FTSE 100 oil and gas multinational Tullow Oil, which is headquartered in London, is to pay an additional $108m (£68m) to the tax authorities in Uganda, bringing to a total $250m (£158m) in payments to settle a long running dispute over the capital gains tax (CGT) due on the partial sale of some of its oil assets
The Uganda Revenue Authority (URA) originally assessed the multinational as owing $473m (£299m) in CGT following the $2.9bn (£1.8bn) sale of Tullow's 66% stake in three oil blocks in Uganda to Total, of France and the China National Offshore Oil Corporation (CNOOC), in 2012.
Tullow paid 30% of the assessment (around $142m/£90m) at the time but appealed against the total claim, saying it had been given a specific CGT tax exemption by the former minister of energy.
There then followed three years of legal wrangling over the issue. In its 2014 accounts, Tullow recorded a contingent liability of $265m (£167m) in relation to the dispute. Tullow subsequently appealed the ruling to the Ugandan High Court and continued with its International Arbitration claim.
Tullow has now announced that it is to pay $250m (£158m) in full and final settlement of its CGT liability, and legal proceedings have been withdrawn.
The settlement comprises the $142m (£90m) the company originally handed over in 2012, plus an additional $108m (£68m) to be paid in three equal instalments of $36m (£23m). The first of these has already been paid and the remainder will be paid in 2016 and 2017.
Aidan Heavey, Tullow chief executive said: ‘The settlement of this long-running dispute is good news for Tullow and Uganda. In recent months, the government of Uganda has proposed welcome and necessary changes to its tax regime for oil and gas investments which it is hoped will enable substantive progress to be made towards the sanction of the Lake Albert oil development.’