Most founders assume that tax on a share sale is the seller's problem. In Uganda, that assumption is wrong in a way that can destroy a transaction. Where the ownership of a company changes by 50% or more, the law can impose a tax charge inside the company being sold — on the company itself, not on the shareholders who received the money.
In May 2026 the Tax Appeals Tribunal confirmed exactly that in a dispute involving the Ugandan KFC franchisee. The ruling is now the clearest statement available of how the rule operates, who pays, and when the clock starts. This article explains the provision, what the Tribunal decided, and why the decision matters to anyone raising capital or selling equity in Uganda.
How Uganda taxes gains on shares
Uganda has no standalone capital gains tax. Gains on the disposal of business assets and shares fall into business income and are taxed at the standard corporate rate of 30% for companies; individuals are taxed at their applicable personal rates.
Layered on top of that is the change-of-ownership provision. Under the Income Tax Act, where the underlying ownership of a company changes by 50% or more, the company is deemed to have realised all of its assets and liabilities at market value immediately before the change. The difference between those market values and the assets' tax values becomes a taxable gain — in the company's hands.
Separately, a change of 50% or more affects accumulated tax losses. Losses may be forfeited unless, for two years following the change, the company continues to carry on the same business and does not take on new business or investment principally for the purpose of using those losses.
Because the test examines underlying ownership, it reaches through holding structures. A transaction executed entirely offshore, between two foreign shareholders, can trigger a charge in a Ugandan operating subsidiary that was not party to the deal and received none of the proceeds.
Kuku Foods Uganda Limited v URA: what the Tribunal decided
In June 2019 a share purchase and subscription agreement was entered into between the existing holding entity, Vivo Energy Investments B.V. and Gutsche Investment. After a sequence of conditions precedent — incorporation of a franchise company, an increase in share capital, conversion of shareholder loans into equity, and registration of the transfers — Vivo Energy and Kuku Establishments Uganda Limited each ended up holding 50% of Kuku Foods Uganda Limited, the KFC franchise operator.
The Uganda Revenue Authority concluded that a qualifying change in ownership had occurred and assessed capital gains tax of UGX 4,235,796,666 under sections 74(2) and 78(h) of the Income Tax Act, treating Kuku Foods as having realised all of its assets and liabilities at market value immediately before the change.
The Tribunal, ruling on 11 May 2026 in Application No. 54 of 2025, dismissed the company's application but set the assessment aside for recomputation. Three findings matter.
The company is the taxpayer. Kuku Foods argued the charge should fall on the non-resident selling shareholders. The Tribunal disagreed. The liability does not arise from the sale and the consideration the shareholders received; it arises because Parliament deemed the company to have realised its underlying assets on a qualifying ownership change. The Ugandan resident entity is the proper taxable person.
The effective date is registration, not signature. URA had worked from an earlier date; the company argued for another. The Tribunal fixed the effective date of the ownership change at 26 February 2020, when the transfers were registered, rather than 19 June 2019 when the agreement was signed. Tax exposure follows legal completion, not commercial agreement.
The computation must be asset by asset. URA had used the base purchase price — USD 4,072,124 — as a proxy for enterprise value, relying on 2018 financial statements. The Tribunal held that section 74(2) requires determining the market value of each of the company's assets and liabilities as at the effective date. A headline deal price is not a substitute for a valuation.
One further detail repays attention: the Tribunal found Kuku Foods was not immovable-property-rich, with only around 16% of assets represented by leasehold improvements, while 72.6% were right-of-use assets. For businesses that lease rather than own their premises, the accounting treatment of those leases now sits directly on the taxable surface.
Why the date and the method matter more than they sound
Market values move. The effective date determines which valuations apply, which financial year the deemed gain falls into, and from when interest and penalties accrue. In a transaction with a long conditions-precedent period — common in regulated sectors and in deals requiring regulatory consent — eight months between signature and registration is unremarkable. Eight months of asset value movement is not.
The requirement to value asset by asset cuts both ways. It removes the shortcut of applying the purchase price, which can produce an inflated assessment. But it also means the exercise is substantive: every item on the balance sheet, and the liabilities against them, must be established at market value on a specific date, often years in the past by the time a dispute reaches a tribunal.
A worked illustration
A Ugandan manufacturer carries assets for tax purposes at UGX 600 million — land, plant and brand value accumulated over years of trading. An investor acquires 55%. An independent valuer puts the market value of the company's assets at UGX 1.8 billion.
