Tullow to pay $108 million tax in Uganda

Drilling for oil in western Uganda. Tullow Oil has agreed to pay $108 million to settle a three-year tax dispute with the government of Uganda. PHOTO | FILE 

By GEORGE NGIGI

In Summary

• The claim relates to capital gains tax arising from Tullow selling a share of its rights after the discovery of an oil well in Uganda.

Tullow Oil has agreed to pay $108 million to settle a three-year tax dispute with the government of Uganda.

The British oil company will have paid a total of $250 million against a tax claim of $473 million made by the Uganda Revenue Authority in 2012.

The claim relates to capital gains tax arising from Tullow selling a share of its rights after the discovery of an oil well in Uganda.

“This sum comprises $142 million that Tullow paid in 2012 and $108 million to be paid in three equal installments of $36 million. The first of these was paid upon settlement and the remainder will be paid in 2016 and 2017,” said Tullow Oil in a statement.

In its 2014 accounts, Tullow recorded a contingent liability of $265 million in relation to the dispute.

READ: Uganda wins $407m Tullow case

Kenya recently passed capital gains tax to be applied in the oil industry and the payment to Uganda’s taxman is an indication of the sector’s ability to drive the exchequer revenues.

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The tax, which became effective on the January 1, will be applied at the rate of 30 per cent on gains involving sale of rights by resident companies in the extractive sector and 37.5 per cent in similar transactions involving non-resident firms.

Tullow is currently prospecting in Turkana where oil reserves have already been confirmed to be commercially viable.