In the recent Appeal Court case of Airtel Uganda Limited v. Uganda Revenue Authority, the provisions of section 15 of Uganda’s Tax Appeals Tribunal Act (TAT Act) and their wider implications came under scrutiny.

In the case at hand, Airtel Uganda Limited (Airtel), a telecommunication company, lodged an objection to an assessment raised by the Uganda Revenue Authority (URA) on 25 February 2004 with the Tax Appeals Tribunal (TAT). In terms of section 15 of the TAT Act, a taxpayer who has lodged a notice of objection to an assessment shall, pending final resolution of the objection, pay 30% of the tax assessed or that part of the tax assessed not in dispute, whichever is greater. Airtel duly paid the 30% of the disputed tax in accordance with this legal requirement.

Both the TAT and the High Court subsequently ruled in favour of the URA and a further appeal to the Court of Appeal was dismissed. As a result, Airtel was liable for the total amount of the originally assessed tax and paid the outstanding 70% tax at that stage. However, the URA also demanded interest on the 70% that was outstanding and had remained unpaid during the litigation process.

Airtel filed a suit in the High Court arguing that the URA does not have a right to claim interest on this amount and that the payment of 30% of the assessed tax in terms of section 15 of the TAT Act absolves the taxpayer from paying penalties in the event that the disputed tax is found to be payable. Any penal interest accrues only after the courts have determined in an objection or appeal that the tax is payable.

The URA was of the view that penal tax (interest) was a creature of statue provided for under section 34 of the Value Added Tax Act (VAT Act) and that in terms of section 65 and 66, the consequence of not paying tax assessed attracts interest at the rate specified. The relevant assessment was issued on 25 February 2004 with a due date for payment of the tax on the same date and, as Airtel’s taxability and due date did not arise out of the court judgement, but in terms of the law, 70% of the tax due was paid late and therefore subject to interest. The URA also disagreed with the view that payment of 30% of the assessed tax absolves the taxpayer from the responsibility of paying the total amount due.