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URA to refund billions in illegal taxes

The Court of Appeal has ordered that Value Added Tax charged on imported goods at a rate of 15% by the Uganda Revenue Authority (URA) is illegal.

VAT is a tax on the value added at each stage of the production and distribution process and on the importation of goods.

Through Birungyi, Barata & Associates, 13,946 people including Margaret Akiiki Rwaheru in 2013 filed a suit in the Commercial Court challenging the legality of the tax, arguing that it is not provided for under the East African Customs Management Act, VAT Act or any other laws of Uganda.

On January 10, 2014, Justice Christopher Madrama Izama, ruled that Domestic VAT at a rate of 15% was irregular and not illegality when applied to importers who qualified to register for VAT but had not registered, hence the appeal.

On Tuesday (November 10, 2020), three COA justices led by Cheborion Barishaki ruled that the complainants’ applicants are entitled to a refund of the illegally collected taxes with interest.

The illegally collected taxes from 13,946 people including Margaret Akiiki Rwaheru amounts to sh20, 954,812,967 while interest is approximately sh11.3b.

Barishaki also ordered URA to pay the applicants 4/5 of the costs for both the COA and Commercial Court.

According to the Advocates Act Remuneration and Taxation Rules, URA is likely to pay sh5b in costs.

The justices ruled that “domestic VAT” at a rate of 15% levied by URA on the applicants had no basis in law and are illegal.

“I have not been able to find any law which authorized URA to collect domestic VAT at a rate of 15%. It was done by URA without any authority of law and therefore contrary to Article 152 (1) of the Constitution. This was not irregular but illegal,” he ruled.

Court documents indicate that VAT registered importers are charged at a statutory rate of 18% but importers that are not VAT registered are charged both 18% and an additional 15%, which is designated as “Domestic VAT.”

Court documents further show that between 2002 and 2013, the applicants imported goods and paid import duty, exercise duty, domestic VAT, and withholding tax to URA, therefore the suit

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