Tullow to pay Sh24bn in tax dues

Tullow Oil has said it had reached a Sh24.5 billion agreement to settle a tax dispute with the Uganda government over a 2012 transaction.

The row, which was entering its fourth year, was threatening to derail oil production talks.

“Following constructive discussions with the Government of Uganda and the Uganda Revenue Authority, Tullow has agreed to pay $250 million in full and final settlement of its Capital Gains Tax liability,” Tullow’s statement reads.

In 2012, the London-listed company- also big in oil exploration in Kenya- sold at least 66 per cent of its assets to Total and CNOOC at $2.9 billion. As a result of the transaction, URA made an assessment noting that Tullow had made some gains from the sale and then slapped a $473 million tax bill on the oil company.

Tullow disputed this, dragging the government to various courts including the Tax Appeals Tribunal, the Uganda High Court and as far an International Tribunal. The two parties have, however, decided to settle this dispute with both making some concessions.

LEGAL PROCEEDINGS WITHDRAWN

“Following this settlement, both these legal proceedings have been withdrawn,” the statement from Tullow reads.

The settlement is a $223 million cut from what the government had wanted from Tullow. Additionally, Tullow had been looking at a payment of $265 million, according to its 2014 annual report; however it will only be paying $250 million.

Already, Tullow paid $142 million into an escrow account as the case was being heard. The oil company said it will be settling the remaining $108 million in three equal instalments of $36 million until 2017.

Mr Aiden Heavey, the chief executive officer Tullow Plc, said in the same statement that “the settlement of this long-running dispute is good news for Tullow and Uganda.”

The latter had been racking up legal costs from Curtis, Mallet-Prevost, Colt & Mosle LLP, a legal firm hired by the government for the oil cases.

Documents seen by The Daily Monitor show that by the end of March 2014, the law firm had invoiced government $7.3 million as expenditure on all the cases.

For Tullow, the firm had invoiced at least $643,000. The government did pay the $7.3 million but also collected $1 million as tax from the law firm. Other expenses incurred by the government are from URA’s legal team and lawyers from the Attorney General’s chambers.

URA referred the matter to the Attorney General Freddie Ruhindi for comment. Mr Ruhindi told The Daily Monitor yesterday that the Cabinet some last year, gave the green-light for the talks having realised that Uganda did not have a strong case against Tullow as it was the case with Heritage.

“We did not have an exemption clause for incomes tax with Tullow so we did not stand a good chance in an international jurisdiction. So in that way it was prudent that we negotiate to reach that conclusion which is nonetheless good for both Uganda and Tullow,” Mr Ruhindi noted.