The Tax Appeals Tribunal has upheld a $100,000 (UGX357 million) penalty imposed on TotalEnergies EP by Uganda Revenue Authority (URA) for failing to provide transfer pricing information within prescribed timelines during a tax audit.
The ruling reinforces URA’s enforcement powers over multinational companies operating in Uganda.
In a decision delivered to end almost two years of a legal battle, the Tribunal ruled that URA acted lawfully in penalising the oil and gas company under the Income Tax Act, after finding that key documents requested during a transfer pricing audit remained outstanding for several months despite repeated notices and deadline extensions.
Seven and a half months of requests
The dispute arose from a transfer pricing audit initiated by URA on 15 June 2023, focusing on TotalEnergies EP Uganda’s transactions with its related and associated entities, including the group headquarters in France.
URA sought extensive documentation to assess whether intercompany transactions were conducted on an arm’s length basis, as required under Ugandan tax law.
According to the Tribunal, URA pursued the requested information for approximately seven and a half months, issuing multiple written notices, reminders, emails, and deadline extensions.
When substantial information remained outstanding, URA imposed the $100,000 penalty on 10 January 2024.
TotalEnergies’ challenge
TotalEnergies EP Uganda challenged the penalty, arguing that the Income Tax Act does not prescribe specific timelines for providing transfer pricing information, that URA could not rely on timelines set under the Tax Procedures Code Act to enforce penalties.
TotalEnergies also argued that it had partially cooperated by uploading documents and engaging with URA through SharePoint while sourcing additional information from its global headquarters. The company maintained that the audit was still ongoing and that penalising it at that stage was unlawful.
URA’s position
Powered by dfcu: How a Bank Overdraft, Grit, and Vision Lifted Dr. Richard Wemesa onto Uganda’s Best Farmers ListHowever, URA argued that the Income Tax Act and the Tax Procedures Code Act must be read together, with the Tax Procedures Code Act lawfully empowering the Commissioner General to issue notices specifying timelines for furnishing information, and that, despite repeated extensions, most of the requested transfer pricing documentation had not been submitted.
URA said timely disclosure is essential in complex multinational audits, where delays can undermine the integrity of tax administration.
Tribunal’s ruling
The Tax Appeals Tribunal thus agreed with URA, holding that the phrase “within the time prescribed” under the Income Tax Act includes timelines lawfully set by URA under the Tax Procedures Code Act, that URA issued valid notices clearly setting deadlines, and that TotalEnergies failed to fully comply within those timelines, notwithstanding partial engagement.
The Tribunal also found that the $100,000 penalty, which falls within the statutory range of $50,000 to $500,000, was lawful and proportionate.
The Tribunal noted that even at the time of the hearing, some requested information remained outstanding.
Audit continues
The ruling did not determine whether TotalEnergies underpaid tax or breached the arm’s length principle. The case addressed procedural compliance, and the substantive transfer pricing audit may continue separately. The Tribunal awarded costs to URA.
Broader implications
The decision underscores that partial or delayed cooperation during tax audits can attract significant penalties.