Deemed gain: UGX 1.8 billion − UGX 600 million = UGX 1.2 billion
Tax at 30%: UGX 360 million, payable by the company
If the company also carries UGX 200 million of tax losses, it may lose the ability to use them unless the continuity conditions are satisfied for two years after the change.
The investor has now paid for shares in a company that owes URA a substantial sum because of the investment itself, and which has lost a deferred tax asset it was counting on. Where the deal documents did not anticipate this — no indemnity, no price adjustment, no escrow — the dispute that follows typically poisons the relationship in the first year. The figures are illustrative; the sequence is not.
This is a regional pattern, not a Ugandan quirk
Founders who operate across borders should note how consistently the region has moved in the same direction:
Tanzania applies section 56 where underlying ownership changes by more than 50% compared with ownership at any time in the previous three years, with deemed realisation at market value and forfeiture of pre-change losses.
Rwanda restricts loss carry-forward where ownership of an unlisted company changes by more than 25% in a tax period.
Kenya widened CGT on indirect transfers by non-residents under the Finance Act 2026, including where a transaction changes the group membership of a Kenya-resident company.
Ethiopia now taxes offshore share sales where more than 20% of the value derives from Ethiopian property.
Regional and international investors structure around these rules as a matter of course. Founders who do not are the ones who absorb the cost, because the party with the information sets the terms.
The exposures that catch Ugandan founders
Cumulative dilution. The threshold does not require a single transaction. Two rounds that each look modest can cross 50% between them, and the second investor may be entirely unaware they have triggered a charge for the company.
Offshore movement above the operating company. A change in the ownership of a parent — including one driven by a fund's own exit, a restructuring, or a merger between shareholders — can trigger the rule in the Ugandan subsidiary.
The valuation gap. The deemed gain is market value less tax value. Companies that have held land for twenty years, or built brand and goodwill not reflected on the balance sheet, carry the largest exposure precisely because they have been successful.
Losses that quietly evaporate. A business that has invested heavily and accumulated losses it expected to shelter future profit can lose that shelter in the same transaction that was meant to fund growth.
The questions to resolve before you sign anything
Where does your cumulative ownership change currently stand, counting every direct and indirect movement, including at holding-company level?
What is the market value of your assets against their tax values today — in other words, what would a deemed realisation actually cost?
Does the sequencing of your proposed fundraise cross the threshold, and is there a commercially genuine alternative that does not?
If the charge arises, who bears it: is it in the price, in an indemnity, in escrow, or nowhere?
Do you have tax losses worth protecting, and can the continuity conditions realistically be met after the deal?
Is the position sufficiently uncertain that engagement with URA before completion would be worth the time it costs?
Every one of these turns on your specific cap table history, your balance sheet and the deal in front of you. The threshold is simple; nothing downstream of it is.
Where founders need guidance
The Kuku Foods decision confirms two things at once: URA is actively applying these provisions, and tribunals will uphold liability even while ordering recomputation. What it does not do is make the analysis easier. Working out whether your transaction crosses the threshold, what it would cost, and how to allocate that cost in the documents is specific work that has to be done before term sheets are signed — because afterwards you are renegotiating rather than structuring.
Acquihub works with founders and investors across East Africa on change-of-control analysis, deal structuring and exit orchestration. If you are planning a raise or a sale in Uganda, or you hold a Ugandan subsidiary beneath an offshore structure that may be about to move, talk to us first.
Frequently asked questions
What triggers Uganda's change-of-ownership rule? A change in the underlying ownership of a company of 50% or more. Because the test looks at underlying ownership, changes at a holding-company level, including offshore, can trigger it.
Who pays the tax when ownership of a Ugandan company changes? The Ugandan resident company itself. The Tax Appeals Tribunal confirmed in Kuku Foods Uganda Limited v URA that the liability arises from a statutory deeming provision applying to the company, not from the consideration received by the selling shareholders.
What rate applies? Uganda has no separate capital gains tax. Gains are included in business income and taxed at the corporate rate of 30% for companies.
When does the ownership change take effect for tax purposes? The Tribunal held that the effective date is when the transfers are registered, not when the agreement is signed. In Kuku Foods that was 26 February 2020 rather than the June 2019 signing date.
How is the deemed gain calculated? By reference to the market value of each of the company's assets and liabilities as at the effective date of the change, less their tax values. The Tribunal rejected the use of the headline purchase price as a proxy for enterprise value.
Do tax losses survive a change of ownership in Uganda? Not automatically. Losses may be forfeited unless, for two years after the change, the company carries on the same business and does not undertake new business or investment principally to use the losses.