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Contents Question 01: Employment Income .................................2 Answer 01: ...............................................................................2 Question 02: Employment Income .................................2 Answer 02: ...............................................................................2 Question 03: Employment Income .................................3 Answer 03: ...............................................................................3 Question 04: Employment Income .................................3 Answer 04: ...............................................................................3 Question 05: Employment Income .................................4 Answer 05: ...............................................................................4 Question 06: Investment Income ....................................4 Answer 06: ...............................................................................5 Question 07: Investment Income ....................................5 Answer 07: ...............................................................................5 Question 08: Depreciation Allowance ...........................5 Answer 08: ...............................................................................5 Question 09: Depreciation Allowance ...........................6 Answer 09: ...............................................................................6 Question 10: Business Income - Partnership .............6 Answer 10: ...............................................................................7 Question 11: Investment Income ....................................7 Answer 11: ...............................................................................7 Question 12: General ............................................................7 Answer 12: ...............................................................................7 Question 13: Business Income - Corporation.............7 Answer 13: ...............................................................................8 Question 14: General ............................................................8 Answer 14: ...............................................................................8 Question 15: Business Income - Partnership .............8 Answer 15: ...............................................................................8 Question 16: Double Taxation ..........................................8 Answer 16: ...............................................................................9 Question 17: Permanent Establishment.......................9 Answer 17: ...............................................................................9 Question 18: Double Taxation ..........................................9 Answer 18: ...............................................................................9 Question 19: NonCompliance .........................................9 Answer 19: ...............................................................................9 Question 20: NonCompliance .........................................9 Answer 20: ...............................................................................9 Question 21: Business Income Sea Transport ........9 Answer 21: ...............................................................................9 Question 22: Special Industries - Charities .............. 10 Answer 22: ............................................................................ 10 Question 23: Remission & Refund Income Tax ... 10 Answer 23: ............................................................................ 10 Question 24: Business Income - Corporation.......... 10 Answer 24: ............................................................................ 10 Question 25: Foreign Controlled Corporation ........ 11 The use of this publication is subject Answer 25: ............................................................................ 11 to the same terms and conditions of Tax Laws in Tanzania site. Click here for the terms and conditions.
Publication TLT-01
Tax Laws
Tanzania.
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Housing Benefit (Note 3) Taxable amount for 2005 Note 1: The chargeable income of a resident individual who at the end of a year of income has been resident in the United Republic for two years or less in total during the whole of the individuals life shall be determined the same way as the income of a non-resident person, whereby the person's income from the employment, business or investment for the year of income that has a source in the United Republic is included. Income derived from other countries is excluded [Section 6(2)] Note 2: The lesser of the total contribution made or statutory contribution (i.e. 2,400,00 p.a.) can be deducted from total income. For the purpose of deducting employers contribution, the contribution must have been included in employees income. So we first include employers contribution, then we less the lesser of total contribution and statutory contribution. Total gross cash emoluments 13,028,000 Employers contribution (10%) 1,302,800 Employees contribution (10%) 1,302,800 Total contribution 2,605,600 Note 3: If an employer provides residential housing to the employee, and the employer claims deduction in relation to capital and maintenance of the house, then the House Benefit is taxable and is calculated as: The lesser of: (i) 1,800,000 (i.e. 150,000 x 12); and (ii) the greater of: (a) 15% x 12,130,800 = 1,819,620 (b) 1,440,000 (i.e. 120,000 x 12) . . Housing Benefit = 1,800,000. Question 4. (a) Mr. Juakali is a resident employee who is employed by the ABC Co. Ltd. effective from 1st January, 2004. The facts relating to his employment are as follows: (i) Monthly receipts: Tshs. Basic Salary 1,000,000/= Transport Allowance 850,000/= Lunch Allowance 350,000/= Medical Allowance 100,000/= (ii) Mr. Juakali was given residential house free of charge but the Company claimed expenditure of Tshs. 150,000/=. The rental market value of the house was Tshs. 700,000/= of which Mr. Juakali contributed Tshs. 100,000/= as rent. (iii) Mr. Juakali was given a new self driven car of above 3000cc that was used for private use. This car claims expenditure on the maintenance and ownership against taxable income. (iv) Mr. Juakali was given an interest free loan of Tshs. 4,000,000/= payable in 24 monthly installments (assume the statutory interest rate in relation to the calendar year was 12% p.a.) (v) Other benefits which were enjoyed by Mr. Juakali included: Electricity Tshs. 150,000 p.m Water Tshs. 120,000 p.m Additional information was given as follows: (i) Transport allowance of Tshs. 850,000/= @ 7 = Tshs. 5,950,000 has been given to Mr. Juakali including each child and his spouse because he is domiciled more than 45 km from the place of employment. (ii) Mr. Juakali was given Tshs. 400,000 cash to be paid as tuition fee to Makerere University by the IFDA Scholarship where he is enrolled for a Masters degree course. REQUIRED: (i) Calculate the Housing Benefit and Car Benefit enjoyed by Mr. Juakali per month. (ii) Calculate the monthly taxable income for Mr. Juakali.
