Wakilii

Uganda Revenue Authority v Jacobsen Uganda Power Plant Co. Limited (Civil Appeal 26 of 2018)

High Court · [2023] UGCOMMC 159 · 2023 Appeal Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Appeal from the Tax Appeals Tribunal's majority ruling in TAT Application No. 11 of 2016
Decision
Appeal dismissed in its entirety; Tax Appeals Tribunal's ruling upheld

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The High Court dismissed the appeal and upheld the Tax Appeals Tribunal's majority ruling that URA was not justified in charging Withholding Tax and VAT on the monthly Euro 15,000 reimbursement paid by the Respondent to JELCO. The court held that these reimbursed expenses for air tickets, accommodation and per diem incurred by JELCO in rendering services were not management charges attracting Withholding Tax under the Income Tax Act nor imported services subject to VAT. The expenses remained non-taxable reimbursements rather than income derived from Uganda.

Outcome

Appeal dismissed in its entirety; Tax Appeals Tribunal's ruling upheld

Facts

URA audited Jacobsen Uganda Power Plant Co. Limited and assessed UGX 5,351,374,339 in unpaid Value Added Tax and Withholding Tax. Upon objection, the assessment was revised to UGX 2,369,047,723. The Respondent appealed to the Tax Appeals Tribunal, which ruled in its majority decision that Withholding Tax and VAT were not applicable to expenses of Euro 15,000 per month which the Respondent paid to JELCO (a Norway-based company) as reimbursement for air tickets, accommodation and per diem incurred by JELCO staff while providing management services to the Respondent. The management fee itself was Euro 35,000 per month. URA appealed the Tribunal's ruling to the High Court on three grounds relating to Withholding Tax and VAT liability.

Issues

  1. Whether the Tribunal erred in ruling that URA was not justified in charging Withholding Tax on the payment of 15,000 Euros made by the Respondent to JELCO.
  2. Whether the Tribunal erred in holding that it was doubtable that all payments for air tickets were sourced in Uganda.
  3. Whether the Tribunal erred in ruling that URA was not justified in charging VAT on the Respondent.

Orders

  • Appeal dismissed.
  • Tax Appeals Tribunal's majority Ruling in TAT Application No. 11 of 2016 upheld.
  • Costs of the appeal awarded to the Respondent.

Rules and key headnotes

Tax Law — Withholding Tax — Management Charges — Reimbursable Expenses
Reimbursement of expenses incurred by a non-resident person in rendering services does not constitute a management charge under section 78(b) of the Income Tax Act and is not subject to Withholding Tax under section 83(1), as such expenses are not paid as consideration for services but as reimbursement of costs already incurred.
Tax Law — Income Tax — Source of Income — Non-Resident Income
An expense does not become income merely because it is reimbursable; reimbursement of expenses incurred by a non-resident person in a foreign jurisdiction for air tickets purchased abroad does not constitute income derived from Uganda under section 79 of the Income Tax Act.
Tax Law — Tax Appeals — Burden of Proof — Legality versus Excessiveness
Where a taxpayer challenges the legality of a tax assessment rather than its excessiveness, section 18 of the Tax Appeals Tribunal Act does not impose on the taxpayer the burden of proving that the assessment is excessive; the taxpayer must instead prove the illegality of the assessment.
Tax Law — Value Added Tax — Imported Services — Place of Supply
VAT liability is determined by the place of supply of goods or services rather than the location of the supplier or customer; reimbursement of expenses for services supplied outside Uganda (such as air tickets purchased in Norway) does not constitute supply of imported services under section 4(c) of the Value Added Tax Act and is not subject to VAT.
Statutory Interpretation — Tax Statutes — Literal Rule
In interpreting a taxing statute, courts must apply the literal rule and give words their plain meaning without reading in or implying anything not expressly stated; there is no room for intendment, equity or presumption in tax law, and nothing is to be read into sections of a taxing statute that is not there.
Tax Law — Value Added Tax — Double Taxation — Third Party Services
In the absence of a legal obligation or framework to withhold VAT, a taxpayer cannot be held accountable for or required to collect or pay VAT for services provided by a third party entity where VAT has already been charged at the point and time of consumption of the goods or services.

Legislation cited (20)

Cases cited (5)

  • Siraj Hassan Kajura v Uganda Revenue Authority (Supreme Court Civil Appeal No. 9 of 2015)
  • Cape Brandy Syndicate v Inland Revenue Commissioners [1921] KB 64
  • Stanley Mining Services (T) Limited -Vs- Commissioner General & Commissioner Income Tax (2004) 2] TLR 22
  • Rowe & Maw (A Firm) v Commissioners of Customs & Excise (1975) 1 BVC 51
  • Bank of Africa Uganda Ltd v Uganda Revenue Authority (TAT Application No. 62 of 2018)

Full judgment

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

Uganda Revenue Authority v Jacobsen Uganda Power Plant Co. Limited (Civil Appeal 26 of 2018) [2023] UGCommC 159 (17 February 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.