Wakilii

Apollo Hotel Corporation Limited v Uganda Revenue Authority (Civil Appeal 48 of 2022)

High Court · [2023] UGCOMMC 138 · 2023 Appeal Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Appeal from Tax Appeals Tribunal decision on VAT assessment
Decision
Appeal dismissed; Tax Appeals Tribunal decision upholding VAT assessment of UGX 398,418,385 affirmed

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The High Court dismissed the appeal, holding that the provision of the Centralized Reservation System by Starwood to Apollo Hotel Corporation Limited constituted an import of services attracting VAT. The court found that the appellant, not the third-party users making bookings, was the consumer of the CRS service. The court further held that the CRS was an ancillary service inseparably linked to the principal supply of the Sheraton brand license, and therefore took the VAT character of that principal supply.

Outcome

Appeal dismissed; Tax Appeals Tribunal decision upholding VAT assessment of UGX 398,418,385 affirmed

Facts

Apollo Hotel Corporation Limited operates the Sheraton Hotel Kampala under an international license agreement with Sheraton International Inc. The appellant entered into agreements with Sheraton International Inc. for the right to use the Sheraton brand and to use Starwood's Centralized Reservation System. Uganda Revenue Authority assessed VAT of UGX 398,418,385 on payments made by the appellant to Starwood for the CRS, treating it as an imported service. The appellant objected, arguing that the CRS was utilized by persons outside Uganda to book hotel stays and did not constitute an import of services. The Tax Appeals Tribunal held that the CRS was an ancillary service to the principal supply of the Sheraton brand license and that it constituted an imported service attracting VAT. The appellant appealed to the High Court.

Issues

  1. Whether the provision of the Centralized Reservation System constituted an import of services attracting VAT under the VAT Act.
  2. Whether the supply of the Centralized Reservation System was an ancillary service to the principal service of the right to operate the hotel under the Sheraton brand.

Orders

  • Appeal dismissed.
  • Decision and orders of the Tax Appeals Tribunal upheld.
  • Costs of the appeal and costs before the Tax Appeals Tribunal awarded to the respondent.

Rules and key headnotes

VAT — Import of Services — Destination Principle — Identification of Consumer
For purposes of determining whether a service is imported and attracts VAT, the consumer of the service is the person who procures and utilizes the service, not third parties who may benefit from or interact with that service. The destination principle requires identification of the taxable event by reference to the location of the actual consumer who pays consideration for and uses the service.
VAT — Import of Services — Software Provided Remotely
Where a non-resident entity provides software remotely to a Ugandan business which utilizes that software in its business operations in Uganda and pays consideration for it, there is an import of services attracting VAT under the VAT Act, regardless of whether third parties outside Uganda interact with the software.
VAT — Single Supply vs Multiple Supplies — Ancillary Services
Where a transaction comprises a bundle of services, it may be regarded as a single supply where the circumstances point to a transaction for the whole rather than separate divisible sub-parts. An ancillary service that does not constitute an aim in itself but is a means for better enjoying the principal service takes the VAT character of the principal supply.
VAT — Franchise and Licensing Arrangements — Integrated Software Systems
In hospitality franchise or licensing arrangements, where the licensee is contractually obligated to adopt and use the licensor's proprietary software systems as part of achieving brand uniformity and compliance with group standards, and where the right to use such software is tied to the continuation of the license, the provision of the software constitutes an ancillary service inseparably linked to the principal supply of the brand license.
Appeals from Tax Appeals Tribunal — Questions of Law Only
Under section 27(2) of the Tax Appeals Tribunal Act, an appeal to the High Court may be made on questions of law only. The High Court has no jurisdiction to entertain grounds of appeal that do not disclose questions of law or controversy of law.

Legislation cited (6)

Cases cited (32)

  • Uganda Revenue Authority v Tembo Steels Ltd (High Court Civil Appeal No. 9 of 2006)
  • National Social Security Fund v Uganda Revenue Authority (High Court Civil Appeal No. 29 of 2020)
  • Elias Kasolo v Security Group Uganda Limited & Anor (Court of Appeal Civil Appeal No. 212 of 2020)
  • Luwa Luwa Investments v Uganda Revenue Authority (High Court Civil Appeal No. 43 of 2022)
  • Hamam Singh Bhogal T/a Hamam Singh & Co. v. Jadva Karsan (1953) 20 EACA 17
  • Baku Raphael v Attorney General (Supreme Court Civil Appeal No. 1 of 2005)
  • Attorney General v. Shah (No. 4) [1971] EA 50
  • Roche Transport v Uganda Revenue Authority (High Court Civil Appeal No. 20 of 2021)
  • Father Nanensio Begumisa and three Others v Eric Tiberaga (Supreme Court Civil Appeal No. 17 of 2000)
  • Tonny Kilama & Anor v Mrs Grace Perepetua Otim (High Court Civil Appeal No. 31 of 2019)
  • Africa Broadcasting (U) Ltd v Uganda Revenue Authority (Tax Appeals Tribunal Application No. 44 of 2018)
  • Aviation Hangar v Uganda Revenue Authority (Tax Appeals Tribunal Application No. 21 of 2019)
  • Cape Brandy Syndicate v IRC (1921) 1 KB 64
  • College of Estate Management v Customs and Excise Commissioners [2004] STC 15
  • Card Protection Plan Limited v Commissioners of Customs And Excise [1999] 2 AC 601
  • Uganda Revenue Authority v Total Uganda Limited (Court of Appeal Civil Appeal No. 11 of 2012)
  • Cowi AS v Uganda Revenue Authority (High Court Civil Appeal No. 34 of 2020)
  • Mu-Jhu Care Limited v Uganda Revenue Authority (Tax Appeals Tribunal Application No. 18 of 2018)
  • Commissioner of Customs v Madgett and Baldwin (1998) ECR 6229
  • Card Protection Plan v Commissioners of Customs and Excise [2001] EKHL 4
  • Coca-Cola Central East and West Africa Limited v Commissioner of Domestic Taxes [2020] eKLR
  • Unilever Kenya Limited v The Commissioner of Income Tax - Income Tax Appeal No.753 of 2003
  • Commissioner of Domestic Taxes v Total Touch Cargo Holland [2018] eKLR
  • Coca Cola Central East & West Africa v Commissioner of Domestic Taxes HC Tax Appeal 11/2013
  • F.H. Services Kenya Limited v Commissioner of Domestic Taxes, Appeal No.6 of 2012
  • Panalpina Airflo Limited v Commissioner of Domestic Taxes HC Income Tax Appeal No. 5 of 2018
  • LG electronics Africa Logistics FZE Kenya branch v The Commissioner of Domestic Taxes Kenya Revenue Authority (2020) eklr
  • OA Brown v The Queen, [1998] GSTC 40 (TCC) (Canada)
  • Mesto Zamberk v Financni Reditelstvi v Hradci Kralov: C-18 /12, 2014 STC 1703 (Court of Justice of the European Union)
  • Commissioners of Revenue and Customs v Metropolitan International Schools Limited, 2017 UKUT 0431 (TCC)
  • Canadian Medical Protective Association. v The Queen, 2009 FCA 115, (FCA)
  • Canadian Imperial Bank of Commerce v. The Queen, 2018 TCC 109

Full judgment

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Apollo Hotel Corporation Limited v Uganda Revenue Authority (Civil Appeal 48 of 2022) [2023] UGCommC 138 (2 August 2023)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.