Libra Advocates and Consultants

Libra Advocates and Consultants


Updated and tracked EACCMA now available.
The Team that ensures you #Get_it_Right_the_First_Time!
Pegasus Technologies develops financial and billing solutions for companies, and currently partners with a number of banks, telecoms and utility corporations in Uganda to provide bespoke financial and billing solutions, including a secure and convenient mobile payments platform for both end users and merchants.

Libra TaxGen LLC, trading under the brand name Libra Advocates & Consultants, is an entity offering specialised Tax | Legal | Advisory services.

Our Team of Advocates, Lawyers & Consultants will be more than happy to help you Get It Right The First Time!

Operating as usual


Updated and tracked EACCMA now available.

Updated and tracked EACCMA now available.


The Team that ensures you #Get_it_Right_the_First_Time!

The Team that ensures you #Get_it_Right_the_First_Time!


Pegasus Technologies develops financial and billing solutions for companies, and currently partners with a number of banks, telecoms and utility corporations in Uganda to provide bespoke financial and billing solutions, including a secure and convenient mobile payments platform for both end users and merchants.

Pegasus Technologies develops financial and billing solutions for companies, and currently partners with a number of banks, telecoms and utility corporations in Uganda to provide bespoke financial and billing solutions, including a secure and convenient mobile payments platform for both end users and merchants.



Our mantra at Libra Advocates and Consultants is #Get_It_Right_the_First_Time. Today, I will posit the same mantra for the benefit of the taxman by acknowledging that indeed, many taxpayers want to get their tax...right the first time, and we applaud the digital reforms undertaken by Uganda Revenue Authority (URA) which are intended to help taxpayers to get it right the first time. Digital tools like e-tax, DTS and EFRIS are making it easier for individuals and businesses to get their tax right the first time by cutting down on the errors that can result from keeping records manually and on paper.

If I were asked by Prince Rumanyika IV about how best to reduce the tax gap (i.e. the difference between the tax that should be paid and what URA actually collects), and how to get it right the first time, I would advise that the best way to promote voluntary compliance is by designing compliance into systems and processes that help taxpayers get things right the first time and from the very start. I would also advise that the best way to prevent non-compliance is by using available data and other sources of intelligence to drive the compliance approach; by ensuring that resources are targeted in the most efficient and effective way towards the greatest risks; and by using data analytics to identify discrepancies in what is declared in tax returns. Finally, I would advise that the best response to general non-compliance is by identifying and targeting the areas where there may be tax risk, and then employing tough measures to tackle those who deliberately try to cheat the system, including a mix of civil and criminal sanctions, where warranted, to ensure there are consequences for those who deliberately fail to meet their obligations.

In the last week, many taxpayers received notifications about “APPOINTMENT OF YOUR NEW CLIENT RELATIONSHIP OFFICER” and my only hope is that the appointments are based on segmentation of taxpayers by type and size, and that URA will tailor its approach to ensuring compliance based on taxpayer behaviours, capabilities and the level of risk. In this way, URA will be able to use systems, processes and services that are closely tailored to the requirements of each group or segment, while maintaining fairness and consistency across the board, and addressing cross-cutting behaviours.



Section 24 of the Tax Procedures Code Act was amended to allow a taxpayer who is dissatisfied with an objection decision of the Commissioner to apply to the Commissioner to resolve the dispute using Alternative Dispute Resolution (ADR) procedure. This procedure is expected to be prescribed by the Minister of Finance in Regulations. The amendment introduces a two-tier system that offers a taxpayer two stages of internal review. In other words, after an initial review of an objection by Uganda Revenue Authority (URA) and the service of an objection decision, a taxpayer who is not satisfied with the decision can request another internal review by another team. After the internal ADR process, the taxpayer can then choose to appeal to the Tax Appeals Tribunal.

The Tax Appeals Tribunal (Tribunal) derives its origin from Article 152(3) of the Constitution, which directs the establishment of tax tribunals for the purposes of settling tax disputes. The tribunal itself was established under the Tax Appeals Tribunals Act, with powers to adjudicate on all disputes arising from the administration of various tax statutes by URA. It was set up to provide taxpayers with an easy, timely and independent alternative avenue for tax arbitration by 5 members i.e., a chairperson who must be qualified to be appointed a judge of the High Court, and 4 other members with requisite qualifications and experienced conceptual understanding to decide tax matters. To get the best judgments from the Tribunal, this mix of experience and skills are necessary.

