Wakilii

Goldstar Insurance Company Limited v Uganda Revenue Authority (Application 154 of 2020)

Tribunal · [2023] UGTAT 25 · 2023 Application Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application challenging withholding tax and VAT assessments issued by Uganda Revenue Authority following an audit
Decision
Application dismissed; applicant liable for both withholding tax and VAT assessments as determined by Uganda Revenue Authority

Observed later treatment

No later-treatment classification is recorded for this judgment.

Citator coverage is limited to judgments in the Wakilii corpus and source-matched treatment records. Absence of a signal is not an assertion that the case remains good law.

AI-generated summary. This summary was generated by AI from the full text of the judgment. It may contain errors or omissions—always read the source judgment before relying on it.

Holding

The Tribunal held that withholding tax under Income Tax Act s.118D applies to the gross amount of reinsurance premiums paid to non-resident reinsurers, without deduction for ceding commissions or discounts. The applicant was required to apportion input tax under VAT Act s.28(7) where it made both taxable and exempt supplies, including commission income from reinsurance services which is VAT exempt. Application dismissed; applicant liable for both WHT and VAT assessments.

Outcome

Application dismissed; applicant liable for both withholding tax and VAT assessments as determined by Uganda Revenue Authority

Facts

Goldstar Insurance Company Limited, a Ugandan insurance company, cedes portions of its insurance risks to non-resident reinsurance companies. URA conducted an audit for the period January 2014 to December 2018 and issued additional assessments: Shs. 1,683,949,537 for withholding tax and Shs. 376,815,272 for VAT. The WHT assessment arose because the applicant withheld tax on net premiums after deducting what it termed a discount (referred to as commission in reinsurance treaties and financial statements) and claims paid, rather than on gross premiums ceded. The VAT assessment arose because the applicant failed to apportion input tax between taxable and exempt supplies, including commission income from reinsurance, facultative fees, and rental income from residential properties. The applicant objected, arguing the deduction was a discount for administrative costs, not a commission, and that it provided no reinsurance services warranting VAT apportionment.

Issues

  1. Whether the applicant is liable to pay the withholding tax assessed of Shs. 1,683,949,537.
  2. Whether the applicant is liable to pay the VAT assessed of Shs. 376,815,272.
  3. What remedies are available to the parties.

Orders

  • Application dismissed.
  • The applicant is liable to pay withholding tax of Shs. 1,683,949,537.
  • The applicant is liable to pay VAT of Shs. 376,815,272.
  • Costs of the application awarded to the respondent.

Rules and key headnotes

Withholding Tax — Reinsurance Premiums — Gross Amount Requirement
Under Income Tax Act s.118D, a resident person making payment of premium for reinsurance services to a non-resident person must withhold tax on the gross amount of the payment at the prescribed rate, without deduction for ceding commissions, discounts, or claims paid.
Statutory Interpretation — Plain Meaning Rule — Taxing Statutes
Where the language of a taxing statute is plain and unambiguous, the words must be given their ordinary meaning. In taxing Acts, clear words are necessary to tax the subject; there is no room for intendment, no equity about tax, and nothing is to be read in or implied.
Substance Over Form — Ceding Commissions in Reinsurance
The substance of a transaction must be examined to determine its true legal rights and obligations and tax implications. Amounts described as discounts or commissions in reinsurance arrangements, when deducted perpetually from gross premiums to reimburse administrative costs, constitute fees or commissions rather than true discounts, regardless of the label used by the parties.
Evidence — Reliance on Financial Statements — Estoppel
Taxes are determined by what is stated in audited financial accounts signed by directors as a true and fair position of the company's affairs. Where a taxpayer's financial statements describe amounts as commissions, the taxpayer is estopped from later characterizing those amounts as discounts for tax purposes.
Value Added Tax — Apportionment of Input Tax — Exempt Supplies
Under VAT Act s.28(7), where a taxable person makes both taxable and exempt supplies during a tax period, input tax must be apportioned according to the formula in the Fourth Schedule. Commission income earned from reinsurance services constitutes exempt supply under the Second Schedule para.1(d)(iv), requiring apportionment of input tax.
Value Added Tax — Import vs Export of Services — Zero Rating
The zero-rating provision in VAT Act Third Schedule para.1(a) applies to services exported from Uganda, not to services imported into Uganda. An insurance company importing reinsurance services from abroad for use in Uganda cannot claim zero-rating on the basis that the services are consumed outside Uganda.

Legislation cited (14)

Cases cited (15)

  • Okello Okello v The Commissioner General URA (HCCS 229 of 2010)
  • Warid Telecom (U) Ltd v Uganda Revenue Authority (HCCS 24 of 2011)
  • General Insurance of Corporation of India v Assistant Commissioner of Income Tax (TDS) 1(2) Mumbai
  • British Dominions General Insurance Co Ltd v Duder [1915] 2 KB 400
  • Platinum Credit v URA (Application 28 of 2018)
  • M-Kopa Limited v URA (Application 23 of 2019)
  • Britam Insurance Company Uganda Ltd v URA (Application 69 of 2018)
  • Ostheimer v United States 264 F.2d 789 (3d Cir. 1959)
  • Cape Brandy Syndicate v Inland Revenue Commissioners [1920] 1 KB 64
  • Uganda Revenue Authority v Kajura (SCCA 9 of 2015)
  • AON (U) Limited v URA (MC 66 of 2000)
  • Comfort Homes Uganda Limited v URA (Application 66 of 2020)
  • Placer Dome Inc v Canada [1992] 2 CTC 98
  • Uniworkers Transporters and Logistics Ltd v Uganda Revenue Authority (Application 62 of 2018)
  • Axa France Vie, New Delhi vs Acit Circle Int. Tax 1(1) (1) ITA No.411/Del/2023

Full judgment

↓ Download PDF

The original judgment as reported. Read the original PDF before relying on any passage.

Goldstar Insurance Company Limited v Uganda Revenue Authority (Application 154 of 2020) 2023 UGTAT 25 (21 December 2023)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.