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Housing Benefit (Note 5) Total Taxable Income Note 1: This salary is from secondary employment and the rules regarding secondary employments is: All secondary employers must withhold tax at the maximum individual rate, which is 30%. However, if employees total income is less than the top band threshold (Tshs 8,640,000 per annum), the employee may apply to TRA Income Tax Department to have a lower rate applied to the secondary employments. Note 2: Loan Interest Benefit = (12% - 0%) x 3,000,000 = 360,000 Note 3: With 3,000cc, car benefit = 1,500,000 : : 2/3 private = 1,000,000 taxable Note 4: NSSF Contribution: Employer (15%) 1,080,000 Employee (5%) 360,000 Total 1,440,000 Since it is less than the statutory amount of 2,400,00 all employees contribution of 360,000 is deductible. Note 5: (i) Market rental = 2,400,000 (ii) 15% of total income before HB = 1,770,292.5 (iii) Deduction claimed = 1,800,000 (iv) Higher of (ii) and (iii) = 1,800,000 (v) Lesser of (i) and (iv) = 1,800,000 HB = 1,800,000 Question 6. AADU is a newly formed company carrying out fishing business. During the first year (2008) of operation it made the following transactions:(i) Received dividend from SHIDUSA Ltd a resident corporation amounting to TZS 6,000,000. AADU owns 40% of the shares of SHIDUSA Ltd. (ii) Dividends amounting to TZS 3,500,000 were received from KWENU Ltd, which is listed on the DSE, and owned 22% by TABU Ltd a nonresident company. (iii) Dividends amounting to TZS 1,550,000 received from CHUCHUMA Company Ltd a resident company. (iv) AADU has its office along Ali Hassan Mwinyi Road, the office was underutilized. The company decided to rent the front office to Juma Bakari a shop businessman, who used it as a shop after paying TZS 800,000 as rent. (v) During the year the company received TZS 400,000 as rent from Mr. James a Tanzanian, with respect of a house occupied by him situated at Changanyikeni-Dar es Salaam. (vi) Also the company received royalty from Madengu Ltd amounting to TZS 400,000 out of lease of Video tapes used for promotion. (vii) During the year, AADU sold 6 hectares of land which was at KUNDUCHI and received TZS 300 million. This land was purchased for 2,000 in 1970. Three years prior to its sale, this land has been used for as agricultural land. In addition to those transactions it earned business profit of TZS 100 million. REQUIRED:
7,200,000 681,950 1,200,000 1,000,000 Nil Nil 360,000 1,000,000 Nil 360,000 11,801,950 1,800,000 13,601,950
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In July 2004, the company had attended the International trade fair organized by the BET, which was held at Kurasini, Dar es Salaam. UBMC won the 2nd prize a valmet tractor, worth by then 3,600,000/=. This tractor was ordered by the government from the Valmet plant in DSM. However, the delivery of the tractor was delayed, pending a price review. Prices were reviewed to 10 mill/= per tractor during August 2005. The UBMC received the tractor on 16/8/2005 and used it from the same date. Part of the plant and machinery was sold for 3 mill/= on 3/2/2005. UBMC decided to purchase a new aircraft on 3/3/2005 for 50 mill/= to enable it coordinate with the head office at Mombasa where its Board of Directors met since 2000 to-date. It also purchased a new ship of 500 tons for 60 mill/=. Both were used from the same date. A new boiler was purchased for 600,000/= for the glass manufacturing section. A concrete foundation was constructed for 300,000/= to install the boiler. This was used from mid December 2005. On the 15/8/2005, the ship, the market value of which was estimated at 20 mill/= was stolen at DSM harbour. The company was using tyres manufactured by the General Tyre (EA) Ltd. of Arusha Tanzania and radiators manufactured by the Afro Cooling Company Ltd. (ACCL) of Pugu Road DSM. Since these major sources of raw materials had financial problems, the UBMC advanced a 6mill/= loan to the ACCL for purchase of plant and machinery; and 10mill/= loan to General Tyre (EA) Ltd. for the purpose of purchasing a lorry to transport rubber from Iringa rubber farms. Part of the office furniture was sold during December 2005 for 1.2 mill/=. While the purchaser took the furniture during the same month, payment was to be made during March 2006. Required: Calculate the depreciation allowance that UBMC is eligible to claim from TRA according to the ITA, 2004 as at 31st December 2005. Suggested Solution Tax Payer: Union Bearing Manufacturing Company Ltd. (UBMC) Year of Income: 2005 Computation: Depreciation Allowances DEPRECIABLE ASSETS DEPRECIABLE ASSETS POOLS CLASS I (Tshs.) II (Tshs.) III (Tshs.)
