High Court Redraws VAT Boundaries for Social Clubs

By Joshua Kato

The Kampala Club v URA – decided on 09 th September 2025 Once upon a time, in the bustling heart of Kampala, there stood a century-old club, a place where laughter echoed in tennis courts, where chessboards carried stories of quiet battles, and where generations gathered not for profit, but for fellowship. For over a hundred years, Kampala Club had been more than brick and mortar; it was a sanctuary of belonging. Members paid their annual subscriptions not as a price tag for services, but as a token to remain part of this living story.

But one day, the taxman knocked at the gates. With the sharp eye of the Uganda Revenue Authority (URA), these humble membership fees were suddenly recast as “taxable supplies.” To the taxman, every shilling collected was no longer just a symbol of loyalty, it was consideration for services, squarely within the grip of the Value Added Tax Act, Cap. 349.

And so, began a legal tale. Was membership in a social club a commercial supply like selling a car or renting a hotel room? Or was it, as the Club insisted, simply the price of belonging, intangible, communal, and social? The question climbed from the Tribunal’s chambers to the High Court, were judges were asked to decide: can fellowship itself be taxed?

The appellant, Kampala Club, is a non-profit company limited by guarantee. Its main purpose is not to generate profit, but to provide leisure and recreational facilities for its members. The Club has, since its founded in 1912, charged annual subscription fees. imposed VAT on these fees, citing Section 18(1) of the VAT Act, which imposes VAT on “every taxable supply in Uganda made by a taxable person.” The Authority argued that subscription fees amounted to consideration for access to recreational facilities, a taxable supply under law.

The Club, however, disagreed. It argued that while it may be a taxable person in respect of other services such as accommodation and refreshments, membership fees are different. “The payment of the fees does not satisfy the definition of ‘consideration’ as there is no direct quid pro quo for the recreational services,” the Club contended. The Tribunal sided with URA. Kampala Club appealed.

The High Court sided with the Club, ruling that not all payments can be equated to taxable supplies. It held that: “A taxable supply must be made by a taxable person engaged in business, provided for consideration, and it must form part of the supplier’s business activities carried out in the course of commercial endeavor.” The Court drew heavily on Section 1(k), which defines “business” to include trade, profession, or any adventure in the nature of trade. The judges stressed that hobby and leisure pursuits cannot qualify unless they are profit-driven.

“Mere recreational or hobby pursuits, even if they occasionally yield income, do not constitute business activity,” the Court observed. The Court further distinguished between membership fees and service payments. Referring to Section 2(h) on “consideration,” it held that the fees were not for services, but for continued membership rights. “The mere fact of charging subscription fees does not ipso facto equate to offering commercial supplies,” the Court declared.

The ruling clarified two pillars of VAT law: The Business Activity Test: Under Section 1(k), an activity must be commercial in character. Purely social privileges fail this test. The Consideration Test: Section 2(h) requires a direct exchange. Subscription fees, being for the privilege of belonging, are not quid pro quo service payments. Thus, under Section 18(1), membership fees cannot be considered taxable supplies.

This ruling reshapes VAT obligations for non-profit clubs and associations. Membership and subscription fees for belonging remain outside VAT, but discrete services such as catering, accommodation, or events are still taxable. For URA, the ruling is a reminder that expanding the tax base requires careful statutory interpretation. For taxpayers, it provides a precedent to protect communal contributions from being treated as commercial supplies.

The judgment did more than resolve a tax dispute. It affirmed that belonging is not commerce. “The subscription fee secures continued qualification for membership privilege, distinct from a service fee,” the Court noted. In practical terms, it shields hundreds of clubs and associations across Uganda from VAT burdens on their subscriptions. In symbolic terms, it preserves the spirit of fellowship, separating community from commerce.

The High Court’s decision establishes that: Leisure and recreational activities for social benefit do not amount to business activities under Section 1(k). Membership and subscription fees do not meet the definition of “consideration” under Section 2(h). Only supplies made in the course of business under Section 18(1) are taxable.

For practitioners, it is a guidepost to always distinguish between membership privilege and service supply. The Kampala Club v URA ruling firmly clarifies that under Sections 1(k), 2(h), and 18(1) of the VAT Act, membership and subscription fees are not taxable supplies, as they secure the privilege of belonging rather than payment for services. For clubs and associations, this means subscriptions must be separated from commercial income, supported by proper documentation, while URA must respect the legal boundary between community contributions and business transactions. Ultimately, the case restores certainty to VAT law by reminding all stakeholders that not every payment is taxable, and not every act of belonging is a business.

The writer is a chartered Accountant, business analyst and international Tax Advisor.