Bujagali Energy v URA: Late Assessments, Foreign Currency and Capital Allowances

Jurisdiction: Uganda · Decision: Tax Appeals Tribunal, Application No. 4 of 2024 · Ruling date: 30 April 2026 · FGL review: September 2026

Bujagali Energy Limited v Uganda Revenue Authority is a useful case for finance teams because it brings several difficult tax-control questions into one dispute: when an old tax period can be reopened, how foreign-currency expenditure should be translated for tax purposes, how capital project costs should be classified, and how documentary evidence affects withholding-tax positions.

The Tribunal ultimately dismissed Bujagali Energy Limited's application and upheld a revised assessment of UGX 155,618,956,094, comprising income tax of UGX 155,320,573,662 and withholding tax of UGX 298,382,432.

Why the case matters

Large projects often produce tax positions that remain relevant long after the original transaction. Construction costs may be incurred in several currencies and across several years. Assets may be commissioned later. Capital allowances may then continue for many years after construction is complete.

That creates a control problem: the tax treatment used today may depend on records, exchange rates, contracts and classifications created years earlier. Bujagali shows why those foundations need to remain reconstructable.

Old tax periods are not always closed forever

A central issue was whether URA could issue additional assessments outside the ordinary limitation period. The Tax Procedures Code Act generally restricts additional assessments to the statutory period, but it permits an assessment at any time where fraud, gross or wilful neglect is involved or where new information has been discovered in relation to the tax payable.

The Tribunal accepted URA's position that information obtained through the audit amounted to new information for this purpose. It therefore held that the additional assessments in issue were not time-barred.

The practical lesson is not that URA can reopen any old period without limitation. It is that a taxpayer should not assume age alone makes a tax position immune from review. The legal basis for reopening, the information newly discovered and the connection between that information and the assessment still matter.

This connects closely with the evidence lessons in FGL's Medisell v URA analysis, where the quality of the evidence behind an assessment and a taxpayer's explanation was central.

Foreign-currency expenditure follows the date it is incurred

The foreign-exchange dispute concerned section 56(2) of the Income Tax Act. That provision requires an amount denominated in a foreign currency to be converted into Uganda shillings using the Bank of Uganda mid-exchange rate applying on the date the amount is derived, incurred or otherwise taken into account for tax purposes.

Bujagali argued for a treatment connected to the later commissioning of the hydroelectric project. The Tribunal instead examined when the expenditure had actually been incurred. It linked that question to the income-tax rules on when economic performance occurs.

Because the relevant services and property were provided throughout the construction and development phase, the Tribunal concluded that the expenditure was incurred on those underlying dates. URA was therefore correct to translate the foreign-currency amounts using the exchange rates applying when the expenditure was incurred rather than a later commissioning-date rate.

A later depreciation claim does not create a new forex loss

Bujagali also argued that using the earlier exchange rates created a deductible foreign-exchange loss when the assets were later commissioned and depreciation allowances were claimed.

The Tribunal rejected that reasoning. On the facts before it, the invoices were issued and paid in the years in which the expenditure was incurred. The Tribunal distinguished a genuine foreign-exchange gain or loss arising between invoicing and payment from a difference caused simply by comparing an earlier expenditure-date rate with a later date on which a capital allowance is claimed.

For finance teams, this is an important distinction. A tax depreciation schedule should not silently remeasure historical cost simply because the exchange rate has changed by the time the allowance is claimed.

Capital-project costs need disciplined classification

The dispute also covered costs Bujagali had classified as start-up expenditure. These included labour-camp set-up, site preparation, project access roads, reservoir clearing, feasibility-related costs, community-development expenditure and compensation costs.

The Tribunal concluded that those items did not fall within the statutory concept of start-up expenditure. In its reasoning, start-up costs are preliminary or pre-opening costs associated with establishing the business itself, such as registration, legal, accounting, promotional or training costs. The project costs in dispute were more closely connected to land and buildings or to pre-construction activity.

This matters because classification determines the timing and availability of deductions. A cost described internally as a "project start-up cost" does not automatically qualify as statutory start-up expenditure.

Withholding-tax disputes still come back to evidence

The ruling also dealt with withholding tax on offshore and local services. In relation to certain foreign-service providers, URA had already reduced the assessment after reviewing additional documentation. But Bujagali did not produce sufficient documentary evidence before the Tribunal to prove that the remaining services were supplied offshore.

The Tribunal therefore upheld the remaining assessment on that issue. It also upheld local withholding-tax amounts where the taxpayer did not produce credible evidence to support the factual position advanced.

The broader control lesson is straightforward: contracts, invoices, supplier details, place-of-performance evidence, tax-residency information and payment records need to be retained together. A tax treatment that cannot later be reconstructed is vulnerable even where the underlying commercial explanation may have been reasonable.

What finance teams should build into their controls

• Historical-cost files: retain original invoices, contracts, payment dates and the exchange rate used for each material capital item.
• Capital-allocation schedules: separate land, buildings, plant, start-up costs, repairs, operating costs and other project expenditure using the legal tax categories rather than project-management labels alone.
• Assessment history: preserve prior returns, audit correspondence, information requests, objection decisions and reconciliations so an old tax period can still be reconstructed.
• Cross-border service files: document where services were performed and retain evidence supporting any offshore or withholding-tax treatment.
• Reconciliation ownership: require finance, tax and project teams to agree the accounting-to-tax bridge before the project team disperses or the supporting records become difficult to retrieve.

Where revenue or tax systems produce large differences, FGL's ERP, VAT and income-tax reconciliation guide provides a complementary control framework.

The wider lesson from Bujagali

Bujagali is not only a case about a hydroelectric project. It is a case about the lifespan of financial evidence.

A capital project may finish, but its tax consequences can continue for years. Exchange rates, cost classifications, asset registers, contracts and supplier evidence may later determine the result of an audit or appeal. Finance teams therefore need records that preserve not only the number posted to the ledger, but also why that number was treated in a particular way.

For more Uganda-specific analysis, see the Uganda Tax knowledge desk and FGL's Case Briefs library.

Sources

• Bujagali Energy Limited v Uganda Revenue Authority, Application No. 4 of 2024, [2026] UGTAT 13 (30 April 2026).
• Tax Procedures Code Act — section 25 on additional assessments.
• Income Tax Act — section 56 on currency conversion.

FGL note: This article summarises a published Tax Appeals Tribunal decision for general professional learning. Tax treatment depends on the law in force and the facts and evidence of each case.