Uganda Tribunal rules Coca-Cola agent falsely claimed US$2.7M services as exports to evade VAT 

UGANDA – Uganda’s Tax Appeals Tribunal has ruled that Allied Beverages Limited, Coca-Cola’s marketing agent in Uganda, misclassified local services as exports in an attempt to evade UGX 9.7 billion (US$2.7 million) in value-added tax (VAT).  

The Tribunal upheld the Uganda Revenue Authority’s (URA) assessment, determining that the services rendered between December 2020 and August 2022 were consumed locally and thus subject to Uganda’s standard 18% VAT rate. 

The dispute centered around services billed by Allied Beverages to The Coca-Cola Export Corporation (TCCEC), a U.S.-based affiliate.  

The agency claimed its promotional activities — including radio, television, billboard, and school-based campaigns — qualified as zero-rated export services because the contracting party was located outside Uganda. 

However, the Tribunal rejected this defense, finding that the marketing campaigns were conducted entirely within Uganda, targeting Ugandan consumers. It concluded that Century Bottling Company (CBL), Coca-Cola’s bottling partner in Uganda, was the direct beneficiary of the services. 

“The economic reality of the marketing services provided by the Applicant is that they were performed in Uganda and targeted Ugandan consumers,” the Tribunal ruled. “This was not an export; this was local consumption.” 

Allied Beverages had presented a March 2022 addendum to its contract with TCCEC, which stated that the services were used and consumed outside Uganda. The Tribunal, however, deemed this addendum a deliberate misrepresentation aimed at avoiding tax obligations. 

The evidence presented by URA showed that Allied Beverages ran extensive marketing campaigns across Ugandan media outlets such as Capital FM, NTV, Radio Simba, and BBS. Products advertised included Coca-Cola, Fanta, Minute Maid, and Nutri Bushera. 

The agency also subcontracted local advertising firms to conduct promotional activities in Ugandan languages. 

URA’s legal team maintained that these services were clearly supplied and consumed within Uganda, with the goal of increasing domestic sales of bottled Coca-Cola products.  

The Tribunal agreed, stating that the economic substance of the services outweighed the legal form presented in the contract. 

Citing precedents from similar cases, including the Elma Philanthropies and Allied Beverages High Court rulings, the Tribunal emphasized that actual usage and consumption determine tax status, not the location of the contracting entity. 

In addition to upholding the tax assessment, the Tribunal ordered Allied Beverages to pay 80% of the legal costs. 

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