KAMPALA – A Shs 4.2 billion tax bill imposed by the Uganda Revenue Authority (URA) has pushed the operator of KFC in Uganda, Kuku Foods Uganda Limited, into a fierce legal battle for survival, with its operations now teetering on the brink.
The crisis deepened in March when the Tax Appeals Tribunal delivered a significant blow to the fast-food chain, rejecting its application to halt the tax collection until their underlying dispute is resolved. This decision leaves the company exposed to immediate enforcement action by the URA while it fights the assessment in court.
The tribunal, led by Judge Crystal Kabajwara, dismissed Kuku Foods’ request for an injunction, ordering the company to pay costs. The ruling stated that Kuku Foods failed to meet the legal tests for such an order, finding no strong preliminary case, no proof of “irreparable harm” that couldn’t be compensated with money later, and that the “balance of convenience” favoured the URA’s mandate to collect public revenue without delay.
From Losses to a Multi-Billion Tax Bill
The dispute’s origins trace back to the period between 2018 and 2022. Kuku Foods reported operating losses of approximately Shs 8.3 billion to the URA during this time, a position that would typically allow it to carry forward these losses to offset future tax bills.
However, the company later revised this loss figure significantly upward to Shs 16.8 billion, citing a review of its books to reflect more accurate financials. This substantial revision raised red flags at the URA, prompting a comprehensive audit of the company’s income tax returns.
URA “Smells a Rat”
The audit revealed what the tax body considered major discrepancies. The URA disallowed several expenses Kuku Foods had claimed, deeming them invalid deductions, and identified what it classified as “undeclared income.” Consequently, the URA slashed the accepted loss amount from a claimed Shs 21.3 billion down to the original Shs 8.3 billion.
Furthermore, the URA issued additional assessments for Value Added Tax (VAT) and withholding tax totaling Shs 3.4 billion. Although a subsequent dispute resolution process reduced the VAT and withholding tax demand to Shs 1.8 billion, it also uncovered an additional Shs 7.6 billion in alleged undeclared income.
The situation reached a breaking point in September 2024 when a URA “returns examination” completely wiped out Kuku Foods’ remaining tax losses. This move flipped the company’s financial standing from having carry-forward losses to owing the URA Shs 4.2 billion in taxes.
Kuku Foods Cries Foul
Kuku Foods has vehemently contested these adjustments, arguing that being forced to pay taxes while claiming to be in a loss-making position causes “irreparable damage.” The company claims the hefty tax bill threatens its ability to raise capital, compete with rivals, and maintain its current operations in Uganda’s competitive fast-food market.
In a bid for respite, the company filed a main appeal with the Tax Appeals Tribunal and sought a temporary injunction to freeze the status quo and prevent URA from collecting the disputed amount during the litigation.
With the tribunal refusing to grant that protection, Kuku Foods must now fight its main court case under the shadow of the colossal tax demand. Industry experts warn that if the dispute is not resolved in the company’s favour, things for the popular fried chicken chain could “go south very fast,” potentially jeopardizing its entire future in Uganda.
