The Tax Appeals Tribunal ruled that the National Social Security Fund (NSSF) is liable to pay tax to URA amounting to Ugx 42,718,583,006/-, concluding the tax dispute between the two entities in the favour of the tax collector.
NSSF receives contributions from its members and pays out benefits as required under the NSSF Act.
In 2013, URA carried out an audit against NSSF which revealed that NSSF claimed as an allowable deduction, interest paid in respect of contributions made by its members.
URA disallowed the said deduction and issued an assessment against NSSF for income Tax amounting to UGX. 42,196,249,077 (Forty-Two Billion, One Hundred Ninety-Six Million, Two Hundred Forty-Nine Thousand, Seventy-Seven Shillings).
NSSF objected to the said assessment on grounds that it was entitled to deduct such interest under S. 25(1) of the Income Tax Act.
URA madean objection decision maintaining its position that NSSF was not entitled to make the said deduction. The matter went before the Tax Appeals Tribunal (TAT).
TAT ruled that;
i) The contributions made by the members to NSSF do not constitute a debt obligation within the meaning of Sections 25(1) and (2) s of the Income Tax Act.
ii) The amount referred to as interest under S.23 of the NSSF Act does not qualify as interest for the purposes of Sections 25(1) and 2(kk) of the Income Tax Act.
iii) The interest paid by NSSF was not incurred in the production of income included in the gross income.
The Tribunal held the Applicant is liable to pay the Principal tax of UGX. 30,521,703,065. (Thirty Billion Five Hundred Twenty-One Million, Seven Hundred Three Thousand, Sixty-Five Shillings) and penal interest of UGX. 12,196,879,941. (Twelve Billion, One Hundred Ninety-Six Million, Eight Hundred Seventy-Nine Thousand, Nine Hundred Forty-One Shillings.