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URA loses Shs700m tax case to real estate firm
URA loses Shs700m tax case to real estate firm
BY EPHRAIM KASOZI
KAMPAL The Tax Appeals Tribunal (TAT) has overturned a Uganda Revenue Authority (URA) Shs703m Value Added Tax (VAT) assessment against a city real estate dealer for sale of unimproved land.
URA had issued the assessment in 2019 to Mr Gerald Kikambi following an audit on sale of land at Gayaza in Wakiso District that was carried out between 2014 and 2015.
In a unanimous decision, the three member panel comprising Dr Asa Mugenyi, Dr Stephen Akabway and Mr Siraj Ali ruled that the supply of unimproved land is considered as exempt and not standard rated.
The tribunal also held that there is no evidence to show that Mr Kikambi did not supply unimproved land.
“At the time of the audit, the land had already been sold. The land the respondent (URA) visited was not the land that was the subject matter of the dispute. There is no evidence that the applicant (Kikambi) built an access road to the land that is subject of the dispute before sale. The tribunal cannot establish the condition of the land before it was sold and thereafter,” the tribunal that sat on Friday held.
TAT held: “The assessment on the applicant of Shs703,421,101 is set aside. The 30 percent paid by the applicant is refunded and awarded costs incurred.”
The tribunal decision resulted from a Value Added Tax (VAT) assessment of Shs703.4m by URA on Mr Kikambi for transaction in respect of his real estate business.
TAT dismissed URA’s argument that by providing an access road, utilities, putting up a fence or a wall around the land saying it does not amount to improvement.
“If there are improvements on land, whether the value increases or not, VAT is due. The value of land is determined by the market forces of demand. If the demand for land is high, the value may go up with or without any improvements on the land. There may also be forced sale below the market price. Therefore, the respondent (URA)’s contention that there was improvement on the land because its value increased may not be tenable,” the tribunal ruled.
Background
The land dealer petitioned the tribunal challenging the VAT charge of Shs703m claiming that he sold unimproved land as opposed to URA’s position that he sold an improved land which is standard rated, attracting VAT of 18 per cent.
Documents show that in 2019, URA carried out an audit on Mr Kikambi’s returns and raised an additional assessment of Shs703,421,101 as VAT for June 2015 reasoning that the real estate dealer was selling improved land which led to the variances between income and VAT sales declaration which he objected.
