A tax compliance audit into the matter of DFCU Group (which owns DFCU Bank and other business) was recently conducted and it revealed that the entity has been inappropriately diminishing its tax liability through under declaration of space let put to tenants at its DFCU Towers.

The compliance audit covered the period between January 2014 and December 2020. The audit indicates the rental income from the property that is located at Kyaddondo Road was understated to the tune of Shs8.4b. There are also other income tax payment-related obligations relating to unsupported expenses, variances in investments that were characterised as income re-characterisee receivables.

It is reported that late last year, several meetings were held between the tax authorities and the group to harmonise the issue but no progress was made.

At the end of January, URA escalated issues demanding that DFCU pays up or faces consequences. URA was willing to diminish the defaulted tax from Shs6.4b to Shs3.5b but DFCU decided to go to the tax appeals tribunal. However, before the matter is heard, DFCU is required to pay 30% of the amount in dispute.

According to URA the undeclared tax has been accumulating as follows: Shs955m in 2014, Shs536m for 2015, Shs172m for 2016, Shs1b for 2017, Shs1.5b for 2018, Shs1.53b for 2019 and Shs680m for 2020.

DFCU’s General Manager George Ochom and their auditors KPMG are engaging the taxman on the issue.

Ochom says URA came to the wrong conclusion regarding the issue because auditos misclassified service charges like parking, security, fumigation, and utility fees which tenant pay as part of rental fees yet it is not part of DFCU’s income.

Ochom indicates that some tenants like the Dutch embassy got huge discounts because they made a huge lumpsum payment covering several years. URA rejected this saying DFCU managers have failed to adduce evidence that they have a policy allowing such huge rental discounts.

URA has also rejected DFCU’s claim that Shs3.5b was incurred as interest on repayment of a loan incurred when the building (DFCU Towers) that was completed in 2014 was being constructed.

URA also disputes the disclosed dividend income, allowable expenses of Shs1.6b and Shs844m which DFCU says they spent on their Annual General Meeting. Ochom says as a listed company, the AGM is important business and the money was spent on a public address system, refreshments, lunch and invitation of members among other costs.

The tax body also disputes Shs1.9b that DFCU Group says it invested in DFCU Bank’s recapitalisation.