Wakilii

Uganda Revenue Authority v COWI A S (Civil Appeal No. 34 of 2020)

Court of Appeal · [2021] UGCA 134 · 2021 Appeal Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Appeal from a decision of the Tax Appeals Tribunal to the High Court (Commercial Division)
Decision
Appeal allowed; Tax Appeals Tribunal ruling set aside and VAT assessment of shs. 371,409,113 upheld

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The High Court, on appeal from the Tax Appeals Tribunal, held that Regulation 13(3)(a) of the VAT (Amendment) Regulations 2011 lifts the corporate veil to treat a Ugandan branch as a taxable person distinct from its overseas head office, and is not inconsistent with section 11(2) of the VAT Act. Support and supervisory services rendered for consideration by the Danish head office to its Ugandan branch constituted imported services liable to VAT under a destination-based system. As the respondent had not proved overpayment, it was not entitled to a refund. The Tribunal's ruling was set aside and the VAT assessment upheld.

Outcome

Appeal allowed; Tax Appeals Tribunal ruling set aside and VAT assessment of shs. 371,409,113 upheld

Facts

COWI A/S is a consultancy engineering company incorporated in Denmark, registered in Uganda as a foreign company operating a branch. Following an audit of the branch's operations for 2013–2016, the Uganda Revenue Authority found that VAT had not been paid on the man-hour cost of head office staff in Denmark whose costs were allocated to the Ugandan branch. URA issued an assessment including a VAT component; the respondent paid under protest and objected. The head office staff performed support and supervisory work such as reviewing legal and accounting work, road designs and engineering consultancies for compliance with group standards, with the branch acting on those reviews. These costs were charged to the branch. The respondent argued the services were performed in Denmark, not imported into Uganda, and were merely an arm's length allocation of profits and losses within the group, and that head office and branch were one legal person. The Tax Appeals Tribunal allowed the respondent's application; URA appealed to the High Court.

Issues

  1. Whether Regulation 13(3)(a) of the VAT (Amendment) Regulations 2011 is inconsistent with section 11 of the VAT Act.
  2. Whether the respondent imported services into Uganda liable to Value Added Tax.
  3. Whether the respondent is entitled to a tax refund.

Orders

  • Appeal allowed on all grounds.
  • Ruling of the Tax Appeals Tribunal set aside.
  • Costs of the appeal to the appellant.

Rules and key headnotes

Value Added Tax — Branch and Head Office — Statutory Lifting of Corporate Veil
Regulation 13(3)(a) of the VAT (Amendment) Regulations 2011 statutorily lifts the corporate veil so that a branch in Uganda is treated as a taxable person distinct from its overseas head office, even though both form part of the same legal entity, so that transactions between them fall within the scope of VAT.
Conflict between Statute and Subsidiary Legislation — Harmonious and Purposive Construction
Where a statute and regulations made under it appear to conflict, they must be interpreted purposively and harmoniously to give effect to both; only where the inconsistency is irreconcilable will the regulation be void to the extent of the inconsistency under section 18(4) of the Interpretation Act.
Value Added Tax — Employee-to-Employer Supply Exclusion — Section 11(2)
The exclusion of supplies made by an employee to an employer under section 11(2) of the VAT Act is not inconsistent with Regulation 13(3)(a); once the branch is treated as distinct from the head office, employees at the head office are deemed to render service to that office, which in turn supplies the branch, making the supply taxable.
Value Added Tax — Imported Services — Destination Principle
Support or supervisory services rendered for consideration by an overseas head office to a Ugandan branch in furtherance of the branch's business constitute imported services consumed in Uganda and are liable to VAT under the destination principle.
Value Added Tax — Refunds — Burden of Proof
A taxable person is entitled to a refund under section 42(1) of the VAT Act only upon proof that the amount paid exceeded the actual payable amount; absent such proof no refund arises.

Legislation cited (15)

Cases cited (11)

  • Danske Bank A/S v Skatteverket (Case C-812/19)
  • Metropolitan Life Limited v Commissioner for the South African Revenue Services [2008] 4 All SA 558 (C)
  • Salomon v Salomon and Co Ltd [1897] AC 22
  • In Re Sir Dinshaw Maneckji Petit, AIR 1927 Bom 371
  • NSSF v URA (Civil Appeal No. 29 of 2020)
  • Shah Vershi Devshi & Co v The Transport Licensing Board [1971] EA 289
  • Russell v Scott [1948] AC 422
  • Macpherson v Hall (HM Inspector of Taxes) (1969-1973) 48 TC 210
  • Fleming v Associated Newspapers Ltd (1970) 48 TC 382
  • Pepper (Inspector of Taxes) v Hart [1993] 1 All ER 42
  • Davis v Johnson [1978] 1 All ER 841

Full judgment

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

Uganda Revenue Authority v COWI A S (Civil Appeal No. 34 of 2020) [2021] UGCA 134 (18 October 2021)
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.