The Uganda Revenue Authority (URA) has announced its intention to challenge a recent High Court decision ordering the tax body to refund Heritage Oil and Gas Ltd a total of $193.5 million (approximately Shs709 billion). The case, which has been ongoing for over a decade, centers on a disputed Capital Gains Tax (CGT) assessment levied on Heritage following the sale of its oil interests in Uganda.
Speaking on the matter, URA Commissioner General John Musinguzi emphasized that the agency is not satisfied with the ruling and will appeal. “This case has a long history, and URA has previously prevailed in multiple forums, including the Tax Appeals Tribunal and arbitration proceedings in London. We remain determined to pursue justice,” he said.
The dispute dates back to 2010, when Heritage sold its 50% stake in Uganda’s oil exploration licenses to Tullow Oil for $1.45 billion. URA assessed a CGT of $404.9 million on the sale, including $30 million on a contingency payment. However, Heritage contested the tax, arguing that $150 million of its initial investment in exploration should not be taxable.
Justice Susan Abinyo of the High Court’s Commercial Division recently ruled in Heritage’s favor. She determined that the $150 million investment was improperly included in URA’s tax calculations and ordered the refund of $45 million in wrongly assessed taxes, along with $148.5 million in statutory interest. The interest, calculated at 2% per month, accounts for the prolonged delay in resolving the dispute.
The decision has raised concerns among economists and analysts, with many warning of its potential impact on Uganda’s treasury and investment climate. “This is a significant financial hit for the government. It also sends a message to international investors about the risks of doing business here,” one analyst noted.
Despite these challenges, URA has reassured the public of its commitment to fair tax administration. “It is not right for someone to profit from Uganda’s resources without paying their fair share of taxes,” Musinguzi stated. He also highlighted that Heritage had yet to pay $4 million awarded to Uganda in a previous arbitration ruling.
The case highlights the complexities of enforcing tax regulations in Uganda’s growing oil sector. As URA prepares its appeal, stakeholders are closely monitoring the proceedings, which could set a critical precedent for future tax disputes involving multinational companies.