Paying taxes without breaking the business

_________________

OPINION

By Joshua Kato, CA.

For many Ugandan businesses, the greatest fear is not the obligation to pay tax, but the manner and timing in which that obligation is enforced. Each year, domestic tax arrears run into trillions of shillings, with Uganda Revenue Authority (URA) data consistently showing that the private sector accounts for the largest portion of unpaid taxes. Behind these figures are thousands of businesses under financial strain, willing to comply, but unable to raise large lump-sum payments without paralysing operations.

Small and medium enterprises, which form the backbone of Uganda’s economy, are particularly exposed. Many operate on thin margins and depend on daily or monthly cash inflows. When a substantial tax assessment arises, often from audits, delayed filings, reconciliations, or accumulated penalties, the immediate demand for full payment can trigger severe distress. In recent years, enforcement actions such as bank account attachments and business closures have highlighted how tax compliance challenges can quickly turn into business-ending events.

It is within this context that URA’s Public Notice issued on 1 February 2026, operationalising online installment payment arrangements, becomes highly significant.

The public notice formally informs taxpayers that URA has activated a structured, digital process allowing eligible taxpayers to apply to settle outstanding tax liabilities in installments. While the legal basis has always existed under the Tax Procedures Code Act, the notice marks a clear administrative shift: installment payments are no longer informal negotiations but a standardised, accessible option available through the URA online system.

In practical terms, the notice signals that URA is encouraging early engagement rather than confrontation. It invites taxpayers to come forward, disclose their liabilities, and propose realistic payment plans, before enforcement action is triggered.

Installment payments simply mean paying tax in parts over time instead of in one lump sum. The total tax remains payable, but settlement is spread across agreed periods to reflect the taxpayer’s cash-flow capacity.

• Value Added Tax (VAT)
• Corporate Income Tax
• Pay As You Earn (PAYE)
• Withholding Taxes, and
• Other assessed domestic tax liabilities.

For many taxpayers, this distinction is critical. It turns tax from an immediate financial shock into a planned obligation that can be managed alongside normal business expenses.

One of the most important aspects of the installment arrangement is the freedom it gives taxpayers to propose their own payment plans. Through the URA e-services platform, a taxpayer selects the liability, proposes an upfront payment, chooses the number of installments, and sets payment amounts based on expected cash flows.

This is a major shift from the traditional approach where taxpayers were simply told how much to pay and when. Now, the taxpayer takes an active role in designing a plan that is realistic, practical, and sustainable.

For example, a contractor awaiting delayed payments may structure installments around expected receipts. A seasonal trader may propose higher payments during peak months and lower ones during off-season periods. A manufacturing business may align payments with production and sales cycles.

This flexibility is what makes the arrangement truly effective.

Installment arrangements work best when they are proactive, not reactive. Once enforcement measures such as agency notices or account attachments are issued, the taxpayer’s negotiating position weakens significantly.

Applying early helps in demonstrates good faith and willingness to comply, reduces the risk of enforcement action, allows URA to assess the proposal calmly and objectively and protects the taxpayer’s business reputation and banking relationships

In contrast, ignoring assessments or delaying engagement only increases penalties, interest, and enforcement risk.