The Tax Appeals Tribunal has declared as null and void, a UGX 31.8 million customs tax assessment issued by the Uganda Revenue Authority, ruling that the tax body acted unlawfully when it disregarded a trader’s declared transaction value and substituted it with an arbitrary reference price.
The ruling follows a dispute involving the tax body and Depo Limited, a building materials importer, over the importation of stone-coated steel roofing tiles from China.
Citing what it described as “glaring inconsistencies,” URA had rejected the importer’s declared customs value and applied an alternative rate of USD 1.75 per kilogram, derived from its internal database, resulting in the additional UGX 31,804,124 assessment.
The importer rejected it and appealed to the Tax Appeals tribunal – adducing documentary evidence, including telegraphic transfer records and the contractual agreement with the supplier.
The Tribunal concurred with the importer, and faulted URA for ignoring legitimate paperwork to impose an alternative valuation.
“Once an importer provides credible proof of the price actually paid or payable, the Commissioner does not have unfettered discretion to ignore that evidence and impose an alternative valuation,” the Tribunal ruled.
The Tribunal further criticized URA for failing to provide a written rationale explaining how the USD 1.75 per kilogram rate was determined or why it was appropriate for Depo’s specific consignment.
The Tribunal also highlighted URA’s breach of the valuation hierarchy under the East African Community Customs Management Act.
Customs law mandates six sequential methods for determining transaction value, with the fallback method applicable only after the preceding five methods have been exhausted.
The Tribunal found that URA prematurely applied the fallback method, effectively bypassing statutory procedures.
The Tribunal consequently annulled the UGX 31.8m additional assessment and directed that any excess taxes paid under protest be refunded.
URA was also instructed to pay Depo’s legal costs.
Legal analysts note that the ruling reinforces the principle that tax administration in Uganda must operate within Uganda’s statutory frameworks rather than relying on unexplained or arbitrary administrative decisions based on speculation.
By upholding the legitimacy of properly documented transaction invoices, the decision strengthens predictability and legal certainty for importers, providing a safeguard against arbitrary valuations, which disadvantage taxpayers.
This precedent is expected to bolster investor confidence and contribute to a more stable and predictable trade environment in Uganda.
