Kampala — July 15, 2025
A tax tribunal has ordered former retail giant Shoprite Uganda to pay over Shs 1.3 billion in Value Added Tax (VAT) arrears following a ruling that exposes significant accounting irregularities and under-declaration of taxable sales during the company’s operations in Uganda.
The ruling underscores growing scrutiny of multinational corporations operating in Uganda, particularly in sectors like retail where internal transactions can blur the lines of tax liability. Shoprite, which exited the Ugandan market in 2021, remains subject to tax audits and obligations incurred during its operational years.
The three-member panel, chaired by Siraj Ali, concluded that Shoprite failed to substantiate its defense against claims by the Uganda Revenue Authority (URA) that it had wrongly treated internal stock transfers as VAT-exempt, thereby under-declaring its tax liability.
“Contrary to the assertion by the Applicant, the items transferred…were not entirely composed of unprocessed agricultural products,” the tribunal noted. “Some of the items were standard rated processed products which were not exempt from VAT.”
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The URA’s assessment stemmed from inconsistencies between Shoprite’s declared VAT sales and the figures used to calculate franchise fees—figures which included internal transfers that should not have been treated as gross sales.
Shoprite attributed the discrepancies to an accounting error that followed the departure of its finance manager. The company claimed franchise fees had mistakenly included inter-branch transfers, inflating reported sales figures. However, the tribunal dismissed the explanation as “implausible,” especially given that the same issue occurred over two consecutive years.
“It is hard to believe…that no other person in the Applicant’s finance department was aware that in computing the annual franchise fees, it was essential to exclude the inter-divisional sales from the total sales,” the panel stated in its decision.
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Further undermining Shoprite’s defense, the URA presented sample invoices listing clearly taxable items such as Snack Mixes and Dried Fruit Flakes—processed products not eligible for VAT exemption. The tribunal also criticized Shoprite’s failure to correct the error through amendments to tax filings or by seeking refunds from its franchisor.
In addition to the VAT issue, the tribunal addressed a separate Pay-As-You-Earn (PAYE) dispute involving Shs 58.9 million in tax obligations on expatriate employee benefits, including rent, utilities, and school fees. Both Shoprite and the URA agreed that the benefits were taxable, but Shoprite argued that the taxes had already been settled.
The tribunal ruled that the PAYE matter was resolvable through reconciliation, directing both parties to complete the process and file a report by July 15, 2025.
Broader Implications
The ruling is a reminder that multinationals cannot shield themselves from tax obligations by exiting the market or citing internal management lapses. It also highlights the importance of consistent, transparent accounting practices, particularly when dealing with complex transactions such as franchise fees and inter-branch transfers.
The case marks a significant victory for the URA in its ongoing efforts to strengthen tax compliance and close revenue gaps caused by aggressive or negligent corporate accounting.