After nearly nine years of applications, reviews and referrals within the Uganda Revenue Authority (URA), GroFin Africa Fund Uganda Limited successfully challenged the continued deferral of a tax refund claim arising from excess income tax payments.

The dispute: 

GroFin Africa Fund Uganda Limited challenged URA's continued deferral of a refund arising from excess income tax payments made in 2015. GroFin claimed Shs. 2,471,271,192, following approximately nine years of applications, reviews and referrals between various URA departments.

GroFin's position was that URA had repeatedly acknowledged the existence of the tax credit in its tax ledgers but had neither refunded nor offset the credit against other tax liabilities. GroFin relied on section 123 of the Income Tax Act, which provides the framework for dealing with excess income tax payments, including the application of excess credits against outstanding tax liabilities and the refund of any remaining balance. URA maintained that the refund claim was premature and that verification remained outstanding.

The ruling: 

The Tribunal dismissed URA's preliminary objection and set aside the continued deferral of the refund. The Tribunal drew a distinction between verification and an actual decision on a refund claim. It held, in substance, that verification cannot be used to indefinitely defer an admitted tax credit without the Commissioner ultimately making a decision on the taxpayer's claim.

Importantly, the Tribunal found that URA had not issued a final refund decision under section 123(8) of the Income Tax Act. Consequently, the objection mechanism under section 123(9) had not been triggered.

The Tribunal therefore treated URA's continued deferral as a decision capable of being challenged directly before the Tribunal under section 14 of the Tax Appeals Tribunals Act.

URA was directed to pay Shs. 2,375,840,379 within 30 days, with the remaining credits to be reconciled.

Key takeaway: 

The decision preserves the distinction between the two statutory mechanisms. Where the Commissioner makes a substantive decision on a refund claim under section 123(8) of the Income Tax Act, the taxpayer must follow the objection process under section 123(9). However, where the Commissioner merely continues to defer the claim without making the statutory refund decision, that deferral itself may be directly reviewable by the Tribunal under section 14 of the TAT Act.

Practical implication for taxpayers: 

URA verification should not become an open ended process; where a tax credit has been identified or admitted but the refund remains unresolved, the taxpayer may have grounds to challenge the continued deferral, rather than being required to wait indefinitely for a formal refund decision.
 

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