Rwenzori Commodities Limited v Uganda Revenue Authority
Tax Appeals Tribunal, Application No. 36 of 2024. 30 July 2025. Coram: Ms. Crystal Kabajwara; Mr. Siraj Ali; Mrs. Christine Katwe.
EBITDA · Capping of Interest Expense · Net Interest · Gross Interest · Applicability of Accounting Principles in Tax · Applicability of International Best Practices vis-à-vis Domestic Law
The 30% interest cap: does it apply to all the interest a group company pays, or only to what is left after the interest it earns?
The situation
A tea grower and processor in a group claimed interest expense of UGX 1,738,250,300 for 2019 and 2020. It also earned interest, and computed the cap on its net interest. The Revenue Authority's international tax team applied the cap to the gross interest expense, disallowed the excess and assessed UGX 521,475,118.
What the law says
For a taxpayer that is a member of a group, other than banks, some microfinance institutions and insurers, deductible interest 'in respect of all debts owed' may not exceed thirty percent of tax earnings before interest, depreciation and amortisation (ITA s. 25(3)); the excess may be carried forward for up to three years (s. 25(4)).
What each side argued
The company: read the cap on net interest, as accounting practice and the OECD's BEPS Action 4 approach would, to reflect the real cost of borrowing.
The Revenue Authority: the section speaks of interest on debts owed, a gross figure; OECD guidance does not bind Uganda; and Parliament did not adopt a net rule when it legislated in 2018.
How it was resolved
The Tribunal upheld the Revenue Authority: the cap applies to gross interest expense, and the application was dismissed.
What a practitioner takes from it
Model the cap on gross interest. Interest income does not buy back deductions under s. 25(3).
Plan to use the three-year carry-forward, since disallowed interest is not lost at once.
Check group status again for 2026/27: the Income Tax (Amendment) Act 2026 redefines a 'group' as persons with at least 51% common underlying ownership.
What could change
If Parliament wants a net rule, it has to say so; the Tribunal will not read one in. Groups that both lend and borrow internally are the ones this ruling bites.