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KAMPALA - The Inspectorate of Government (IGG) has ordered Space Holdings Limited to refund sh2.9b to Government, which they failed to pay in taxes, since 2018.

The Deputy Inspector General of Government, Anne Twinomugisha Muhairwe, said the money was for value added tax and withholding tax that was not remitted to Uganda Revenue Authority (URA) following the sale of the company’s warehouse to the Electoral Commission.

In a letter dated December 13, 2023, Muhairwe directed that the company deposits the money to the IG assets recovery account held in the Bank of Uganda (BoU) within 30 days.

“You are hereby directed to refund sh2.9b to the IG’s assets recovery account number 003030088000007 held in BoU. The refund should be made within 30 days from the date of receipt of this letter. Quote reference KLA/10/02/2022 in your electronic transfer of funds,” she directed.

Muhairwe, however, warned that failure to comply with her directive will lead to the company’s director prosecution, in the courts of law. Martin Mugarura is the founder and chief executive officer of Space Holdings Limited.

The IG’s directive followed a complaint from a whistleblower that Space Holdings Limited in financial year 2018/19 and 2020/21, refused to remit VAT worth sh3b to URA arising from the sale of a warehouse to the Electoral Commission (EC).

EC is a constitutionally established organ of the Government of Uganda, whose mandate is to organise and conduct regular, free and fair elections, in an efficient, professional and impartial manner.

According to the IG, URA officials irregularly issued withholding tax exemption certificates to the company, which led to financial loss to government.

Probe

IG investigations indicate that in FY2018/19, EC awarded Space Holdings Limited a contract to supply a warehouse at sh16.9b inclusive of taxes. The funds, according to the IG, were fully paid over a period of two financial years from FY2018/19 to FY2020/21, including sh2.6b for value added tax (VAT).

IG report further revealed that the company neither declared nor paid the VAT to URA to date. In addition, the company uttered a false tax invoice to the EC for sh4.8b, indicating that it had been exempted from payment of withholding tax.

According to Muhairwe, this was in breach of the established procedure where applications for waivers are forwarded to finance ministry office by URA Commissioner General, John Rujoki Musinguzi.

A URA tax audit conducted in February 2023 found that Space Holdings Limited’s tax liability was valued atsh2.7b.

Finance ministry request

According to IG, on March 13, 2023, the company requested a tax waiver of sh2.4b from the finance minister, Matia Kasaija, on account of the cash flow challenges it was facing, yet the company had received the funds and refused to remit them to URA.

The IG’s directive to Space Holdings Limited was copied to finance ministry permanent secretary, Ramathan Ggoobi and URA Commissioner General Musinguzi.

“The purpose of this communication, therefore, is to draw our findings to your attention for appropriate action regarding the company’s request for a tax waiver,” Muhairwe.

When contacted, the Space Holdings Limited managing director, Martin Mugarura said he has no comment.

About Space Holding

Space Holding Limited is a private Company in Uganda dealing in general supplies with subsidiary companies dealing in both Events and Sales and distribution in Uganda and across the globe. Its objective is to deliver quality products on time.