What you need to know:
- Airtel inherited the liability after acquiring the assets and assuming liabilities of Zain, which had also inherited the tax from Celtel in 2010
The Supreme Court has ruled that telecom firm Airtel is not entitled to a Shs1.5b refund from Uganda Revenue Authority because it was lawfully collected.
Airtel inherited the liability after acquiring the assets and assuming liabilities of Zain, which had also inherited the tax from Celtel in 2010.
The telecom had challenged the payment of Shs1.5 to URA, inherited from its successor company.
The money resulted from a tax assessment by URA consisting of Excise Duty, Value Added Tax and Penal Tax amounting to about Shs1b as well as accumulated interest.
The outstanding tax resulted from a URA audit into Celtel affairs before it was sold to Zain and subsequently to Airtel.
In a unanimous ruling, a panel of five judges of the Supreme Court led by Justice Elizabeth Musoke allowed the URA appeal faulting the Court of Appeal on its findings that the Penal Tax had been suspended during pendency of tax objection proceedings.
Other justices included Chief Justice Alfonse Owiny–Dollo, Faith Mwondha, Mike Chibita and Stephen Musota
“The Court of Appeal erred when it ordered a refund of Shs1.5b paid by Airtel as unpaid Value Added Tax and Penal Tax thereon that accrued during the pendency of the tax objection proceeding instituted by Airtel,” Justice Musoke held in the lead judgment.
She also directed that Airtel pays legal cost incurred by URA in all courts while prosecuting the case.
The Supreme Court also reinstated the High Court findings, which stated that although Airtel had a right to lodge an objection before the Tax Appeals Tribunal on the tax assessment, their lodgment of the objection did not absolve it from paying Penal Tax from the date the objection was unsuccessful.
A Panel Tax is imposed on a person that fails to furnish a tax return by the due date. Such a person or an institution pays a penal tax of 2 percent.
The Supreme Court overturned findings of the Court of Appeal that had held that Airtel had been penalised by URA for seeking redress from the Tax Appeals Tribunal and faulted the appellant court for holding that a person who objects to a tax accessed, appeals against it and pays 30 percent of the tax accessed, cannot be penalised under a section of the value added tax laws.
According to the Supreme Court, the Court of Appeal’s decision was not supported by relevant tax laws because penal tax is payable where a person fails to pay tax by the due date.