The Tax Appeals Tribunal has ordered the Uganda Revenue Authority (URA) to refund over USD 2.5 million (UGX 9.1 billion) to East Africa Marine Transport Company Limited (EAMT).
The ruling, delivered on April 30, 2025, centered on a disputed Value Added Tax (VAT) charged on the purchase of M.V. Mpungu, the first scheduled roll-on/roll-off freight vessel operating on Lake Victoria.
The tribunal found that URA had wrongly levied VAT on the vessel, despite EAMT’s investment being eligible for VAT exemption under Uganda’s laws encouraging strategic sector development.
EAMT, a logistics and marine transport company, had committed to invest at least USD 20 million to improve cargo transport between inland ports in Uganda (Port Bell) and Tanzania (Mwanza).
As part of the initiative, EAMT contracted Seco Marine (U) Ltd to design, build, and deliver a 96-meter-long ferry capable of transporting 21 fully laden freight vehicles across Lake Victoria.
The vessel, M.V. Mpungu was delivered in January 2025 at a cost of approximately USD 14.9 million, excluding VAT.
URA initially granted EAMT an exemption from income tax based on its classification as a strategic sector investor. However, it declined to confirm VAT exemption on the ferry, arguing that a ferry did not qualify as machinery or equipment under the law.
URA contended that only feasibility and design services qualified for exemption, and that the building and delivery components of the ferry did not meet the criteria under Paragraph 1(ae) of the Third Schedule to the VAT Act.
EAMT disputed this interpretation, arguing that the ferry was indeed machinery and equipment central to its logistics business. It claimed URA’s fragmentation of the ferry contract into separate components including, design, build, and delivery—was artificial and inconsistent with the law’s intention to promote investment in strategic sectors.
The Tribunal sided with EAMT, ruling that the ferry qualified for VAT exemption and that URA’s decision to deny the claim was legally flawed. The Tribunal also criticized the inconsistency of granting income tax exemption while denying VAT relief under the same qualifying conditions.
The Tax Appeals Tribunal also ruled in favor of EAMT, declaring that a ferry purchased by the company qualifies as “machinery or equipment” and is therefore exempt from Value Added Tax (VAT).
Inside Uganda’s Property Market: Broll Uganda’s Moses Lutalo on Sector Realities and the Signals Investors Can’t IgnoreThe Tribunal agreed with EAMT’s argument that the VAT exemption, originally denied by the Uganda Revenue Authority (URA), is intended to encourage investment in strategic sectors such as marine transport. It cited the broader government policy objective of promoting manufacturing and infrastructure development through reduced input costs.
Crucially, it found that the ferry, used for marine cargo transport, met the conditions for VAT exemption, including alignment with government policy and compliance with the definition of machinery in Black’s Law Dictionary (10th Edition).
The Tribunal further pointed out that URA had previously granted EAMT income tax exemption on similar grounds and criticized the authority for inconsistency in its application of fiscal incentives.
Significance
The ruling is being lauded as a landmark case in Uganda’s tax jurisprudence reinforcing the obligation of URA to interpret tax laws in alignment with national economic priorities.
It also provides a legal precedent that could benefit investors undertaking capital-intensive projects in sectors deemed strategic by the government.
Legal Representation
EAMT was represented by Grant Thornton’s Tax Disputes Resolution Team, including Bruno Kalibbala, Bruno Amanya, Anil Patel, Jasmine Shah, and Ankit Jangla.
