Princess Salote Pilolevu Mafile'o Tuita

Tongasat has won its appeal against the decision by the Supreme Court allowing an appeal by the Ministry of Revenue and Customs over a dispute tax assessment.

The Court of Appeal’s decision came after the Supreme court reversed the decision of the Tax Tribunal and restored the Minister’s amended assessment of $T17,931,141 .27 for consumption tax to be paid by Tongasat.

“The Tribunal held that these services in Tonga could not support the assessment and in our judgement it did not err in law in doing so,” the Court of Appeal judges said.

The assessment was based on Tongasat’s half share of the gross revenue it received from third parties who had contracted for the use of orbital slots allocated to Tonga by the International Telecommunications Union, an organisation under the auspices of the United Nations, the court of appeal said.

The Government was entitled to the other half of the gross revenue, and the Company had to pay Tongan income tax on its net profits

The Consumption Tax Act 2003 imposed a tax of 15% on the value of a taxable supply of services in Tonga by a taxable person.

The Tribunal had found that the services Tongasat supplied to the Government in obtaining contracts for the use of Tonga’s orbital slots were supplied from its place of business in Hong Kong and for this reason were not taxable.

It also held that the reporting and similar services supplied by Tongasat to the Government in Tonga for which no separate payment was made could not support the assessment

The Minister’s appeal to the Supreme Court was allowed by Justice Scott  who held that the reporting and similar services supplied by the Company from its place of business in Tonga supported the assessment.

The Court of Appeal has restored the decision of the Tribunal which had found that “most of the work” that earned revenue was performed from the Company’s place of business in Hong Kong

The Court of Appeal noted that there was an air of unreality about the case because the Act intended the burden of the tax to fall on the recipient of the services, which in this case was the Government.

It seemed that if the assessment had been upheld the Company could have recovered the tax from the Government

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