Wakilii

Aviation Hangar Services Ltd v Uganda Revenue Authority (TAT Application No 21 of 2019)

Tribunal · [2020] UGTAT 4 · 2020 Application Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application challenging VAT assessment after disallowance of VAT refund claim
Decision
Application dismissed with costs to the respondent

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Tax Appeals Tribunal held that aircraft maintenance services performed in Uganda on foreign-operated aircraft do not constitute zero-rated exported services under the VAT Act. Where the recipient is not a taxable person and services are physically performed in Uganda, section 16(2)(a) of the VAT Act operates to render the supply taxable in Uganda regardless of where the services are ultimately consumed. The maintenance services were standard rated and the applicant's VAT refund claim was properly rejected.

Outcome

Application dismissed with costs to the respondent

Facts

Aviation Hangar Services Ltd, a wholly-owned Ugandan subsidiary of Intra-Ocean Aviation Finance Corporation (IOAFC) registered in Mauritius, provides aircraft maintenance services. IOAFC leases aircraft to humanitarian aid agencies operating in various African countries. Under a Service Level Management Agreement, IOAFC flies its aircraft to Uganda solely for maintenance and servicing by the applicant, after which the aircraft are flown out to operate elsewhere. The applicant applied for a VAT refund of UGX 122,671,551 for the period November 2017 to June 2018, treating its services as zero-rated exports. Uganda Revenue Authority rejected the refund claim and issued an additional VAT assessment of UGX 384,025,308, contending that the maintenance services were standard-rated local supplies performed in Uganda.

Issues

  1. Whether the services provided by the applicant to foreign operated aircrafts attract standard rated or zero rated VAT?
  2. What remedies are available to the parties?

Orders

  • Application dismissed.
  • Costs awarded to the respondent.

Rules and key headnotes

VAT — Zero Rating — Exported Services — Place of Supply
For services to qualify as zero-rated exports under the VAT Act, they must satisfy both the requirements of paragraph 2(b) of the Third Schedule (supplied for use or consumption outside Uganda) and not fall within the override provision of section 16(2)(a), which deems a supply to take place in Uganda where the recipient is not a taxable person and the services are physically performed in Uganda by a person present in Uganda at the time of supply.
VAT — Nature of VAT — Transaction Tax versus Consumption Tax
VAT is a transaction tax charged on value addition at each stage of production and distribution, not solely a consumption tax. It is collected in installments and is concerned with transactions that add value to goods or services, regardless of where final consumption occurs.
VAT — Aircraft Maintenance Services — Place of Consumption
Where aircraft maintenance services including labour, replacement of parts, and overhaul are performed in Uganda, the consumption of those services occurs in Uganda at the time the service is completed and the aircraft becomes airworthy, even if the aircraft subsequently operates outside Uganda. The consumer of the maintenance service is the aircraft itself at the time and place of service, not the passengers who later use the aircraft or the entity that operates it.
VAT — Exported Services — Evidentiary Requirements
Under regulation 12 of the VAT Regulations, a taxpayer claiming zero rating for services supplied to a person outside Uganda must provide evidence that the services are used or consumed outside Uganda, which evidence can be in the form of a contract with a foreign purchaser clearly specifying the place of use or consumption outside Uganda. Failure to provide such evidence to the tax authority defeats the claim for zero rating.
Taxing Statutes — Literal Rule — No Room for Intendment
In interpreting a taxing statute, courts must look only at what is clearly said. There is no room for intendment, no equity about tax, and no presumption. Nothing is to be read in and nothing is to be implied. One can only look fairly at the language used and apply the literal rule.
VAT — Disharmony Between Act and Regulations — Interpretation
Where there is disharmony between the VAT Act and the VAT Regulations, the VAT Act as principal legislation prevails. To harmonise the Regulations with the Act, the phrase 'use and consumption of the service outside Uganda' in the Regulations should be interpreted to mean use and consumption wholly outside Uganda. If there is a local component of use or consumption of services in Uganda, it shall be deemed to be a supply of services in Uganda.

Legislation cited (15)

Cases cited (13)

  • Commissioner of Domestic Taxes v Total Touch Cargo Holland (Income Tax Appeal No. 17 of 2013)
  • FH Services Kenya Ltd v Commissioner Domestic Taxes (Appeal No. 6 of 2012)
  • Coca Cola Central East and West African Ltd v Commissioner of Domestic Taxes (Appeal No. 11 of 2013)
  • Uganda Revenue Authority v Kajura (Civil Appeal No. 9 of 2015)
  • Cape Brandy Syndicate v Inland Revenue Commissioners [1920] 1 KB 64
  • Uganda Revenue Authority v Total Uganda (Civil Appeal No. 8 of 2009)
  • Card Protection Plan Ltd v Customs and Excise Commission [2001] UKHL 4
  • Uganda Revenue Authority v Uganda Taxi Operators & Drivers Association (SCCA No. 13 of 2015)
  • Golden Leaves Hotels and Resorts Limited and Apollo Hotel Corporation v Uganda Revenue Authority (Civil Appeal No. 64 of 2008)
  • Metcash Trading Limited v The Commissioner for the South African Revenue Service CCT 3/200
  • Uganda Revenue Authority v Siraje Hassan Kajura (Civil Appeal No. 9 of 2015)
  • Uganda Revenue Authority v Total Uganda Limited (Civil Appeal No. 11 of 2012)
  • Panalpina Airflo Limited v Commissioner of Domestic Taxes (Income Tax Appeal No. 5 of 2018)

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

Aviation Hangar Services Ltd v Uganda Revenue Authority (TAT Application No 21 of 2019) 2020 UGTAT 4 (30 March 2020)
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.