Taxpayers subject to Uganda’s transfer pricing rules should prepare for tougher transfer pricing audits and a greater risk of disputes following Parliament’s passing of Clause 9 of the Income Tax (Amendment) Bill, 2026. The Bill now awaits presidential assent and once signed into law, will take effect on July 1, 2026. As governments intensify efforts to combat tax avoidance and evasion, tax authorities globally are increasingly demanding greater transparency in cross border transactions. Multinational groups are now expected to demonstrate that related party dealings reflect arrangements that independent parties would have accepted under similar conditions.
In Uganda, this requirement also applies to local groups with related party transactions above Shs500 million in aggregate in a year. Historically, much of the burden during transfer pricing audits rested with the Uganda Revenue Authority to challenge pricing arrangements and prove that profits reported in Uganda did not reflect economic reality. However, under the proposed amendment, taxpayers will effectively be expected to demonstrate from the outset that their related party transactions are commercially justifiable, priced at arm’s length, and supported by reliable documentation.
For taxpayers subject to Uganda’s transfer pricing rules, this will fundamentally change how transfer pricing is approached. It will no longer be viewed merely as a year end compliance exercise. Businesses will increasingly need to explain the commercial rationale behind related party transactions, identify which entities perform key functions, determine which parties bear risks, and demonstrate that profits reported in Uganda align with actual economic activities undertaken locally. As a result, future URA audits are expected to become more rigorous, evidence driven, and focused on commercial substance.
Once the amendment comes into force, taxpayers will be required to maintain robust transfer pricing documentation covering the full value chain of related party transactions, including accounting records, cost allocation methodologies, and the parties’ actual conduct, all supported by reliable evidence. Failure to provide sufficient documentation demonstrating compliance with the arm’s length principle upon request will increase the risk of disputes. Consequently, the adequacy of transfer pricing documentation is likely to become an increasingly contentious area between the URA and taxpayers.
Transfer pricing documentation will, therefore, become significantly more important than a routine compliance file prepared for regulatory purposes. Generic group documentation alone will not suffice. Even where multinational groups maintain regional transfer pricing files and global master files, local substantiation will become ever more critical. Taxpayers will need contemporaneous records that clearly connect legal agreements, accounting treatment, and the operational reality. Accounting consistency is also expected to attract closer scrutiny. Differences between transfer pricing positions and financial statements including revenue recognition, cost allocations, and inter-company balances will increasingly trigger attention.
Essentially, transfer pricing will need to become more integrated into finance, governance, and operational reality. Ultimately, future transfer pricing disputes in Uganda will depend as much on credibility as on calculations. The key question will no longer simply be whether a taxpayer’s profit margin falls within an acceptable range, but whether the taxpayer can present a coherent, evidence based, and commercially credible explanation of how its related party arrangements operate in reality. Clause 9 therefore signals a broader evolution in Uganda’s transfer pricing enforcement framework and further aligns the country with international standards.
Businesses that continue to treat transfer pricing as a compliance afterthought will face increased financial and reputational exposure. Those that proactively align their policies, documentation, and operational conduct with the new expectations are likely to be better positioned to manage audits and engage constructively with the URA. More than ever, transfer pricing health checks and robust documentation will be critical for multinational groups and local group companies seeking to ensure compliance with Uganda’s transfer pricing framework and minimize exposure to principal tax, penalties and the related cost of disputes. Businesses that proactively review their transfer pricing policies, governance frameworks, and supporting documentation will be better positioned to manage future audit risks and evolving compliance expectations.