Brief Facts:
The ruling sought to answer the question of whether expenses incurred for the purpose of facilitating the effective performance of services represent a taxable supply of the said services. The Applicant charged fees for reimbursable and miscellaneous expenses (fuel, per diem) incurred in the provision of the said consultancy services. However, no VAT was charged in respect of the said expenses.
Issues for Determination:
- Whether the Applicant’s reimbursable fees and miscellaneous expenses are subject to VAT?
- Whether the Applicant is liable to VAT on invoice PS/0PM/PRPD2/002/15?
- What remedies are available to the parties?
Tax Appeals Tribunal Decision:
- A reimbursement is a supply and is subject to VAT. The Tribunal explained that reimbursable expenses were provided by third parties to the Applicant, and the Applicant incurred VAT on the same at the time of expenditure.
- The Tribunal held that incidental costs that the business must incur to deliver a good or service should not be excluded from the value on which VAT is calculated. Expenses thus fall within the definition of consideration under the VAT Act.
The Applicant was therefore held liable to pay VAT of UGX 42,800,580 on the expenses classified by the Applicant as reimbursable. The Application was dismissed with costs.
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