For the second time,Uganda has won the case against Heritage oil. The company first lost in the Uganda’s Tax Appeals Tribunal, which upheld that the transaction was taxable. After losing the case in Uganda, Heritage took the matter to London.
A three-member arbitration team ruled against the three core tax claims by Heritage, which was contesting the decision by the Uganda Revenue Authority (URA) to tax their $1.45b transaction with Tullow Oil, according to Ali Ssekatawa, URA assistant commissioner for litigation.
Ssekatawa, who was URA’s lead counsel during the hearing in Kampala, said the Government had already recovered the money ($434m) from Tullow. This is the reason Tullow has sued Heritage in London to recover its money.
The tax dispute starte in December, 2010 when Heritage Oil and Gas Ltd announced its intention to transfer its Ugandan petroleum assets to Italian giant ENI. But Tullow Oil Uganda, which had 50% stakes in the assets, exercised its first right of option under the same terms and bought the assets however URA demanded 30% of the $1.45m deal as capital-gains tax before the transaction was approved.
Heritage was against paying the tax, claiming that the transaction was not taxable in Uganda. The firm demanded to settle the tax dispute via the International Court of Arbitration in London.
The London ruling has conclusively affirmed that oil transactions will be taxable. It also means that such deals will be subject to a 30% capital-gains tax for Uganda.