The Tax Appeals Tribunal in Kampala has ordered beer firm, East African Breweries International Limited (EABIL) to pay Uganda Revenue Authority (URA) shs 9.7 billion in tax arrears.
According to court documents, EABIL is a wholly-owned subsidiary of East African Breweries Limited and is incorporated in Kenya but in July 2015, URA audited Uganda Breweries Limited, also a subsidiary of East African Breweries Limited and found information relating transactions with EABIL between May 2008 and June 2015.
EABIL was purchasing and disposing of stock where the company purchased goods from Uganda Breweries Limited at a cost and markup of 7.5 percent.
Consequently, URA issued an assessment of income tax of shs9.7 billion for the period between June 2009 and June 2015 on the ground that EABIL was resident in Uganda for tax purposes.
However, EABIL ran to court challenging the assessment of shs9.7billion by the tax body.
However, a panel of three members including Dr Asa Mugenyi (chairman), George Mugerwa and Siraj Ali ruled that it was difficult to explain how EABIL was able to purchase goods from Uganda Breweries Limited and export them without having a presence in Uganda as had been testified by officials.
“The tribunal notes that the activities of the group companies were overlapping. It is not clear whether they were actually sharing TIN, premises and staff.”
“This doubt is exacerbated by the invoices and dispatch notes tendered in evidence that show that they were issued in Uganda. They had the address of the applicant (EABIL) as also in Kampala. How was the applicant stamping the said documents if it didn’t operate in Uganda?”
The tribunal, therefore, ruled that East African Breweries International Limited had failed to prove that it doesn’t operate in Uganda and therefore directed that the pay the assessed tax.
“Taking all the above into consideration, the tribunal finds that the applicant(EABIL) didn’t discharge the burden placed on it to prove the respondent ought to have made the decision differently. This application is dismissed with costs,” the tribunal directed.