Tribunal Rules Against TotalEnergies Uganda in Shs 14.4 Billion Tax Case

TotalEnergies Marketing Uganda Ltd has lost its case at the Tax Appeals Tribunal, which upheld the Uganda Revenue Authority’s tax assessment of Shs 14.4 billion. The dispute centered on Value Added Tax (VAT) and Withholding Tax (WHT) related to payments made by the Ugandan company to its sister company in Kenya for fuel handling and logistics services.

According to the Tribunal, these payments were not simple reimbursements or pass-through costs as TotalEnergies Uganda had claimed. Instead, they were payment for actual services rendered by TotalEnergies Marketing Kenya and therefore taxable under Ugandan law.

The case involved a charge of USD 5.54 per cubic meter of fuel, which TotalEnergies Uganda argued was mostly paid to third-party service providers like Kenya Pipeline Company and clearing agents. The company said only a small portion was kept as income by the Kenyan affiliate.

However, the Tribunal disagreed. It referred to the Service Level Agreement (SLA) between the two firms and stated that the full fee was clearly defined as a handling charge. The SLA did not support the idea that this amount was a mix of different reimbursements.

In its ruling, the Tribunal said, “The SLA clearly treats the entire USD 5.54 as a handling fee for services provided by Total Kenya. It does not allow for splitting the amount into smaller non-taxable parts.” The Tribunal also pointed out that trying to present new evidence during the trial, which contradicted the signed contract, could not be accepted due to the Parol Evidence Rule.

The judgment also highlighted concerns about how some multinational companies structure cross-border operations to reduce their tax obligations. By routing service payments through affiliates in other countries and classifying fees as reimbursements, these companies may try to avoid taxes in the country where the business activity is happening.

On the VAT issue, the Tribunal ruled that the services provided by Total Kenya did not qualify for exemption or zero-rating. The law only exempts services directly related to importing goods, not logistics or administration services. Since the handling services were invoiced separately and not included in the customs value of the fuel, they had to be taxed.

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Regarding the WHT, the Tribunal found that the services counted as Ugandan-sourced income under the law. The SLA was considered a service contract that made Total Kenya subject to tax in Uganda. The Tribunal said that TotalEnergies Uganda had not provided enough proof or contract terms to support its claim that the fees were not taxable.

The Tribunal also dismissed the argument that these were just disbursements or reimbursements, explaining that tax laws do not make exceptions simply because a service is paid on behalf of someone else.

In the end, the Tribunal fully agreed with the tax assessments made by the Uganda Revenue Authority. It dismissed TotalEnergies Uganda’s application and ordered the company to pay the tax, along with costs.

Tax professionals say the case shows how closely Ugandan tax authorities are now looking at agreements between international companies and their affiliates. It highlights the importance of following tax rules on cross-border services and making sure contracts are transparent and specific.