ATC Uganda Limited v Uganda Revenue Authority
Court of Appeal, Civil Appeal No. 220 of 2022. 27 March 2026.
Interest that was never paid
Interest on a shareholder loan was added to the principal for five years instead of being paid. Was it 'paid' for withholding tax?
The situation
A tower company borrowed about USD 124.5 million from its Dutch parent in 2012 at 6.56%, with interest capitalised into the loan. It withheld no tax until it started paying interest in cash in 2018. The Revenue Authority assessed about UGX 24.2 billion in withholding tax; the taxpayer lost at the Tribunal and the High Court.
How it was resolved
The Court of Appeal dismissed the appeal. 'Payment' is defined broadly to include conferring value; capitalising interest conferred value on the lender and discharged the interest obligation, so tax was due when interest was capitalised. English case law is persuasive only. The Revenue Authority could rely on the lender's books, given the related-party relationship and treaty information exchange.
What a practitioner takes from it
Capitalised interest on related-party loans triggers withholding tax when capitalised.
Review every intra-group loan with capitalising interest.