Uganda orders Heritage Oil to pay $404m tax

24th November 2011, Comments 0 comments

Uganda ruled Thursday that Heritage Oil must pay a $404 million tax bill, dismissing an appeal by the UK-listed company.

Heritage argues it is not liable to pay tax in the country on the $1.45 billion sale last year of stakes in two oil blocks in western Uganda to Anglo-Irish firm Tullow Oil.

"We dismissed the appeal by Heritage ... they should pay the taxes," Asa Mugenyi, the chairman of the Tax Appeals Tribunal, told AFP.

The decision comes ahead of an international arbitration hearing in London on the issue.

Heritage had unsuccessfully sought to suspend the proceedings in Uganda pending the case in the UK.

A spokeswoman for the Uganda Revenue Authority hailed the decision by the tax tribunal as it provided a precedent for future deals.

"It is a landmark decision for us as it sets a precedent that taxes must be paid in Uganda," Sarah Banage, a spokeswoman for the tax body, told AFP.

Banage said that it was too early to know whether the decision in Uganda would have any impact on the arbitration hearing in London, but added that the outcome in Uganda was a positive sign ahead of the case in the UK.

Uganda in March allowed Tullow to sell two-thirds of its Uganda interests to France's Total and China's CNOOC in a $2.9 billion deal, after Tullow agreed to pay over $300 million as security against Heritage's unpaid taxes.

Tullow subsequently launched a claim against Heritage in London to reclaim the money.

Uganda's plans to develop estimated reserves of two billion barrels of oil along the country's border with Democratic Republic of Congo are currently being paralysed by a wrangle over corruption in the sector.

In October Uganda's parliament called for all oil deals to be suspended pending an investigation into allegations that ministers took tens of millions of dollars in bribes.

© 2011 AFP

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