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2,550,000
2,583,700
2,550,000
(1,200,000) 1,383,700
956,250 956,250
172,963 172,963
TWDV 31st Dec 2005 1,593,750 70,200,000* 1,210,738 *(93,000,000/= + 900,000/=) less 23,700,000/= or (93,000,000 23,250,000) + 450,000 Question 9. ABC Co. Ltd. commenced a business of assembling computer hardware on 1st May 2005. The company acquired the following assets from XYZ, which was winding up its business in the URTon 30th April 2005: a) A house, which was used by the XYZs director, for Tshs. 15,000,000. This was converted by ABC Co. Ltd. into a factory building after incurring additional alterations cost of Tshs. 4,500,000. b) Factory building was acquired for Tshs. 24 million. One fifth of this building houses the head office. The office was air-conditioned with air conditioners worth Tshs. 2 million. c) Factory plant and machinery worth Tshs. 180 million. The tax written down value (TWDV) of the machinery was Tshs. 60 million in the vendors books. d) Two five-ton Lorries worth Tshs. 40 million in total. Their total TWDV was Tshs. 32 million and their total book value (BV) was Tshs. 28 million. e) A saloon car costing Tshs. 23 million. This car had a nil BV and TWDV in the books of the vending company. ABC Co. Ltd. used the car purely for business purposes. f) Processors, Data key boards, Printers, which were semi assembled, were also acquired for Tshs. 20 mill. g) Office furniture was purchased for Tshs. 4.2 million. This asset had a TWDV of Tshs. 1,800,000/= and accumulated depreciation of Tshs. 400,000. h) Office stationery and some operational guides were also purchased for Tshs. 1,900,000/= After the commencement of the business, the following transactions took place: i) One of the lorries was gutted by fire. Tshs. 8 million as insurance compensation was received from National Insurance Corporation for the loss. ii) On 1st November 2005 an eight-ton trailer was purchase for Tshs. 38 million. iii) BBA sold to ABC Co. Ltd. a godown building constructed for Tshs. 15 million at Tshs. 175 million. It was used for storage of ABC Co. Ltd. finished products from 1st January 2006. iv) The remaining lorry was exchanged for a new one on 1st March 2006. ABC Ltd. had to pay an additional Tshs. 10 million for the new lorry, the total cost of which was Tshs. 24 million.
