Tribunal rules fuel handling fees are fully taxable services
TotalEnergies Uganda Loses Shs 14.4Bn Tax Case Over Fuel Handling Fees
The Tax Appeals Tribunal has delivered a landmark ruling against TotalEnergies Marketing Uganda Ltd, upholding a Shs 14.4 billion tax assessment by the Uganda Revenue Authority (URA). At the center of the dispute were fees paid to the company’s Kenyan affiliate, which TotalEnergies claimed were non-taxable reimbursements.
The Tribunal, however, concluded that these payments—amounting to USD 5.54 per cubic meter of fuel—were not incidental to the importation of goods but constituted taxable services. The court rejected the company’s argument that these were third-party disbursements or reimbursements for services like pipeline and customs handling.
Instead, the panel emphasized that the Service Level Agreement (SLA) between Total Uganda and Total Kenya clearly framed the fee as a handling charge for logistics and administrative services, making it subject to VAT and Withholding Tax.
“These payments are not reimbursements but consideration for services rendered,” the Tribunal stated. It also invoked the Parol Evidence Rule, dismissing attempts to reinterpret the written contract through post-hoc testimony and breakdowns.
The Tribunal further determined that the services did not qualify for VAT exemption under Uganda’s laws and that clearing and forwarding services were not relevant to this specific assessment. Since the handling services were billed separately and excluded from the customs value of fuel, they were deemed independently taxable.
On Withholding Tax, the Tribunal declared that the income from these services was sourced in Uganda, and thus taxable under Section 84 of the Income Tax Act.
A Blow to Multinational Tax Evasion Tactics
The case brings to light how multinational corporations sometimes structure regional transactions to obscure tax obligations. By routing services through affiliates and disguising service fees as reimbursements, companies can reduce exposure in countries where business is conducted.
“The VAT Act and its Regulations do not exempt imported services just because they’re labeled as pass-through charges,” the Tribunal added.
Tax analysts say the ruling is a wake-up call for global firms operating in Uganda and other developing markets. It stresses the importance of transparent inter-company agreements and the need for revenue authorities to scrutinize cross-border logistics contracts.
In its verdict, the Tribunal upheld all URA assessments and ordered TotalEnergies Uganda to pay costs, marking a decisive victory for Uganda’s tax enforcement.
