Ugandan businesses that do not maintain accurate financial records risk paying significantly more tax than they owe, tax practitioners have warned, as the country operates a self-assessment system that places responsibility on taxpayers to declare their income, expenses and liabilities correctly. Daisy Namayanjja Sanyu, managing partner at Bennett Advisory, said businesses that cannot document their income and allowable expenses may struggle to establish their actual taxable profits when assessed by the Uganda Revenue Authority (URA). She illustrated the risk with a hypothetical example: a business earning Shs1 billion without documented operating expenses could face a tax assessment treating the entire amount as taxable profit. At the standard corporate income tax rate of 30 per cent, this would result in a liability of Shs300 million, even though the actual amount payable depends on applicable tax rules and allowable deductions.
The consequences of poor record-keeping extend beyond initial overassessment. Businesses that neglect tax obligations for several years face mounting financial pressure when they must settle outstanding liabilities alongside current tax payments. Namayanjja warned that some businesses misinterpret multiple demands from URA as evidence of excessive taxation, when the notices may relate to different tax obligations, assessments or stages of debt recovery. Different URA departments handle assessments, objections, routine payments and debt recovery, potentially creating confusion among taxpayers unfamiliar with the processes.
Compliance becomes particularly urgent when businesses seek contracts or government services. Government institutions, non-governmental organisations and private companies require suppliers to present tax clearance certificates before awarding contracts or engaging their services. Businesses that have neglected filing requirements face penalties, additional costs and delays when forced to regularise their tax affairs to pursue business opportunities. Namayanjja said proper bookkeeping, including maintaining invoices, payment records and supporting documents for business expenses, is essential to establishing correct tax liability and challenging inaccurate assessments.
Tax practitioners identified inadequate taxpayer awareness as a major challenge, with businesses needing clearer information about applicable taxes and required returns. One practitioner called on URA to strengthen taxpayer education, particularly among informal sector businesses, to help entrepreneurs understand their obligations. Namayanjja attributed non-compliance partly to perceptions that professional tax services are expensive and difficulties accessing reliable advice. Some entrepreneurs mistakenly assume small businesses are exempt from tax, while others ignore filing requirements until enforcement action begins. Namayanjja estimated that more than 90 per cent of Ugandan businesses are not fully tax-compliant, though she cited no formal study to support this figure.
The practitioners' advice centres on maintaining accurate financial records, understanding filing deadlines and seeking qualified assistance before tax problems accumulate. Namayanjja and other tax practitioners urged business owners to understand their tax responsibilities from the time they begin operating rather than waiting until they need tax clearance certificates. A tax clinic scheduled for November 19 at the Sheraton Hotel in Kampala aims to improve business owners' understanding of their tax obligations and help them identify potential compliance risks. The initiative reflects broader calls for businesses to strengthen their financial management practices and seek timely guidance to avoid preventable tax disputes.