In executing its mandate, TAT operates as an appellate court to confirm or reverse the decisions of URA. It is literally supposed to stand in the shoes of the Commissioner General and re-examine all powers and discretions available that are relevant to the challenged objection decision. In its arbitration of tax disputes, TAT may affirm, set aside, vary or refer back an objection decision with recommendations or directions, for reconsideration by URA. Moreover, the TAT Act was amended to provide for mediation to the TAT Registrar or other mediator, including powers to make orders as to damages, interest or any other remedy against any party.

The question that pops to my mind is why introduce a two-tier internal review system when we have a Tax Appeals Tribunal that exists to provide taxpayers with access to an independent and impartial tax dispute resolution process, and whose primary objective is to ensure that taxpayers who want to challenge a tax assessment are spared from going to a court of general jurisdiction that is encumbered with complex and onerous procedural rules? Is it because TAT has failed to efficiently and effectively execute its mandate?

Let’s examine the #AlternativeFacts!

The grapevine has it that the tax review system is being reformed to maintain, if not restore, its effectiveness and therefore ensure that it achieves the intended objective of providing taxpayers with access to a swift, independent and impartial tax dispute resolution process. This is because it has also become evidently clear that the operations of TAT have run into several challenges that have inhibited its effectiveness, with tax resolution of disputes taking longer than expected and thus resulting in a backlog of outstanding disputes.

Arguments have been made that the presence of the TAT chairperson for each and every hearing for which a ruling must be made is a procedural requirement that delays the resolution of disputes, and those familiar with the process will attest to the fact that it could also lead to potential biases in decisions. Although each panel sits 3 members, the Tribunal’s decisions generally do not reflect the separate views and reasoning of each member who, by virtue of their skills, should present their own views, including reasons for arriving at that position especially where there are dissenting views amongst the members.

While it is possible for TAT decisions to be unanimous, it does not help the system when there has hardly been a dissenting view even on issues that are seemingly controversial. From the judgements, it would appear that most decisions represent the view of a single member. This is not consistent with having three members whose presence should ordinarily enrich and further develop our tax jurisprudence. Presenting dissenting decisions would allow the Tribunal produce more robust decisions, and thus giving room for healthier debates on tax disputes.

Still on the question of judgements, it is worth noting that in applying the law and administering justice in the disputes that are brought before them, Members of the Tribunal have a duty to make reasoned judgements based on the law, and in this regard have three important functions to perform:

(1) To provide clear answers to the parties as to who is right or wrong, and why. The parties in a court action expect the court to provide an answer to the question of who is right and who is wrong. They also want to know why the court has ruled in the way that it has and not otherwise.

(2) To effectively communicate their reasoning to parties. The parties expect to be guided on how to amend their decision-making to ensure that it conforms with the court’s interpretation of the law.

(3) To effectively communicate their decisions to the wider public, so that a taxpayer who may be contemplating legal action knows exactly what can be expected of the court.

Clarity in a judgement made by TAT and the appropriate reasoning would be the answer to the above requirements. This is far from the current reality. TAT ought to know that well-reasoned judgements give the parties certainty that the determination is fair, and that the members have performed their task in a competent, impartial and independent way. Consequently, URA would know precisely what it must do to improve its decision-making process. Similarly, taxpayers who are contemplating legal action would be able to work out how advisable it would be to file a suit and what protection the court can provide. The contents of a decision are prescribed by law and the courts apply a specific method of legal reasoning, based on a collation of facts and legal rules, in order to arrive at the concrete application of the tax law in a particular case. The objective should be to arrive at a clear result, and to provide answers to specific questions on whether a tax is due from a specific taxpayer or not. The objective should not be to achieve a reconciliation of the taxpayer’s arguments with the position of the tax administration, as is common with TAT judgements.

That said, the relevance of the ADR process will hinge on its efficiency, credibility, transparency, and above all its ability to reach determinations that are generally regarded as satisfactory and fair. Various factors will influence the independence of the ADR team, including the rules for appointing its officials, its integration into the institutional hierarchy, its supervisory structure and the administrative status of its employees. According to the OECD guidelines for tax administration, an internal review process has three main objectives, which must be prioritized:

(1) Efficiency - Where judicial procedures are particularly slow, ADR procedures that focus on serving low-income taxpayer should resolve tax disputes in a more timely and less expensive manner than courts of law. These objectives can be accomplished by minimizing procedural rules, allowing informal communication within the tax authority and with the taxpayer, and adopting a flexible approach to dispute resolution that focuses on achieving mutually agreeable outcomes.

