Court of Appeal Rules in Favor of URA in Shs270m Former Spinning Mills Workers Tax Dispute

The Court of Appeal has delivered a significant ruling upholding the Uganda Revenue Authority’s (URA) decision to deduct Shs269.6 million in Pay As You Earn (PAYE) tax from the terminal benefits of over 1,400 former workers of the defunct Uganda Spinning Mills Limited (USML).

In a unanimous decision, a three-justice panel consisting of Deputy Chief Justice Moses Kazibwe Kawumi, Justice Cheborion Barishaki, and Justice Asa Mugenyi determined that terminal payouts given to former employees qualify as taxable income under the Income Tax Act. The appellate judges emphasized that this classification applies regardless of the fact that the employment relationship had already been severed.

This ruling successfully sets aside a previous 2016 High Court judgment. The earlier ruling had declared the tax deductions unlawful and ordered both the URA and the Attorney General to refund the deducted money along with interest to the aggrieved former staff members.

Legal experts note that this appellate decision reinforces the tax body’s authority to collect PAYE on severance and terminal packages, impacting how similar labor disputes and compensation payouts will be handled moving forward.

Read more details on the Daily Monitor.