MTN Uganda Limited v. Uganda Revenue Authority

In a landmark decision delivered on 30th June 2026, the Tax Appeals Tribunal ruled in favour of MTN Uganda, setting aside additional Local Excise Duty assessments amounting to UGX 33.9 billion relating to Over-the-Top (OTT) services for the period April 2020 to June 2021. The Tribunal found the assessments to be erroneous, excessive, and unsupported by a transparent methodology.

Background
The dispute traces its origins to the Excise Duty (Amendment) Act, 2018, which introduced excise duty on OTT services such as WhatsApp, Facebook, and other internet-based communication platforms. While Parliament introduced the tax and defined what it covered, it left its practical implementation largely open. The Act did not prescribe how it would be implemented or enforced.

To bridge that gap, URA, the Uganda Communications Commission (UCC), and telecommunications operators worked together to develop practical implementation mechanisms using the operators’ existing systems.

Among the agreed measures were:
• Telecoms would devise the best mechanisms to collect the OTT tax.
• A “day” for OTT tax purposes would mean a 24-hour period from the time a customer first paid the tax, rather than a calendar day.
• Telecom operators would create bundled products combining data and the applicable OTT tax.
• MTN would establish an Online Virtual Account (OVA) through which every OTT tax payment would be reflected instantly and be visible to URA in real time.

To comply with these arrangements, MTN configured its Policy Control and Charging Rules Function (PCRF) to ensure that only customers who had paid the OTT tax could access OTT services. Customers who had not paid were automatically blocked.

In simple terms, no payment meant no access.

The Audit and Additional Assessments.
Following the repeal of the OTT tax in 2021, URA audited MTN Uganda’s compliance with the regime and, in 2023, issued additional assessments alleging that the company had under-declared Local Excise Duty on OTT services.

URA’s case was based on data collected from probes installed within the GTP region of MTN’s network. Those probes captured all network traffic including unsuccessful attempts by customers who tried to access OTT services but were automatically blocked because they had not paid the tax.

Rather than distinguishing between successful access and unsuccessful attempts, URA treated every recorded attempt as a taxable access.

URA also introduced a 1MB/1KB data threshold to determine what constituted taxable access, despite the fact that neither the Excise Duty (Amendment) Act, 2018 nor any subsidiary legislation prescribed such a threshold. More importantly, the threshold had never been agreed upon or communicated during the implementation of the OTT tax.

Even more striking was that, despite having real-time access to MTN’s Online Virtual Account which recorded every OTT tax payment made by subscribers, URA did not reconcile the probe data with the actual payment records before issuing the assessments.

The missing piece: How did URA calculate UGX 33.9 billion?
This became the central issue before the Tribunal. Although URA disclosed a five-day sample of the data it relied upon, it did not provide the complete dataset underpinning the assessments. It also failed to disclose its filtering logic, assumptions, or analytical methodology used to convert raw network traffic into tax assessments of UGX 33.9 billion.

The sample provided revealed that several subscribers identified in the sample had in fact paid the applicable OTT tax. Many of the remaining entries represented nothing more than unsuccessful attempts to access OTT services (customers who had been blocked by MTN’s system) precisely because they had not paid the tax. Yet URA treated those failed attempts as taxable access events.

The Tribunal’s decision
The Tribunal held that URA had failed to show that its methodology reliably identified the taxable event prescribed by the Act, that is, completed access to an OTT service, as opposed to network activity in general. Failure to disclose both the complete dataset and the methodology used to arrive at the assessments was fatal.

The Tribunal further held that the 1KB, 1MB threshold had no statutory basis and was shown to misclassify blocked attempts as access. On top of that the tribunal found that URA’s demonstrations did not establish how successful access was distinguished from failed attempts. Without knowing how URA had processed the underlying data, MTN was deprived of a meaningful opportunity to verify the assessment or challenge the assumptions on which it was based. The Tribunal therefore set aside the additional assessments in entirety.

Implication
While the case involved UGX 33.9 billion, its significance extends well beyond the amount in dispute. The decision reinforces a fundamental principle of tax administration: a taxpayer is entitled not only to know the amount of tax being assessed but also how that amount was arrived at.

As tax authorities increasingly rely on sophisticated technology, algorithms, and data analytics, transparency becomes even more important. Technology may assist in tax administration, but it cannot replace the legal obligation to base assessments on credible, verifiable evidence and a methodology capable of independent scrutiny.

The Tribunal’s decision serves as an important reminder that opaque calculations, unsupported assumptions, and undisclosed methodologies have no place in the assessment of tax liabilities.

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