(2) Self-control - The review process should give the tax authority an opportunity to evaluate its own systematic accuracy and administrative capacity. The primary purpose of the tax authority is not to maximize revenue collection, but to apply tax laws correctly. ADR process can help the authorities ensure equal treatment of taxpayers, identify and correct recurring errors, reduce corruption, and enhance the overall quality of tax administration. Where judgments were inconsistent and uncoordinated due to differences in the efficacy of TAT, ADR will provide a vital measure of consistency and predictability.

(3) Justice - In jurisdictions where litigation is especially slow and expensive, many taxpayers may be effectively unable to obtain legal redress in tax cases. A swift and inexpensive review process that focuses on serving lower-income taxpayers., can greatly enhance the perceived fairness and credibility of the dispute-resolution process.

Finally, beyond affording taxpayers the opportunity to have inaccurate tax assessments revised and errors redressed without the burden of litigation, it is hoped that ADR will offer taxpayers a realistic chance to be heard, and it should ultimately speed the process of redressing taxpayer grievances, and ultimately ease the caseload faced by TAT. Moreover, the requirement to pay 30% of the tax in dispute prior to the appeal being heard by TAT arouses the taxman’s appetite for excessive assessments in a bid to frustrate a taxpayer’s right to challenge them through litigation. This previously created a huge barrier for many taxpayers in accessing justice before the Tribunal.



After much anticipation, 130 out of 139 countries and jurisdictions that constitute members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS), have agreed a two-pillar solution to address the tax challenges arising from the digitalisation of the economy, and to reform international taxation rules so as to ensure that multinational enterprises pay a fair share of tax wherever they operate. Only 25 African countries are members of the Inclusive Framework (Uganda is not), meaning over half of the continent is not directly participating in the standard-setting process. Fortunately, the African Tax Administration Forum (ATAF) has been providing technical support to its members (38) to try and ensure that the new Pillar One and Pillar Two rules meet the needs of African countries. Out of the 25 African participating members, 22 countries agreed to the two-pillar solution.

The agreed framework fundamentally reshapes the international tax system in a way that is unlikely to leave any Multi-National Enterprise (MNE) that falls within the defined scope, unaffected. All factors remaining constant, these rules should become operational in 2023 if a final decision can be reached on the design elements within the agreed framework and an implementation plan released.

Let me attempt a simplified summary that excludes any detailed technical analysis.


This solution targets business models that are unfairly thriving on the inadequacies of the existing international tax framework specifically in the area of limited taxing rights on the basis of the residence of taxpayers or the geographical source of income, and the entitlement of source countries to tax the business profits of non-resident enterprises only if the threshold of permanent establishment is met. This Pillar therefore seeks to expand the taxing rights of market/user/source jurisdictions where there is an "active and sustained participation of a business in the economy of that jurisdiction through activities in, or remotely directed at, that jurisdiction". This will ensure a fairer distribution of profits and taxing rights among countries by re-allocating some taxing rights over the income of MNEs from their home countries to the markets where they have business activities and earn profits, regardless of whether they have a physical presence there, as is the requirement currently.

Pillar 1 has three basic elements, namely

1) A new taxing right for market/user jurisdictions based upon a share of a businesses' residual profits ("Amount A");

2) A fixed return for certain distribution and marketing activities physically in a market/user jurisdiction ("Amount B"); and

3) Dispute prevention and resolution processes to improve tax certainty.

In order to fall within the scope of Pillar 1, an MNE must have a global turnover above 20 billion euros and profitability above 10%. This will be the tax base for exercising taxing rights over residual profits and therefore the reallocation of profits under “Amount A”. Additionally, in order for a market jurisdiction to become entitled to an allocation of “Amount A”, the qualifying MNE must derive at least 1 million euros in revenue from that jurisdiction. The threshold for smaller jurisdictions with GDP lower than 40 billion euros, has been set at 250,000 euros. Double taxation of profit allocated to market jurisdictions will be relieved using either the exemption or credit method.

Other rules have been formulated to determine the revenue that should be treated as derived from a particular market or jurisdiction(revenue sourcing rules i.e. where goods or services are used or consumed.); to determine the tax base for “Amount A”(determination by reference to financial accounting income of the group, with any losses being carried forward); to determine the applicable portion of residual profits to be allocated to the eligible market jurisdictions (between 20-30% of profit in excess of 10% of the MNEs revenue). However, where residual profits are already taxed in a market jurisdiction, a marketing and distribution profits safe harbour will cap the residual profits allocated to the market jurisdiction through “Amount A”.

