The Tax Appeals Tribunal (TAT) has ruled against CFAO Motors Uganda Limited, ordering the automotive dealer to pay UGX 2.08 billion in VAT arrears following a dispute with the Uganda Revenue Authority (URA).
The ruling, delivered on January 31, 2025, was made by a tribunal panel comprising Chairman Siraj Ali, Christine Katwe, and Kabakumba Masiko. The tribunal upheld URA’s position that mark-ups on vehicle sales from bonded warehouses to VAT-exempt customers should still attract VAT, setting a significant precedent for tax compliance in Uganda’s automotive industry.
CFAO Motors challenged URA’s additional VAT assessment for 2018-2020, arguing that its sales to VAT-exempt customers—including diplomats, international organisations, and government agencies—should not be subject to VAT. The company claimed that because its customers are exempt from VAT, its sales, including mark-ups, should also be VAT-free.
However, URA contended that while the importation of vehicles by these customers is indeed VAT-exempt, any additional charge beyond the customs value—including CFAO’s mark-up—is a separate taxable supply under the VAT Act.
Tribunal’s Ruling: VAT Applies to Mark-ups
In a decisive ruling, the tribunal dismissed CFAO Motors’ application and upheld URA’s VAT assessment. Key takeaways from the ruling include:
- VAT exemptions apply only to the customs value of imported vehicles, not to additional services or price mark-ups.
- CFAO Motors’ sales margin is a separate taxable transaction under Ugandan tax laws.
- Under Section 23(c) of the VAT Act, any charge not included in the customs value of imported goods must attract VAT.
