High Court Upholds Tax Exemption for Bank of Uganda Pension Scheme in URA Dispute
The High Court in Uganda has ruled in favor of the Bank of Uganda Defined Benefit Scheme, dismissing a Uganda Revenue Authority (URA) appeal over a tax claim worth Shs106 million. The court affirmed that the pension scheme qualifies as a Settlor Trust, shielding it from direct taxation under Uganda’s Income Tax Act.
The legal battle stemmed from a 2016 request by the pension scheme for a private tax ruling. URA rejected the claim, asserting that the scheme, despite being a registered retirement fund under the Uganda Retirement Benefits Regulatory Authority (URBRA) Act, was subject to taxation under Section 8(4) of the Income Tax Act.
However, the Tax Appeals Tribunal (TAT) ruled in favor of the Scheme, determining that Bank of Uganda (BoU), which contributes 17.1% to the fund alongside 4% from employees, is the Settlor and thus responsible for any potential tax liability.
In Civil Appeal No. 89 of 2020, Justice Phillip Odoki upheld TAT’s interpretation, citing Section 70(f) of the Income Tax Act, which defines a Settlor Trust as one where the settlor retains a reversionary interest in the trust. Court documents revealed that BoU, through its trust deeds (dated 1998, 2005, and 2014), retains such an interest upon termination of the trust—qualifying it under the law.
Importantly, the Court clarified that the Scheme itself is not tax-exempt per se, but rather that the tax liability belongs to the Settlor, in this case, BoU—an entity already exempt from taxation under existing legislation.
Lawyers from Ligomarc Advocates, including Ruth Sebatindira SC, Olivia Kyarimpa, and Damalie Izaula, represented the Scheme’s Trustees in the case. The Court ultimately dismissed the URA appeal, ordering the Authority to cover the costs of the respondents.
The ruling sets a precedent for how retirement schemes structured as Settlor Trusts are treated under Uganda’s tax framework. Legal experts caution that tax exemptions must be explicitly stated in law, and procedural oversights—such as URA’s failure to join BoU as a party in the case—can limit appellate outcomes.
The judgment also highlights a procedural limitation: Uganda’s High Court cannot rule on new issues not previously addressed by the TAT, including whether BoU’s exemption status extends automatically to the Scheme.