Incomings: one lorry-fire Exchanged (14,000) lorry DEP. BASE B 57,000 DEPRE. ALLOWANNCES Initial allowance: P&M (50% * 180,000) Annual allowance: A * B 21,375 TOTAL ALLOWANCES 21375 TWDV 31st Dec. 2005 35,625 * (38,000/= + 180,000/=) less 99,500/=
38,000
6,200
218,500
Question 10. Bush, Bushek and Michapo are partners in one enterprise dealing in transport business. Their business income statement for the year 2004, has the following results: Revenue 208,000,000 Other income 400,000 Total Income 208,400,000 Less: Operating Expenses Depreciation allowance 10,800,000 Fuel and Oils 90,000,000 Spares, repairs & maintenance 14,000,000 Licenses 300,000 Interest 5,600,000 Salaries and wages 26,000,000 Stationery 800,000 Tyres and tubes 55,500,000 Miscellaneous expenses 8,000,000 211,000,000 Net loss for the year 2,600,000 Additional information is given as follows: (i) The partners equally spent 10% of fuel and oils used for office vehicles for private purposes. (ii) Analysis of salaries and wages: => Drivers shs. 7,000,000 => Office Attendant shs. 3,000,000 => Bush shs. 8,000,000 => Bushek shs. 4,000,000 => Michapo shs. 4,000,000 (iii) Analysis of miscellaneous expenses: => Office cleaning => Weigh bridge fines => Total tax paid by partners
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-6,195,833
-13,187,500
(iv) The Partners share profits/losses equally (v) Other Income: This represents interest on drawings paid by Michapo (vi) Interest analysis: Interest on bank overdraft Interest on loan paid to Bush
-6,195,833
(vii) Busheks personal account showed Tshs. 2,000,000/=, 3,000,000/= and 5,000,000/= as income received from Royalty, Dividend and Realization respectively. A non-resident corporation paid dividend, realization is part payment of sale of a building for Tshs. 20,000,000/=. The building that costed Tshs. 4,000,000/= in year 2000 and used for residence was sold to Mr. John in 2004. (viii) Asset acquisition during the year were: Land rover Tshs. 10,000,000/=1 Tractor Tshs. 40,000,000/=2 Pick up Tshs. 7,500,000/=1 Land cruiser Tshs. 35,000,000/=1 All these were used in the partnership business. The depreciation basis as at 31/12/2003 after pooling assets based on the Income Tax Act, 2004 showed the following: Class I II Value 50,000,000/= 123.000,000/= Required: (i) Determine the partnership profits/losses (ii) Determine the partners taxable income Suggested Solution (i) Computation of partnership profit/loss Profit/(Loss) per accounts ADD BACK: 10% fuel & oils 9,000,000 Partners salaries 16,000,000 Depreciation allowance 10,800,000 Interest on loan 600,000 Weight Bridge fines 3,500,000 Total tax paid 3,300,000 Tip to Police 600,000 Subtotal Deduct Interest on drawings (note v) 400,000 Depreciation Note 1 79,187,500 Adjusted Distributable Loss
(2,600,000)
43,800,000 41,200,000
79,587,500 (38,387,500)
Note 1: Computation of Depreciation Allowance: DEPRECIABLE ASSETS DEPRECIABLE ASSETS POOLS CLASS I (Tshs.) II (Tshs.) RATE A 37.5% 25% TWDV 1 Jan 2004 50,000,000 123,000,000 Additions: Land Rover 10,000,000 Tractor 40,000,000 Pick Up 7,500,000 Land Cruiser 35,000,000 DEPRECIATION BASE B 102,500,000 163,000,000 DEPRECIATION ALLOWANCES 38,437,500 40,750,000 TWDV 31 Dec 2004 64,062,500 122,250,000 (ii) Computation of partners taxable income Bush Bushek Michapo Total Salaries 8,000,000 4,000,000 4,000,000 16,000,000 Fuel & Oils 3,000,000 3,000,000 3,000,000 9,000,000 Interest on loan 600,000 600,000 Inter on drawings (400,000) (400,000) Share of loss 12,795,833 12,795,833 12,795,833 38,387,500 Kessy Juma :: http://www.taxation-tz.com
Question 11. What are investment assets under the Income Tax Act 2004? Suggested Solution According to section 3 of the Income Tax Act 2004; Investment Assets are: (i) Shares and securities other than shares: By a resident parent in its resident subsidiary, or Listed on Dar es Salaam Stock Exchange, or By a non resident controlling less than 25% of the controlling shares of the company. (ii) A beneficial interest in a non resident trust. (iii) Interest in land and buildings other than: A private residence in use for three years or more other than such a residence that realizes a gain of more than 15,000,000, An individuals land that has been used for purposes for agricultural purposes for the past two years and whose market value does not exceed 10,000,000 at the time of realization. Question 12. What is the difference between an investment company and a finance company for tax purposes? Suggested Solution Investment company a company whose activities consists mainly in the making and holding of investments whether in land and buildings for the purpose of receiving rents or in securities for the purpose of receiving interest or dividend and a major part of whose income is derived there from. Finance company a company whose activities consists mainly in dealing in securities, land or buildings. It is an essential feature of the business of such a company to vary its investments and turn them to account and investments are its stock in trade, to be bought and sold. Finance company also deals with provision of loans to individuals and businesses. Question 13. In year 200X, the commissioner for Large Tax Payers received a return of income of KK Ltd showing a net profit of Tshs 214,136 computed as follows: Tshs Sales 273,970,710 Cost of sales 150,000,355 Gross Profit 123,970,355 Operating Expenses 27,000,000 Other expenses 96,756,219 Net Income 214,136 Included in other expenses item is a list of the following: (i) Exchange Loss of Tshs 42,143,000 on the importation of raw materials, (ii) Compensation of Tshs 618,500 to terminated employees, (iii) Amortized amount to replace a roof Tshs 4,733,000, (iv) Payments made to remove erroneous terms of a loan contract Tshs 821,000, (v) Penalties for VAT Tshs 3,500,000, (vi) Managing Directors personal visitors entertainment expenses Tshs 3,880,000, (vii) Political parties contributions Tshs 1,007,450, (viii) Board meetings expenses Tshs 4,753,205, (ix) Incentives Tshs 1,473,741, (x) Treasury Loan used by Director to go abroad on vacation Tshs 3,543,123, (xi) Cost to prepare revised accounts Tshs 1,232,456, (xii) Construction cost of a new laboratory Tshs 13,520,620, (xiii) Cancellation of contract Tshs 8,326,124, (xiv) Salaries for future services Tshs 6,577,000, (xv) Legal cost for unsuccessful recovery of salaries from terminated employees Tshs 627,000.
