Court affirms and orders Multiple ICD Ltd to pay VAT amounting to UGX 2.8 Bn to URA.

Clearing and Forwarding firm, Multiple ICD Ltd has been ordered to pay UGX 2.8 Bn Uganda Revenue Authority (URA) after losing an application challenging the Value Added Tax (VAT) assessment for leasing of machinery.

Multiple ICD instituted an Application against URA in the Tax Appeals Tribunal seeking review of URA’s decision to issue an assessment of UGX 2,860,326,866 against Multiple ICD Ltd as VAT on the lease of machinery.

Multiple ICD Ltd entered into an agreement with Kampala Cement Company Ltd, for the lease of cement making equipment and plant at a rent of USD 65,000 per month for a period of 30 years. The agreement, however, contained a “moratorium” period of 3 years i.e. from November 2016 to 31st December 2019 within which parties agreed that VAT was not payable.

URA on the other hand argued that the supply in question was subject to VAT at a rate of 18%.
The Tax Appeals Tribunal has dismissed the Application on grounds that the lease of equipment to Kampala Cement Co. Ltd amounts to a taxable supply.

The Tribunal further held that there is a taxable supply even where money has not been paid but is due. The Applicant was therefore required to issue monthly VAT invoices to Kampala Cement Co. Ltd and collect VAT before the fifteenth of each month.

The Tribunal was of the view that a clause in an agreement cannot take away the duty to pay tax as this is a statutory duty.

The implication of the above decision is that Multiple ICD Ltd is liable to pay VAT amounting to UGX 2,860,326,866 to URA.