REVENUE: Uganda-Mauritius DTA Case Study: Analysing the Huge Revenue Leakages, Battle of Clauses

The Double Taxation Agreement between Uganda and Mauritius was concluded on September 19, 2003 and has been effective since July 1, 2005. It’s among the other DTAs Uganda has, with countries and are still in operation such as; Italy, Netherlands, Denmark, India, Norway, South Africa, UK and Zimbabwe.

The Uganda-Mauritius DTA has on various occasions been the focus of criticism on the grounds that provided pathways for questionable claims of reduced taxation benefits enjoyed by some companies and business entities amounted to a compromise that Uganda was not benefiting from under the bilateral taxation regime.

One such case of the previous cases as concerns this particular agreement is the reduced withholding tax benefit claim by White Sapphire Limited on the Shs 11.2 billion received from Crane Bank Limited as a dividend payment in 2014.

This was fully legal as provided for under Article 10 of the agreement which allows a resident company in a contracting state, like Crane Bank Limited in Uganda, to offer a 10 percent tax charge as opposed to the 15 percent on dividends whose recipient in the other state is the ‘beneficial owner’, in this case White Sapphire Limited – a Mauritian incorporated company.

The Organisation for Economic Co-operation and Development (OECD) model, on which most of the double taxation agreements are based, notes that “the beneficial owner is the individual or individuals who effectively own(s) or control(s) a legal vehicle”.

The OECD model explains that in order to minimize the use of companies and trusts to hide the beneficial owners of assets, information relating to ‘natural persons’ behind a legal entity or arrangement, is now a key requirement of international tax transparency and the fight against tax evasion, corruption and other financial crimes.

Uganda Revenue Authority (URA), however, later discovered that even though White Sapphire Limited was registered in Mauritius, the entity was fully owned by a Kenyan National, Rasik Kantaria. This is contradictory to Uganda’s domestic laws such as Section 88(5) of the Income Tax Act which restricts the application of a DTA tax reduction to where 50 percent or more of the underlying ownership of the company is held by 50% or more by individuals of the resident country.

URA, therefore, raised an assessment against Crane Bank Limited for the additional 5 percent% amounting to Shs 559 million, a course White Sapphire and Crane Bank Limited didn’t agree with and therefore filed a joint suit in the Uganda’s High Court by way of appealing against the assessment.


Court Wrangle Leads Back to Arbitration Clause, No Revenue Clawback

In 2017, the High Court ruled that the issue involved a dispute as to the application of the DTA, and the correct procedure for White Sapphire Limited to resolve the matter was to follow the Mutual Agreement Procedure (MAP) under Article 10 and 26 of the DTA.

The case is still under arbitration but with the closure of Crane Bank, and the lack of any other business interests by White Sapphire in the country, recovering the Shs 559m is not a likely feasible venture for URA.

In their analysis on the court ruling of this case, PricewaterhouseCoopers (PwC) network, a legal firm operating in Uganda argued thus, “The Mutual Agreement Procedure (MAP) process has always been available as an alternative route to challenge the non-application of a DTA benefit (that is; it could be pursued separately from the domestic objection and appeal process). However, it can entail a long and complicated process and may not be the most appropriate approach in every case.

The judgment indicates that the courts may be reluctant to decide such DTA disputes in future and that the MAP process should be applied as a first resort.”

As the COVID-19 pandemic continues to bite, this money lost in the Uganda-Mauritius Double Taxation Agreement would for example have been used to support households facing dire economic pressure, those who depend on daily earnings for their survival.

Businesses like retail shops, salons, boutiques and many other small scale investments have shut down; the owners and those who sorely depend on them lack necessities like food especially those residing in the country’s capital where they can’t access food from their gardens, free water and accommodation compared to those upcountry.

Some 2,795 families would have a fallback of at least Shs 200,000 each, if government used this money to empower communities which are in dire need of literally all basic essential needs.


The story was produced by www.chimpreportscom. It was written as a part of Wealth of Nations, a media skills development programme run by the Thomson Reuters Foundation in partnership with the African Centre for Media Excellence. More information at The content is the sole responsibility of the author and the publisher.

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