Uganda Breweries Limited headquarters in Luzira. The Tax Appeals Tribunal has dismissed a case in which East African Breweries Ltd (EABL) was challenging a tax assessment by URA and has ordered EABL to pay tax worth Shs 9.7bn accrued between May 2008 and June, 2015.
The application arises from an income tax assessment of Shs 9.7bn by Uganda Revenue Authority (URA) on EABL for income purportedly received on transactions involving group companies.
East African Breweries International Limited is a wholly owned subsidiary of East African Breweries and is incorporated in Kenya. In July 2015, URA audited Uganda Breweries Limited (UBL) also a subsidiary of EABL and found information relating to transactions with EABL for the period May 2008 to June 2015.
URA issued an assessment of income tax of Shs 9.7bn for the period June 30 2009 to June 2015 on grounds that EABL was resident in Uganda for tax purposes.
In the case, the Tribunal sought to establish; whether the applicant is a taxable person in Uganda under the Income Tax Act; whether EABL obtained income from Uganda for the period in issue; and remedies available to the parties.
The dispute revolves around transactions between group companies that were purported to be in different jurisdictions. It is contended that EABL, incorporated in Kenya, was marketing products for group companies in Uganda. URA on the other hand contended that EABL sourced income in Uganda which the latter denied.
In his testimony, Siraj Kanyesigye, the URA Assistant Commissioner Large Tax Payers Office said UBL was no longer making sales and it was no longer declaring exports since 2007.
Where sales were made, there were expenses by a sister company, he told the Tribunal.
There was no withholding tax, VAT and management fees between sister companies being paid. He said EABL and UBL are realted – they share ownership and management.
The Assistant Commissioner said he went to Nairobi to understand how the business was being run and was informed the exports of UBL were being handled by EABL which sourced customrs outside the borders. It obtained orders from Congo, Rwanda and South Sudan.
UBL would issue invoices to EABL and EABL would use a company called Bollore to export the goods.Kanyesigye said documents obtained showed that EABL would pay a mark up of 7.5% to UBL and then sell the items at a markup of 70% to 90%.URA argued that EABL was involved in fraudulent tax avoidance scheme and that […]