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6. 7.
8.
Net Income as per accounts/return ADD: Amortized amount to replace a roof Penalties for VAT MDs personal visitors entertainment expenses Political parties contributions Treasury Loan used by Director Construction cost of new laboratory Salaries for future services Adjusted Taxable Income Tax thereon (30%)
REQUIRED: Compute adjusted partnership income and partners income for the year ending 31st December 2005. [Note: The profit on sale of Machinery is from Sindika domestic tailoring machine and interest on overdraft is not related to business]. Suggested Solution KIBWE TRADERS ADJUSTED PARTNERSHIP INCOME STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2005. TSHS Profit as per accounts Add: Non Allowable Deductions Charity & Donations Entertainment to Sindika Legal fee Sindi Patent right Depreciation Salaries to partners Interest on share capital Interest on loan Medical expenses Less: Allowable Deductions Interest on overdraft Profit on sale of machine Depreciation Note 1 Adjusted partnership income TSHS 61,930,000
Question 14. What is blended Loan for the purpose of Income Tax Act 2004? Suggested Solution By virtue of section 32(7) of the Income Tax Act 2004, a blended loan means a loan under which payments by the borrower represent in part a payment of interest and in part a repayment of capital where the interest part is calculated on capital outstanding at the time of each payment and the rate of interest is uniform over the term of the loan. Question 15. Kibwe Traders is a made up of three partners, i.e. Sindi, Sinda, and Sindika with profit sharing ratios of 45%, 15% and 40% respectively. The following details were obtained in their Financial Statements as at 31 st December 2005: Tshs Tshs Gross Profit 173,900,000 Interest on Sindikas overdrawn 7,750,000 Profit on sale of machine 2,210,000 183,860,000 Operating Expenses: Salaries and Wages 7,300,000 Sundry expenses 7,900,000 Office rent 725,000 Medical expenses 7,250,000 Accounting fees 7,650,000 Charity and donations 7,625,000 Entertainment 7,500,000 Salaries to partners (equally) 50,890,000 96,840,000 Interest on share Capital: Sindika Sindi 745,000 Sinda 755,000 1,500,000 Interest on Loan: Sinda 725,000 Sindi 715,000 Sindika Nil 1,440,000 Depreciation: Factory Building 7,500,000 Processing Machinery 7,450,000 Saloon car 7,200,000 22,150,000 Net Profit 61,930,000 Additional Information: 1. In march, 2005 office rent was paid to Sindika, 2. Half of the medical expenses were in respect of treatment of partners and their families equally; donation was paid to Rombo Orphans Center, 3. Entertainment includes Tshs 230,000 in respect of entertainment to Sindika, 4. Legal fees in respect of traffic offence to Sindi Tshs 760,000, Kessy Juma :: http://www.taxation-tz.com
88,450,000 150,380,000
203,374,583 52,994,583
Note: Class II: Cost [10,000,000+13,640,000+600,000,000+7,700,000] Depreciation (2004) 25% WDV (31st December 2004) Depreciation (2005) 25% WDV (31st December 2005) Class VI: Cost [800,000,000+700,000,000] Depreciation 5% Class VII: Cost Depreciation (1/6) Total Depreciation Partners Income from Partnership: Sindi Ratio 45% Loss (23,847,562) Medical Expenses 1,208,333 Entertainment Salaries 16,963,333 Interest on capital 745,000 Interest on loan 715,000 Total Share (4,215,896) Question 16.