“Amount B” which is a "fixed return" for "baseline marketing and distribution activities" performed by distribution entities or permanent establishments of an MNE group, will be determined using the arm’s length principle. “Amount B” is intended to simplify the administration of transfer pricing rules, increase tax certainty and reduce tax controversy between taxpayers and tax administrations.

Important to note is that the Extractives sector and Regulated Financial Services are excluded from the scope of Pillar 1.


Pillar 2 tackles the problem of low tax outcomes and is intended to ensure minimum levels of taxation of multinational enterprise groups. The premise behind this solution is simple - if a state does not exercise their taxing rights to an adequate level, a new network of rules will re-allocate those taxing rights to another state who will. A top-down approach subject to a split-ownership rule for shareholdings below 80%, has been adopted whereby the jurisdiction in which the Ultimate Parent Entity is resident has the primary right to exercise taxing rights over income in a low tax jurisdiction. If the Ultimate Parent entity is resident in a jurisdiction that has not implemented the Income Inclusion Rule, the taxing rights are passed down the chain of ownership until they reach an entity resident in a jurisdiction that has implemented it.

The solution is framed around four rules: an Income Inclusion Rule (IIR), an Undertaxed Payment Rule (UTPR), a Subject to Tax Rule (STTR), and a Switch-Over Rule (SOR).

This will be achieved in the following ways:

1) Through a new global minimum tax regime (‘GloBE‘) which aims to ensure a minimum effective tax rate across all jurisdictions by imposing a top-up tax on a parent entity in respect of the low taxed income of a constituent entity in a source country (Income Inclusion Rule - IIR). The minimum tax rate to be used for purposes of the Income Inclusion Rule and Undertaxed Payment Rule will be at least 15%.

2) By denying an MNE deductions or requiring an equivalent adjustment (top-up tax) to the extent the low taxed income of a constituent entity is not subject to tax under the Income Inclusion Rule (Undertaxed Payment Rule - UTPR). This rule supports the IIR by acting as a backstop to deal with circumstances where the IIR is unable, by itself, to bring low tax jurisdictions in line with the minimum rate. Methodology still to be agreed.

3) By allowing source jurisdictions to impose a minimum level of taxation on certain related party payments subject to tax below a minimum rate (the ‘Subject to Tax Rule‘ - STTR). In other words, where a jurisdiction does not exercise its taxing rights over the receipt of certain payments to an adequate extent, the jurisdiction of the payer has the right to claw back those taxing rights, negating in part the relief it allows for the deduction of the payment for local tax purposes. The minimum rate for the STTR will be from 7.5% to 9%. This is a treaty-based rule that will necessitate realignment of withholding tax rules between contracting states.

4) To support the STTR, a mechanism for enabling jurisdictions to overturn treaty obligations where they have committed to exempting amounts attributable to a foreign permanent establishment under a double tax treaty agreed with another state, will be adopted (the Switch-Over Rule).

In order to fall within the scope of Pillar 2, the global revenues of an MNE must exceed the 750 million euros threshold, in line with current Country by Country Reporting requirements. Countries where MNEs are headquartered will be free to apply the Income Inclusion Rule even if the MNE does not meet the threshold.
Taxes borne by virtue of new taxing rights granted under Pillar One are to be taken into consideration when calculating the effective tax rates of the jurisdictions in which MNE Groups operate. Also, Government entities, international organisations, non-profit organisations, pension funds or investment funds that are Ultimate Parent Entities (UPE) of an MNE Group or any holding vehicles used by such entities, organisations or funds are not subject to the GloBE rules. International shipping income will be excluded from these rules.

In terms of the implementation of the suggested rules, the Income Inclusion Rule and the Undertaxed Payment Rule could be implemented just through changes to domestic law. However, both the Subject to Tax Rule and the Switch-Over Rule will require changes to existing bilateral tax treaties, that could be implemented through bilateral negotiations and amendments to individual treaties or more efficiently through a multilateral instrument to facilitate their adoption. Pillar One is arguably the more politically challenging as it entails states ceding existing taxing rights to so called market jurisdictions, whereas Pillar Two promises to be a tide that lifts all boats (whether jurisdictions like it or not) by setting a floor on acceptable effective tax rates.

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