KAMPALA – MTN Uganda has been ordered to pay the Uganda Revenue Authority (URA) UGX. 44.2 billion in two separate court cases that could forever define how telecoms pay their taxes.
In one case, MTN will pay UGX. 24.2 billion, on the dispute on taxing airtime and pay UGX. 20 billion, in another where the dispute involves taxing inputs for telecom services and mobile money.
The Tax Appeals Tribunal (TAT) ruled on May 28, 2020, in the first case involving MTN Uganda against URA on how taxes applying to airtime should be assessed. MTN sought to change where the tax on airtime should be charged.
Take the case of 10,000 cards, MTN argued it sells airtime at 8,000 Shillings to an agent and that therefore the tax should be applied at that level. URA also argued that tax must be applied at the final price of 10,000 that the agent sells the airtime at.
The court agreed with URA and ordered MTN to pay 24.2billion Shillings that had been assessed. The judges led by Dr. Asa Mugenyi said: “What about instances where MTN sells directly to the final customer.”
They also ruled that MTN gave a commission to agents and not a discount. This means the UGX, 10,000 cost of airtime stands and should be taxed by URA at that.
Telecoms pay 12 percent excise duty on all the airtime sold. The ruling comes at a time when scratch cards have been out of use and MTN sells directly to customers via mobile money.
According to the ruling, MTN Uganda in 2009 introduced a product known as mobile money which was used to sell airtime, among others with MTN selling airtime to dealers at what is known as the point of sale (sale price).
The dealers then sell airtime to customers at a market rate which includes dealer’s commission (retail price). The customers use airtime for making calls, data or SMS or text messages (point of usage).
URA argued that it had asked MTN to apportion input costs between those it incurred for telecom services which are not exempt and then those it incurred for mobile money services, which is a financial service and therefore exempt.
MTN failed to do this, arguing it was disadvantaged by the tax body for asking it apportion costs. The judges rejected this claim and ordered MTN to instead pay URA the 20 billion Shillings assessed.
They ordered MTN to apportion input tax credits according to those that are taxable, those that are used by telecom services only, and those exempt – used by mobile money, a financial service.
Both rulings are a huge boost to URA at a time when tax collections are down due to coronavirus disruptions. Also, it is a march to ensuring big companies pay exactly what they are supposed to.