1. Walsh (Pvt) Ltd is an export oriented company which specialises in the manufacture of state of the art washing machines. The majority of its shareholders are base in the United States of America where most of the company’s products are exported to.

During the year ended December 2020 the company’s total turnover amounted to $35 000 000 usd of which 60% was accounted for by exports.

Net operating profit for the year under review was $27 million after deducting expenses which included:

• Depreciation $150 000

• Shareholders’ dividends 200 000

• Fine for the late submission of a VAT return for the month of July 2 500

• Interest on a loan to purchase manufacturing machines 3 750

The company applied for a loan to purchase two manufacturing at a cost of $5 000 each and had them installed at a cost of $500.

The concept and design of the company’s products was done in Switzerland and Walsh (Pvt) Ltd is obligated to pay royalties for the right of use of that information. During the year under review Walsh (Pvt) Ltd paid $12 000 usd in terms of the royalty agreement.

Required:

Determine the company’s taxable income and tax thereon for the year under consideration giving reasons backed by the tax legislation for your answer [ 20marks]

2. Company A entered into a contract agreement with company C for the supply and fittings of industrial sowing machines, however A could not furnish C with the relevant ITF 236 as required by the tax authorities .

The value of the contract was $300 000 US dollars. Advise what company C is supposed to do in terms of the tax legislation in order that the contract f effected.

When is the withholding tax supposed to be remitted to the tax office and what are the penalties for failing to adhere to the law requirements?