The Limits of URA’s Enforcement Powers

When Agency Notices and Other Recovery Measures Become Unlawful.

Introduction

The Uganda Revenue Authority (URA) has extensive statutory powers to assess, collect and recover taxes. These include the power under section 34 of the Tax Procedures Code Act (TPCA) to recover tax from third parties who owe or hold money on behalf of a taxpayer. Essential as these powers are, their exercise must comply with the conditions and safeguards prescribed by law.

Recent decisions in GH Family General Trading Company Limited v URA, TAT Applications Nos. 110 and 356 of 2025, Ericsson AB v URA, TAT Application No. 60 of 2020, and Continental Tobacco (Uganda) Limited v URA, TAT Application No. 83 of 2026, illustrate these limits. GH Family and Ericsson address premature recovery and the protection of objection rights, while Continental Tobacco concerns continued enforcement after payment of the agreed liability. Together, they reinforce that URA’s collection mandate remains subject to legality, due process and proportionality.

Premature Enforcement.

In GH Family, the dispute arose from funds deposited into the company’s Ugandan bank account, which it said were received to procure goods for businesses in South Sudan. The deposits attracted the attention of the Financial Intelligence Authority, which froze the account and referred the matter to URA for investigation. Page 1. On 2nd and 3rd April 2025, URA issued income tax assessments totaling UGX 2,184,915,725, treating the deposits as undeclared income. It issued agency notices on 4th April and recovered the entire assessed amount on 10th April, only eight days after the first assessment.

GH Family challenged the assessments and recovery, arguing that URA had enforced payment before expiry of the statutory 45-day objection period without grounds for believing it would fail to pay. URA maintained that inadequate supporting records justified treating the deposits as trading receipts and that the risk of non-payment permitted early recovery under section 34 of the TPCA.

The Tribunal held that Section 34(1)(b) of the TPCA is anticipatory in nature. It permits the Commissioner General to take enforcement action before the due date only where there are reasonable grounds for believing that the taxpayer will not pay the tax by that date. Such belief must therefore be founded on objective facts demonstrating a real risk of non-payment. The Tribunal found that the grounds relied upon by URA did not establish that GH Family was unlikely to pay the assessment when it became due. No contemporaneous risk assessment or other evidence demonstrating probable non-payment was produced. Instead, URA’s evidence focused primarily on the alleged under-declaration of income, which did not address the distinct statutory question of whether GH Family was likely to default on payment. The Tribunal further found that URA’s approach was inconsistent with Taxpayers’ Rights, to fair treatment, clear explanations and a fair opportunity to challenge tax decisions.

Accordingly, the Tribunal held that the agency notices had been issued and enforced prematurely. The entire assessed amount was recovered before  GH Family had a practical opportunity to exercise its statutory right of objection, yet URA had failed to establish reasonable grounds for believing that the tax would not be paid when due. The collection was therefore held to be unlawful and URA was ordered to refund the amount recovered together with interest in accordance with section 31(2) of the Tax Appeals Tribunals Act.

Similarly in Ericsson AB v Uganda Revenue Authority, TAT Application No. 60 of 2020, URA issued additional tax assessments of Ushs.10,288,140,569 on 24th May 2019, which Ericsson disputed. Before the expiry of the statutory 45-day period within which Ericsson was entitled to object, URA issued third party agency notices to Ericsson’s banks on 20th June 2019. Ericsson subsequently paid the statutory 30% deposit on 24th June 2019, but URA nevertheless enforced the agency notices and recovered a further UGX 7,227,681,145, resulting in recovery of the entire assessed amount by 26th June 2019.

Ericsson challenged the enforcement, arguing that the agency notices were premature and that they unlawfully deprived it of its statutory right to object, while URA argued that the tax was already due and payable and that the additional assessments did not alter the original payment due date. The Tribunal rejected URA’s position, and held that the fact that tax is due for payment does not extinguish or suspend a taxpayer’s statutory right to object. URA cannot enforce an agency notice in a manner that renders that right nugatory. The Tribunal held that the agency notices were unlawfully issued and enforced and ordered URA to refund the amounts unlawfully recovered, with interest.

What happens when the liability has been paid?

The Continental Tobacco case addressed a different dimension of enforcement: whether coercive enforcement measures can continue after the underlying tax liability has been discharged. In that case, URA had initially assessed the company for VAT and income tax. The taxpayer objected to the assessment and subsequently sought resolution of the dispute through the Alternative Dispute Resolution (ADR). While ADR was ongoing, URA deployed enforcement measures, including an agency notice, sealing the taxpayer’s business premises and lodging caveats over the company’s and its director’s properties.

On 30th January 2026, the parties executed a settlement agreement under which the VAT assessment was reduced to nil and the income tax liability revised to Ushs. 2,149,145,976 URA subsequently confirmed the revised liability, which the taxpayer paid in full on 10th March 2026. Despite full payment, URA maintained the sealing of the
premises and the caveats and subsequently purported to revoke the settlement agreement on allegations of fraud.

The taxpayer appealed to the Tax Appeals Tribunal challenging URA’s continued enforcement measures. URA argued that the ADR settlement agreement was valid, binding and enforceable, and that URA had no statutory power to unilaterally revoke it on unproven allegations of fraud. Having fully paid the revised tax liability, there was no outstanding tax liability capable of enforcement, making the continued sealing of its premises and maintenance of caveats unlawful, arbitrary and contrary to the TPCA, the settlement agreement and its right to fair administrative treatment.

The Tribunal held that the ADR settlement was binding like any other tax decision made by the Commissioner General. If URA believed that the settlement had been procured by fraud, the proper course was to challenge it before the Tribunal not to revoke its own decision and effectively become “plaintiff, judge and juror.” The Tribunal also held that enforcement measures require an existing liability capable of enforcement. Once the taxpayer had discharged the agreed liability, the statutory basis for continuing the closure and caveats fell away.

The continued sealing and caveats were held to be arbitrary, contrary to statute and a breach of the settlement. The Tribunal ordered the premises unsealed, the caveats removed and awarded the taxpayer UGX 50 million in general damages, with interest, for loss of trade and blocked use of  property.

So, Where Are the Limits?

Taken together, the decisions in GH Family, Ericsson and Continental Tobacco establish the following principles for the exercise of URA’s enforcement powers:

Enforcement must be anchored in an enforceable tax liability. Enforcement powers do not exist independently of the liability they are intended to recover. Once the underlying liability has been discharged, continued enforcement requires a separate lawful basis. Agency notices, closure notices and caveats are collection mechanisms not ends in themselves.

An assessment does not automatically justify immediate enforcement. The existence of an assessment does not, by itself, permit the taxman to resort immediately to coercive recovery. Where anticipatory enforcement is invoked, the statutory conditions must be established. Suspicion of under declaration is not necessarily evidence that a taxpayer will not pay.

Enforcement must respect taxpayers’ rights and serve its statutory purpose. Agency notices should ordinarily be a measure of last resort, following proper assessment, engagement with the taxpayer and consideration of payment arrangements. Although section 34 permits anticipatory recovery, it requires due diligence and objective grounds justifying early collection. Repeated use of agency notices without those grounds amounts to administrative overreach and raises concerns about URA’s institutional checks. Premature recovery can disrupt operations, deplete working capital and render the statutory right to object ineffective.

The taxman is also bound by due process. Tax administration imposes obligations on both sides. Taxpayers must comply with the law, maintain records, file returns and pay taxes properly due. Equally, URA must exercise its statutory powers within the conditions, procedures and limits prescribed by law.

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