631,340,000 157,835,000 473,505,000 118,376,250 355,128,750 1,500,000,000 75,000,000 230,000 38,333 193,414,583
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400 mil 100 mil Nil 300 mil 800 mil Page 9
7.
Audit fees Legal fees for staff contracts and retirement funds Amount paid to Tender Board members to facilitate winning a bid
9.
The computers were acquired on hire purchase terms for 12 months. The down payment of Tshs. 120,000,000 was made on 15th February 2005 and the first monthly instalment of Tshs. 20,000,000 was due on 15th February 2005 and the first monthly instalment of Tshs. 20,000,000 was due on 15th March 2005. The cash price of the computers was Tshs. 300,000,000. 10. Provision for debtors (specific) Provision repairs (estimated) Provision for stock obsolescence 11,000,000 8,000,000 9,000,000 28,000,000
11. Sundries included a traffic fine of Tshs. 3,500,000. The balance was general consumables used by the office. REQUIRED Based on the information available, determine the taxable income of Kigongo Company Limited and its tax liability for the year of income 2005. Suggested Solution Computation of taxable income of Kigongo Company for the year of income 2005: Net loss for the year (181,000,000) Add: Non Allowable Deductions: Directors fees Nil Penalties (VAT) 10,000,000 Tender Board Expenses 4,000,000 Employees Contributions 7,500,000 Depreciation 120,000,000 Provisions 28,000,000 Traffic fine 3,500,000 173,000,000 8,000,000 Deduct: Allowable Deductions: Sales of furniture 1,000,000 Dividends (FWP) 5,000,000 Interest Income Nil Business contract penalties Nil Depreciation allowances (Note 1) 130,500,000 136,500,000 Tax Loss 144,500,000 No tax liability and the loss can be carried forward as an expense for next year of income. Note 1: Computation of depreciation allowances Class I Class III Total 37.5% 12.5% Computers 300,000,000 Motor cars 15,000,000 Furniture & Equipments 100,000,000 315,000,000 100,000,000
Sales 1 Dividends 2 Interest income 3 Contractual penalties 4 972,000 Expenses: Directors fees 5 320,000 Salaries 300,000 Interest expenses 6 80,000 Rent and rates 220,000 Legal and professional fees 7 20,000 Contributions to retirement fund 8 15,000 Depreciation 9 120,000 Travelling and entertainment 22,000 Provisions 10 28,000 Insurance 18,000 Sundries 11 10,000 1,153,000 Loss for the year (181,000) Additional notes: 1. Sales figure includes Tshs. 1,000,000 for sale of furniture which was used by the company. 2. The company had bought some shares from City Stock Exchange. These were shares of Sungura Cement Company which distributed dividends during the period. 3. The Company earned Tshs. 8,000,000 as interest from its bank deposits and another Tshs. 4,000,000 from a director to whom the company had extended a personal loan. The Director used the loan to acquire a building in Kenya. 4. The amount was received as a result of a business contract which the other party breached it. 5. Directors fees were paid to the following persons:Mr. A. 200,000,000 Mrs. A (wife of Mr. A) 50,000,000 Mr. B. (Mr. As brother) 70,000,000 320,000,000
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Question 25. The Mwanamboka Company Ltd is a parent company that is based in Tanzania. It has two foreign subsidiaries; one in Zambia named ZAMAFRICA Ltd having 51% shares and another in South Africa named SAHI having 60% shares. The Zambian company has invested in a SAHI which has similar business with that of the parent company, Mwanamboka Company Ltd. SAHI paid an interest of USD 150,000 to ZAMAFRICA. ZAMAFRICA does not tax interest but tax dividends at a rate of 5%. The ZAMAFRICA Ltd paid dividends to the parent company to the tune of USD 120,000 and realized a business profit of USD 1,100,000 during the tax year of income 2005. REQUIRED: (i) Calculate the unallocated income and taxable income for the ZAMAFRICA Ltd
(ii) Determination of net tax payable (S. 75(4)) Tax on unallocated income = 576,300 x 30% = 172,890 Less: Tax on dividend for foreign company (120,000 x 5%) 6,000 Total tax payable 166,890 that is based in Zambia. Foreign tax relief (S.77(1)) Nil (ii) Determine the tax payable. Net tax payable 166,890 ======================================================================================================================
====================================================================================================================== This publication has been prepared by Juma Kessy B. Com Hons (Accounting), UDSM Let him be aware of any errors in this edition and send corrective suggestions, if any.
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