Wakilii

Enviro Serve Limited v Uganda Revenue Authority (TAT Application No 24 of 2017)

Tribunal · [2020] UGTAT 15 · 2020 Application Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application challenging VAT assessment and seeking VAT refund before the Tax Appeals Tribunal
Decision
Application granted with VAT refunds totalling Shs. 480,227,259 awarded to the applicant

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Tribunal held that a taxable person registered under the VAT Act is entitled to input VAT credit from the effective date of registration even where taxable supplies have not yet been made, provided the input VAT was incurred for use in the business. Section 28(8) applies only to mixed supplies, not standard-rated supplies. A taxpayer is not obliged to ensure suppliers remit VAT; collection is URA's responsibility. The applicant was entitled to input VAT of Shs. 285,972,696 for October 2013 to June 2014, VAT of Shs. 123,930,226 for the year ending June 2016, and input VAT of Shs. 70,324,337 from verified supplier invoices.

Outcome

Application granted with VAT refunds totalling Shs. 480,227,259 awarded to the applicant

Facts

Enviroserv (U) Ltd, a waste management company incorporated in June 2013, registered for VAT on 1 October 2013 in anticipation of a contract with Total E&P Uganda B.V. The applicant began constructing a landfill in Hoima and commenced operations in October 2014, issuing its first invoice in January 2015. The applicant filed a VAT refund claim of Shs. 1,304,681,817 for October 2013 to June 2016. URA disallowed Shs. 1,030,625,893, including: (a) Shs. 285,972,696 input VAT for October 2013 to June 2014 on grounds the applicant had not made taxable supplies; (b) Shs. 123,930,226 due to variance between audited financial statements and VAT returns for June 2015; and (c) Shs. 90,286,003 because suppliers had not declared the VAT. The parties reached a partial consent resolving some issues, leaving Shs. 500,188,925 in dispute. The applicant challenged the disallowances before the Tax Appeals Tribunal.

Issues

  1. Whether the applicant is entitled to a VAT refund?
  2. Whether the respondent is entitled to deny the applicant's VAT claim of Shs. 452,560,157?
  3. Whether the applicant was entitled to input VAT credit of Shs. 285,972,696 for the period of October 2013 to June 2014?
  4. Whether the applicant properly accounted for and declared VAT on its revenue for the period reviewed October 2013 to June 2016?
  5. Whether the penalty imposed by the respondent on the declared VAT on its revenue on imported services was lawful?
  6. What are the remedies available to the parties?

Orders

  • The applicant is entitled to a VAT refund of Shs. 285,972,696 with interest for the period October 2013 to June 2014.
  • Though the applicant did not properly account for the year ending June 2016, it was entitled to VAT of Shs. 123,930,226.
  • The applicant is entitled to a VAT credit of Shs. 70,324,337 being the input VAT charged to the applicant by its suppliers.
  • The applicant is awarded the costs of this application.

Rules and key headnotes

VAT — Taxable Person — Definition and Effective Date of Registration
A taxable person is defined under section 6 of the VAT Act as a person registered under section 7 from the time registration takes effect. Registration takes effect from the beginning of the tax period immediately following the period in which the duty to apply for registration arose. Once registered and issued a certificate of registration that has not been cancelled, a person is deemed a taxable person for all purposes.
VAT — Input Tax Credit — Entitlement Without Making Taxable Supplies
Under section 28(1) of the VAT Act, a taxable person is entitled to input VAT credit for all taxable supplies made to that person during the tax period if the supply is for use in the business of the taxable person. The Act does not require that the taxable person must have made taxable supplies to be entitled to input tax credit. The entitlement arises from being a registered taxable person and incurring input VAT for business use.
VAT — Section 28(8) — Application to Mixed Supplies Only
Section 28(8) of the VAT Act, which prohibits a taxable person from crediting any input tax where the fraction B/C in section 1(f) of the Fourth Schedule is less than 0.05, applies only to a taxable person who deals in mixed supplies (standard-rated and exempt, or standard-rated and zero-rated, or all three). Where a taxable person deals only in standard-rated supplies, the applicable provision is section 28(7)(a), which allows the whole of the input tax to be considered.
VAT — Time of Supply — Completion of Service
Under section 14(1)(c) of the VAT Act, a supply of goods or services occurs on the earliest of: (i) the date the goods are delivered or made available, or the performance of the service is completed; (ii) the date payment is made; or (iii) the date a tax invoice is issued. Where a service involves multiple discrete transactions, each transaction is completed when the specific conditions for that transaction are met, and VAT liability arises at that time.
VAT — Taxpayer's Duty — No Obligation to Verify Supplier Remittance
It is not the duty of a taxpayer to ensure that suppliers who have collected VAT from the taxpayer have remitted that VAT to the Uganda Revenue Authority. The collection of tax is the sole responsibility of URA. Where a taxable person presents evidence of invoices issued and VAT paid to suppliers, the taxpayer is entitled to input VAT credit. URA must pursue non-compliant suppliers directly under section 65 of the VAT Act.
VAT — Financial Statements vs VAT Returns — Different Tax Periods
The tax periods under the Income Tax Act are not synchronized with those under the VAT Act. A variance may occur where a transaction is completed in June and declared in VAT returns filed in July. Depending on the circumstances, audited financial statements may not be appropriate in determining the VAT liability of a taxpayer. VAT liability is determined by reference to the submitted VAT returns and the time of supply under section 14 of the VAT Act.
VAT — Double Taxation — Sales Declared in Subsequent Period
Where a taxpayer fails to declare sales in the correct VAT return period but subsequently declares those sales in a later period, disallowing the input tax credit for the period in question without considering the later declaration would amount to double taxation. URA must consider the sales declaration in the later period when computing input tax refund and VAT liability, though a penalty for late filing may be charged.

Legislation cited (38)

Cases cited (5)

  • Posta Bank (U) Ltd v Uganda Revenue Authority (TAT Application No. 18 of 2008)
  • Warid Telecom Uganda Ltd v Uganda Revenue Authority (Civil Appeal No. 24 of 2011)
  • East African Property Holdings (U) Ltd v Uganda Revenue Authority (Civil Suit No. 247 of 2013)
  • Tullow Uganda Ltd & Anor v Uganda Revenue Authority (HCCS No. 445 of 2015)
  • Target Well Control Uganda Ltd v The Commissioner General (HCCS No. 751 of 2015)

Full judgment

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

Enviro Serve Limited v Uganda Revenue Authority (TAT Application No 24 of 2017) 2020 UGTAT 15 (24 January 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.