Summary of ruling

• The Applicant is engaged in the sale of food products such as snacks, spices and herbs processed from its parent company, Tropical Heat Ltd.
• The Respondent conducted a Customs Post Clearance Audit of imports made by the Applicant from January 2016 to December 2020.
• The Respondent found that the Applicant did not qualify for the transaction value method because its relationship with Tropical Heat Ltd has influenced the price.
• Therefore, the Respondent applied the Fallback Value Method to determine the customs value of the imported goods and issued a tax assessment of Ushs. 1,585,917,240 for VAT on imports for January 2016 to December 2020.
• The Applicant objected on grounds that; the Respondent misunderstood its legal status, data from an inappropriate geographical region was used to apply transfer pricing principles, the Respondent wrongfully disallowed rebates and discounts, the relationship with the parent company did not influence the price of the imports and the Applicant wrongfully deviated from the transaction value method.
• The Applicant’s objection was disallowed.
• The existence of a relationship doesn’t automatically disqualify the transaction value.
• The discounts received by the Applicant were justifiable.
• The conditions for rejecting the transaction value method were not met.
• The Respondent’s actions were illegal in that they deviated from the legally mandated sequential application of valuation methods without proper justification for rejecting the transaction value.
• Application allowed and assessment set aside.