The Tax Appeals Tribunal has set limits on how the Uganda Revenue Authority (URA) can interpret bank deposits when assessing companies for taxes, ruling that money entering a business account does not automatically qualify as taxable income.
The decision arose from a dispute between Salento General Enterprises Limited and URA over tax assessments based on deposits and accounting entries that the company disputed.
In its ruling delivered on May 29, 2026, the Tribunal found that the contested funds represented capital and operational financing rather than proceeds from business sales.
It subsequently set aside the assessments, finding that the amounts had been wrongly treated as taxable business revenue.
The case, registered as Application No. 180 of 2024, centred on the classification of financial transactions and whether the money reflected in the company’s bank accounts represented income generated from its operations.
Salento challenged URA’s assessment and presented corrected financial statements and supporting records to explain the disputed transactions.
The Tribunal’s decision underscores the need for tax authorities to examine the source and purpose of bank deposits before classifying them as business income.
For businesses, the distinction is important because bank accounts may receive shareholder contributions, loans, capital injections and other financing that do not necessarily constitute taxable sales.
However, companies must be able to substantiate such transactions with reliable records. Under Section 28 of the Tax Procedures Code Act, the responsibility of demonstrating that a tax assessment is incorrect rests with the taxpayer.
The ruling therefore carries implications for businesses undergoing tax audits, particularly those whose bank transactions include financing and other receipts separate from ordinary trading activities.
It also reinforces the importance of proper bookkeeping, documented financing arrangements and accurate financial statements in resolving disputes with URA.
