URA wins case against Goldstar

THE Tax Appeals Tribunal (TAT) has ruled that the Uganda Revenue Authority (URA) was entitled to impose tax assessment totaling to over sh600m on Goldstar Insurance Company Limited.

The dispute arose out of an audit carried out by URA on the company in respect of corporation for five years from 2008 to 2012. The audit revealed that contingency reserves for that period amounted to sh1,815,897,000 had been claimed as deductions by the insurance company.

Based on the findings URA raised corporation tax assessments totaling sh699,319,467 against the company.

However, Gold Star Insurance Company Limited fully paid the whole amount of tax, but thereafter appealed to TAT for review of URA's decision, saying that the tax should not have been imposed on it.

Represented by Cephas Birungyi and Belinda Nakiganda, the insurance company argued that contingency reseves are allowable deductions under the Income Tax Act and; are a statutory requirement under the law governing insurance companies.

The company further argued that under the Income Tax Act, the assessment by URA was outside the five year period permitted under the law.

It had sought a declaration that it is a a statutory requirement under the Insurance Act for reserves to be deducted as a business expense, that contingency reserves are business expenses and are thus allowable deductions under the Income Tax Act.

However, represented by Mwajuma Nakku and later George okello, URA opposed the company's contention, arguing that the claims by the Insurance company were erroneous and should be rejected.

Dismissing the insurance appeal, the three-man panel of TAT ruled that URA was entitled to impose the tax assessment on the company. The panel included Dr Asa Mugenyi (chair), Dr Stephen Akabway and Siraj Ali.