Gold firm ordered to pay over Shs500m in taxes

A gold refinery firm has been ordered by the Tax Appeals Tribunal to pay  Value Added Tax (VAT) and income taxes of more than  Shs500 million to the Uganda Revenue Authority (URA).
A three-panel tribunal chaired by Dr Asa Mugenyi, in its decision, ordered Bullion Refinery Ltd to also foot the legal costs of the suit to the tax body.

“Therefore, the Tribunal makes the following orders; the applicant (Bullion Refinery Ltd) shall pay income tax of Shs353, 106,000. The applicant shall pay VAT of Shs211,863,360. The applicant shall pay VAT of Shs1, 512,479 resulting from using different exchange rates,” ruled the Tax Appeals Tribunal.

Documents that this publication has seen show that around June 2020, URA conducted an audit on the gold refinery company from February 2018 to June 2019.

This was in respect of a dispute arising from income tax of more than Shs486 million and VAT assessments of more than Shs200 million, arising from a re-characterisation of the gold refinery company’s loan as income.
Tribunal documents also showed that there were undeclared sales due to under-declared refinery charges and forceful registration of VAT by URA.
Following the audit process by the tax body, it, among others, discovered that the refining charges ranging between $10 (Shs37,300) and $20 (Shs75,00) per kilogramme were below the industry average, and the average charge of $50 (Shs187,000) per kilogramme was determined based on two other players.

URA’s audit further showed that the gold firm’s financial statement indicated a loan balance of more than Shs1.1 billion as of June 30, 2019, which money was not supported by any documentation.
Tax officials also discovered that loan amounts of more than Shs951 million in Financial Year 2017/2018   and Shs225 million for the Financial Year 2018/2019 were re-characterised.

As a result, URA issued additional income tax and VAT assessment on grounds that the firm’s loan was re-characterised as income due to a lack of supporting evidence.
During the hearing, Mr Richard Karumuna, the director of the gold refinery company, said in April 2016, the firm obtained a loan from Top Straight-line General Trading LLC in Dubai for purposes of procuring refining equipment.

Further in his testimony, Mr Karumuna stated that it was arbitrary for URA to re-characterise the loan.
He also told the Tribunal that his company used cheaper and more effective means of refining gold between $10  (Shs37,300) and $25 (Shs93,000), which he said was affordable to customers, and that it would make a profit.
But the tribunal held: “Therefore, URA was justified to consider the unexplained sums of the applicant (gold refinery company) as undeclared income and tax them accordingly.”

It added: “Taking the above into consideration, the applicant (gold refinery company) is liable to pay income tax on the unsecured loans, which were re-characterised as income.”