The High Court has dismissed an application by two directors of KK Electricals Limited who had sought to stop their prosecution over allegations of tax evasion and VAT fraud, ruling that the Uganda Revenue Authority (URA) acted lawfully in bringing criminal charges against them.
The directors, Mahmood and Kasey, had filed a judicial review case challenging URA’s decision to prosecute them, arguing that the tax authority had acted illegally and unfairly. However, the court ruled that their arguments did not meet the legal requirements needed to stop the criminal proceedings.
The court found that URA had the statutory authority to investigate the affairs of KK Electricals Limited and institute criminal proceedings where evidence suggested that tax offences had been committed.
The case followed investigations by URA into the company’s tax records, where the authority found that the company had allegedly filed false VAT returns, including claims involving fictitious purchases and invoices. The directors were subsequently charged with making false and misleading statements to a tax officer.
In their application, Mahmood and Kasey argued that KK Electricals Limited was a separate legal entity and that any alleged offences should be attributed to the company rather than its directors. They also questioned the investigations conducted by URA and claimed that they had been unfairly targeted.
However, the High Court rejected the argument, explaining that while companies have separate legal identities, the law allows responsible company officers to face criminal liability in certain tax-related offences.
The court cited Section 82 of the Tax Procedures Code Act, which provides that officers of a company may be held accountable where the company commits offences under tax laws, subject to available legal defences.
The judge ruled that the directors’ complaints mainly challenged the evidence gathered by URA rather than the legality of the prosecution. The court stated that issues such as whether the invoices were genuine, whether the VAT claims were false, and whether the directors personally participated in the alleged offences must be determined by the Anti-Corruption Court.
The High Court further held that judicial review is not meant to replace a criminal trial or examine whether investigators reached the correct conclusions. Its role is only to determine whether a public authority acted within the law.
The court also rejected the argument that URA should have completed all administrative tax procedures before starting criminal proceedings, noting that tax assessments and criminal prosecutions serve different purposes. A tax dispute does not prevent prosecution where evidence indicates possible criminal conduct.
On claims that URA acted irrationally or unfairly, the court found that investigations had been carried out, VAT audits conducted, and electronic tax records, including EFRIS information, analysed before the decision to prosecute was made.
The court therefore dismissed the application, allowing the criminal case against the directors to continue before the Anti-Corruption Court and awarded costs to URA.
Commenting on the ruling, URA Assistant Commissioner for Public and Corporate Affairs Robert Kalumba said the decision reinforces the authority’s commitment to fighting tax fraud and protecting public revenue.
“URA will continue to pursue cases where there is evidence of tax fraud, including the use of fictitious invoices and false declarations. Tax compliance is a legal obligation, and those who deliberately evade taxes must be held accountable through the proper legal processes,” Kalumba said.
The ruling is expected to strengthen URA’s efforts to combat tax fraud involving fake invoices, false VAT claims and misleading declarations. It also serves as a reminder to company directors and business owners that they can be held personally responsible where evidence links them to tax offences.
