URA’S TAX CRACKDOWN PAYS OFF! Standard Chartered Loses Sh1.1Bn Tax Fight

The Tax Appeals Tribunal has ruled in favour of the Uganda Revenue Authority (URA) in a major tax dispute involving Standard Chartered Bank, upholding a withholding tax assessment worth UGX 1.107 billion. The decision is being seen as an important victory for URA in its efforts to ensure that businesses fully comply with Uganda’s tax laws, especially on international financial transactions.

The case centred on withholding tax obligations under the Income Tax Act. URA assessed the bank for taxes arising from transaction charges and account maintenance fees paid to foreign correspondent banks between January 2016 and 2019. These banks were based in countries including the United States, the United Kingdom, Germany, Finland, Canada and Switzerland.

Standard Chartered argued that the transaction fees were ultimately paid by its customers and therefore should not attract withholding tax. The bank also claimed that the account maintenance fees qualified as exempt interest under the law, that Uganda’s Double Taxation Agreements had been wrongly applied, and that part of the tax assessment had been issued after the legal time limit.

However, the Tribunal rejected all the bank’s arguments and agreed with URA. The judges ruled that although the costs were passed on to customers, Standard Chartered remained the legal party that received and paid for the services. As a result, the bank was responsible for meeting the withholding tax obligations.

The Tribunal also found that Standard Chartered did not provide enough evidence to prove that the account maintenance fees qualified as exempt interest. It further agreed with URA’s position that the payments should be treated as technical service fees under the relevant Double Taxation Agreements rather than ordinary business profits.

On the issue of timing, the Tribunal dismissed the bank’s claim that the assessment was time-barred. It ruled that new information obtained during an earlier refund audit gave URA valid grounds to carry out the review and issue the assessment. The application was therefore dismissed, with costs awarded to URA.

Commissioner Legal Services and Board Affairs, Catherine Donovan Kyokunda, welcomed the ruling, saying rigorous audit work and careful tracking of financial transactions are essential in identifying taxable services hidden behind formal business arrangements. She said examining the actual flow of funds helps ensure that local institutions meet their withholding tax obligations on international correspondent banking charges instead of avoiding compliance through pass-through arrangements.

URA Commissioner General John R. Musinguzi said the authority remains committed to promoting fairness, transparency and voluntary tax compliance, noting that every taxpayer must meet their legal obligations regardless of the complexity of their business operations. He said URA will continue strengthening compliance measures to protect government revenue and create a level playing field for all taxpayers.

The ruling is expected to strengthen URA’s enforcement efforts and sends a strong message to financial institutions and other businesses involved in cross-border transactions that they must fully comply with Uganda’s tax laws. It also highlights the importance of keeping proper records and providing sufficient evidence when seeking tax exemptions or challenging tax assessments.