The Tax Appeals Tribunal has held in an industry significant ruling delivered on 14 February 2025 that stamp duty on a group insurance policy is UGX 35,000 irrespective of the number of beneficiaries under the policy.

The Tribunal also held that there is no stamp duty on endorsements removing or adding beneficiaries to an insurance policy except for renewal endorsements, which renew and extend the term of the policy. 

The Tribunal arrived at this position in its ruling in UAP Old Mutual Insurance Uganda Limited v. Uganda Revenue Authority, TAT Application No. 105 of 2023. The ruling was in respect of a review application by UAP challenging an additional stamp duty assessment of UGX 1,726,801,982 arising from URA treating each beneficiary under a group medical insurance policy as a separate policy holder for whom stamp duty should be paid. The application also challenged URA’s treatment of endorsements (adding or removing beneficiaries) as standalone policies for which stamp duty should be paid.

This decision is a major win for Uganda’s insurance sector and employees who are the biggest beneficiaries of affordable medical insurance. Upholding URA’s reasoning would have significantly increased the cost of group medical insurance and potentially forced most employers to abandon taking out medical insurance for employees and their dependants. 

Background

In May 2023, URA assessed UAP to a stamp duty deficit of UGX 1,726,801,982 alleging that for the period January 2017 to June 2021, UAP issued 53,432 medical insurance policies as opposed to the 4,731 medical insurance policies declared by UAP.

UAP objected to URA’s assessment arguing that the stark difference in the number of medical policies issued by UAP and those alleged by URA was because URA had erroneously treated every beneficiary under a group policy as a policyholder and every endorsement (adding or removing a beneficiary from a policy) as a separate policy for which stamp duty should be separately paid. URA rejected the objection hence the application at the Tribunal.

Arguments

At the Tribunal, UAP argued that the insured under a group policy is the corporation/entity/employer that takes out the policy not the various beneficiaries under the policy. UAP asserted that it follows that stamp duty is payable by the insured/policyholder at the rate of UGX 35,000 irrespective of the number of beneficiaries under a group policy. UAP also argued that endorsements to add or remove beneficiaries do not attract stamp duty as this would amount to treating every beneficiary being added/removed as a separate policy – which is not the case.

It should be noted that the Uganda Insurers Association (UIA) was granted leave by the Tribunal to give evidence in support of UAP’s case considering the far-reaching impact of the case on the insurance sector.

Decision

Stamp duty on a group policy is payable at the rate of UGX 35,000 irrespective of the number of beneficiaries

The Tribunal found that there is nothing in the definition of a policy of insurance in the Stamp Duty Act to suggest that the insured means the beneficiaries as suggested by the Respondent. The Tribunal noted that an interpretation that stamp duty is payable for every beneficiary under a group policy is quite far-fetched. Accordingly, the Tribunal held that stamp duty is payable once at the rate of UGX 35,000 irrespective of the number of beneficiaries under the policy.

Endorsements adding or removing beneficiaries are not dutiable 

Here, the Tribunal guided that the residual item 66 of the Second Schedule to the Stamp Duty Act – which imposes stamp duty on any other instrument not specifically mentioned should be construed in harmony with the entire Act, especially the specific provisions/items. Applying this reasoning, the Tribunal held that having found that a policy of insurance under item 48(a) is dutiable at the rate of UGX 35,000 irrespective of the number of beneficiaries, it follows that endorsements to remove or add beneficiaries are not subject to stamp duty.

The rationale for this holding is that if the Tribunal had found that endorsements to remove or add beneficiaries are dutiable it would have contradicted its first holding and left a window for technically treating each beneficiary as a separate policyholder for whom duty is payable.

Public policy observations

The Tribunal made commendable public policy observations in the non-binding part of its ruling. The Tribunal noted the importance of aligning tax collection with public policy and the Government’s broader agenda. The Tribunal noted that one of the Government's policy objectives in its Vision 2040 is availing Ugandans affordable quality healthcare through a shift from a public centred to a public-private-partnership arrangement of delivering healthcare. Increasing the cost of group health insurance would run counter to this agenda.

While these observations are non-binding, they provide invaluable guidance to URA in enforcing its tax collection mandate, the Ministry of Finance and Economic Development in formulating tax policy and Parliament when enacting tax laws.

Conclusion

The Tribunal’s decision is a significant win for the insurance sector and employees who are the main beneficiaries of affordable medical insurance.

UAP was represented by Joseph Luswata who was assisted by Winston Churchill Ruhayana – both from our tax practice.