Summary:

• Unga Group confronts Uganda Revenue Authority’s tax claim on a multimillion-shilling asset transfer through its subsidiary, involving a joint venture with Nutreco International B.V.

Kampala, Uganda | THE BLACK EXAMINER | Listed food processor Unga Group is currently contesting a tax claim related to a substantial asset transfer completed in Uganda last year through its subsidiary. In its latest annual report, Unga reveals that the Uganda Revenue Authority (URA) is seeking taxes on the deal, where its Ugandan subsidiary, Unga Millers, entered a joint venture with Nutreco International B.V. The URA is demanding value-added tax (VAT) on proceeds totaling Sh444 million and corporate tax on the gain amounting to Sh433 million.

The joint venture resulted in the creation of a new entity called Tunga Nutrition (Uganda) Limited, with Unga Millers transferring its assets in exchange for a 50 percent stake. While Unga Millers valued its contribution at Sh704.1 million, the URA believes VAT and corporate tax are applicable, leading to the current dispute. Unga Group argues that it did not anticipate any tax liability, as it believed the transfer of business assets was not subject to VAT and qualified for rollover relief for transactions between related parties.

Despite the URA’s differing opinion, Unga Group has appealed the decision and is currently awaiting resolution by the Tax Appeals Tribunal. The company has not made any provisions for the URA’s tax claim in its financial statements, asserting its confidence in the strength of its case based on professional advice.

This tax dispute coincides with the Uganda unit of Unga Group reporting a net loss of Sh52.35 million for the 12 months ending June 2023, a significant shift from the Sh8.95 million net profit in the preceding period. The Tunga (Uganda) Nutrition deal, which gave rise to the tax claim, involved the use of Unga Millers’ previously inactive flour mill in Kampala for the production of animal feeds and concentrates under Trouw Nutrition’s Hendrix and Unga’s Fugo Brands. The Unga Group, facing various challenges, including high input costs, posted a net loss of Sh959.3 million for the financial year ending June, reversing a Sh311.3 million net profit recorded in the previous year.

Additional Reporting: Business Daily Africa