Wakilii

Bestin Limited v Uganda Revenue Authority (TAT Application 230 of 2022)

Tribunal · [2023] UGTAT 11 · 2023 Application Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application challenging a penal tax assessment for non-declaration of Withholding Tax on payments made after enactment of the relevant provision but pursuant to a purchase agreement executed before the law came into force
Decision
Assessment of Shs. 153,785,040 for non-declaration of Withholding Tax set aside

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Tribunal held that withholding tax under section 118B(2) of the Income Tax Act is not payable on installment payments made after 1 July 2019 where the purchase transaction was completed before that date. The provision applies to the purchase transaction itself, not to subsequent payments fulfilling an obligation arising from a pre-existing agreement. Applying the law retrospectively to a transaction completed before the amendment came into force would create uncertainty and violate the principle that a taxpayer should know the tax due at the time of the transaction. The application was allowed with costs to the applicant.

Outcome

Assessment of Shs. 153,785,040 for non-declaration of Withholding Tax set aside

Facts

On 23 March 2017, the applicant executed an agreement to purchase redevelopment rights over land for US$ 5,000,000. The applicant paid over Shs. 13 billion before 1 July 2019 and paid the balance in three installments: Shs. 1,825,000,000 on 23 September 2019, US$ 200,000 on 18 December 2019, and US$ 420,000,000 on 10 March 2020. Section 118B(2) of the Income Tax Act, requiring withholding tax on purchase of business assets, came into force on 1 July 2019 through the Income Tax (Amendment) Act 2019. On 27 January 2022, Uganda Revenue Authority issued an administrative assessment of Shs. 153,785,040 for non-declaration of withholding tax on the payments made after 1 July 2019. The applicant objected on 15 February 2022, arguing the purchase occurred before the law came into force. URA disallowed the objection on 9 May 2022.

Issues

  1. Whether the applicant is liable to pay withholding tax on payments made after 1 July 2019 pursuant to a purchase agreement executed on 23 March 2017, before section 118B(2) of the Income Tax Act came into force.
  2. Whether section 118B(2) of the Income Tax Act applies retrospectively to transactions completed before its commencement date.

Orders

  • Application allowed.
  • Costs awarded to the applicant.

Rules and key headnotes

Tax Law — Withholding Tax — Retrospective Application — Purchase of Business Assets
Section 118B(2) of the Income Tax Act, which requires withholding tax on purchase of business assets, applies to the purchase transaction itself and not to subsequent installment payments made after the provision came into force where the purchase agreement was executed and the transaction completed before the commencement date of the provision.
Statutory Interpretation — Retrospective Operation — Tax Statutes
Unless the terms of a statute expressly provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation, following the maxim nova constitutio futuris formam imponere debet non praeteritis (a new law ought to regulate what is to follow, not the past).
Tax Law — Certainty Principle — Taxpayer's Knowledge at Time of Transaction
One of the canon principles of a good tax is that it should be certain; a taxpayer should know the tax that is due at the time of the transaction, and where there is doubt as to the application of a law, the taxpayer is given the benefit of the doubt.
Statutory Interpretation — Plain Meaning Rule — Unambiguous Language
Where the language of a statute is plain and unambiguous, the words of the statute should be given their unambiguous meaning without adding words not found in the statute or for which authority cannot be found in the language of the statute itself.

Legislation cited (9)

Cases cited (5)

  • Comfort Homes (U) Limited v Uganda Revenue Authority (TAT Application No. 66 of 2020)
  • AON (U) Ltd v Uganda Revenue Authority (MC No. 65 of 2009)
  • Bank of England v Vagliano Bros [1891] AC 107
  • Primarosa Flowers Limited v The Commissioner of Income Tax Income Tax Appeal 18 of 2013
  • Luwaluwa Investment Limited v Uganda Revenue Authority (Civil Appeal No. 43 of 2022)

Full judgment

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

Bestin Limited v Uganda Revenue Authority (TAT Application 230 of 2022) 2023 UGTAT 11 (29 June 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.