Uganda, oil firms in fresh tax dispute

As Ugandan government continues to fight the $404 million London heritage arbitration case, a fresh tax dispute has cropped up between the government and three Oil companies, according to the Ugandan Daily Monitor.According to an inside source in the oil sector, government, through Uganda Revenue Authority, has moved to de-register all the three oil companies from the VAT regime. This means the oil firms cannot reclaim for cost incurred or refunds of taxes paid on goods or items supplied in the period before the oil production started.The oil firms; Tullow, Total and Cnooc are however protesting the decision arguing that the Production Sharing Agreement they signed with the government had provided that they could claim taxable supply as recoverable costs.According to sources, the government decision has put over UShs104billion at stake and it is most likely to push up the operation costs of the oil companies by 18 per cent. “The arrangement is that ultimately when companies sell crude, they will be able to claim back their VAT on all taxable supplies but government wants to move away from that arrangement,” said the source.The Oil companies were registered as normal trader yet they should have got special status trader to access automatic registration. “They (oil companies) have not been having a uniform approach to this matter,” the source said. “But some had been given a tax claim guarantee in especially block 2 and so there is need to discuss fiscal planning stability with finance otherwise, there is a risk of companies losing historical costs which will not be recovered and the companies are not ready to accept that.”Tullow Uganda PTY LTD, through Ashurst an international law firm filed a case (No. AR/12/34) at the International Centre for Settlement of Investment Disputes against the Ministry of Energy on October 31 2012 with the subject matter: Petroleum Exploration, development and Production agreement. The tribunal has not yet been set but the Secretary General of the Institution registered a request for the institution of arbitration proceedings.