority had capped the company’s deductible interest expense at 30% of EBITDA using gross interest, without offsetting interest income. They argued that the statute refers only to gross interest expense, that OECD guidance is not binding in Uganda, and that Parliament intentionally did not adopt a net interest rule in the 2018 amendments.

The taxpayer argued that the law should be interpreted to use net interest (interest expense minus interest income), citing GAAP principles and OECD BEPS Action 4 guidance, which aim to prevent double taxation and better reflect the real cost of borrowing.

Judgment of the Tax Appeals Tribunal

The Tribunal upheld URA’s position that section 25(3) of the Income Tax Act requires the 30% EBITDA cap to be applied to gross interest expense, not net interest, and dismissed Rwenzori Commodities Limited’s application.

 

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