A tax dispute between Continental Tobacco Uganda and Uganda Revenue Authority (URA) has laid bare tensions between negotiated tax settlements and continued enforcement action, with a case before the Tax Appeals Tribunal revealing contradictions in the handling of a multi-billion shilling assessment. The dispute, according to documents before the Tribunal originated from an initial tax liability exceeding Shs10b.
Tribunal records show that Continental Tobacco had been assessed Shs2.2b in Value Added Tax (VAT) and Shs7.89b in Income Tax, forming the basis of URA’s enforcement actions. However, the dispute took a significant turn on January 30, 2026, when both parties entered into an Alternative Dispute Resolution agreement executed by the URA Commissioner Legal Services, which substantially altered the company’s tax position.
Under the settlement, the VAT liability of Shs2.2b, documents show, was vacated to nil, while the income tax assessment was revised from Shs7.89b to Shs2.14b. Despite the revised obligations, Continental Tobacco argues that URA continued to enforce recovery measures that were premised on the original, higher assessments. According to filings before Tribunal, these actions included the issuance of agency notices to banks, sealing of business premises, and placement of caveats on properties belonging to the company and its directors. The company contends that these enforcement measures remained in place even after the Alternative Dispute Resolution agreement had redefined its tax liabilities, raising questions about the legal effect of such settlements within the tax administration framework.
Under the Tax Procedures Code and Alternative Dispute Resolution Regulations, a settlement agreement is recognised as binding and enforceable. Continental Tobacco argued that once the January 2026 agreement was concluded, URA was obligated to adjust its enforcement actions in line with the revised figures, including lifting restrictions tied to the initial assessments. URA, however, defended its actions by pointing to new information that allegedly undermined the the settlement.
Tribunal records indicate that URA informed Continental Tobacco that it had received intelligence suggesting that the Alternative Dispute Resolution agreement may have been concluded based on misleading disclosures. In particular, URA claimed that Continental Tobacco disclosed only one bank account held at KCB Bank, while allegedly maintaining additional accounts in Centenary Bank and Stanbic Bank that were not revealed during the Alternative Dispute Resolution process.
Following these findings, URA initiated further investigations and, in April 2026, formally notified Continental Tobacco while requesting additional documentation covering a review period from 2014 to 2022. The move reopened scrutiny of the company’s tax affairs, signalling URA’s position that settlement agreements may be revisited where fraud or misrepresentation is suspected. The dispute, however, presented a series of legal questions for determination, key among which included whether the Alternative Dispute Resolution agreement remained valid and binding, and whether URA’s continued enforcement actions, despite the revised tax figures, were lawful.
Continental Tobacco argued that allegations of fraud had to meet a high evidentiary threshold, insisting that such claims could not be presumed and must be pleaded and proven. The company further contended that URA lacked the statutory authority to unilaterally revoke or disregard a concluded settlement agreement, describing the continued enforcement as an abuse of process. Continental Tobacco also maintained that the persistence of enforcement actions, such as business closures, despite compliance with the revised obligations, amounted to a breach of its rights to fair hearing.
Tribunal settles the dispute
In its ruling, the Tax Appeals Tribunal found URA’s actions unlawful and upheld the integrity of the settlement agreement, affirming that the Alternative Dispute Resolution was valid, binding and enforceable, and ruled that the revocation letter issued on May 26, 2026 was null and void. It further held that the continued sealing of the company’s premises and the maintenance of caveats were unlawful, ordering URA to immediately unseal the business premises and directed URA to remove and vacate all caveats, effectively restoring the company’s control over its properties.
In addition, the Tribunal issued a permanent injunction restraining URA from taking any further enforcement action in respect of the liabilities covered under the settlement agreement, unless the agreement is set aside by a competent court or the Tribunal itself. The Tribunal also awarded the company general damages of Shs50m with interest at 6 percent per annum until payment in full, and granted costs of the application to Continental Tobacco. URA is also expected to submit a report to the Tribunal by August 15, 2026, detailing the execution of the orders, but in the event that it wishes to challenge the settlement agreement, it must formally apply to the Tribunal, where the matter would be considered in accordance with the law.