Answer the following questions

MINA WELCOME REMARKS FROM THE CHAIRMAN Welcomed the members and thanked them IOI' IITBII' commitment to the ngWtI'l of KASA. MIN.5 REVIEW OF THE PREVIOUS MINUTES The minutes were taken as read and confirmed as a correct record of the proceedings. MIN.6 EXPANSION INTO UGANDAN MARKET The Chairman opened the discussion to members and below is a summary of their deliberations. 1. Chairman (Renaldo) introduced the idea of opening up a sugar manufacturing plant in Arua. Uganda. Justied that the last time he was in Uganda; he saw a vast empty fertile land in Arua that could be used to grow sugarcane. the main raw material in the production of sugar. Also argued that Arua. being near the Democratic Republic of Congo (BBC) and South Sudan. KASAwould be able to sell their sugar locally and exportsome of it to those neighbouring countries. The Managing Director (Ronaldinho). however. had a different idea. Proposed opening up huge stores in different parts of Uganda and merely import finished sugar from South America direct to Uganda. Reasoned that it would even be cheaper to import sugar because costs of producing sugar in Uganda were very high. Cited the costs as electricity. unstable exchange rates. lack of expertise in this sector. high taxes on locally produced goods. among others. The Board Secretary (Calvados) advised the meeting that it would make sense to start a production facility in Mauritius under their subsidiary. MASA. and then export the finished products to Uganda, basing his argument on lower production costs in Mauritius. He argued that their team in Mauritius was well versed with the African market and other tax advantages. The Finance Director(Pe|e). opined that KASAwould export modern technology to Ugandan companies dealing in the production of sugar. Argued that KASA could recruit people. train them and send them to Uganda. That KASAwould earn a lot of money from such exported human resources. That if this did not work. then KASA could give production rights to one of the Ugandan companies". Question 1 KASA, a Brazilian conglomerate, is the largest sugar manufacturing company in South America. KASA has been in operation since 1981; its main success is attributed to abundant sugarcane in the area, the main raw material for sugar production. KASA has grown organically from a small company to now the largest producer of sugar in South America. TheirBoard of Directors is planning to start operations in Uganda by December 2019. None of the directors has experience ofthe Ugandan market though a few trips have been made to Uganda and more information gathered through research. In their meeting held on 5 July, 2018 inBrasilia, several decisions were made as per the minutes below: MINUTES OF THE BOARD MEETING HELD ON 5 JULY, 2018 MIN. 1 ATTENDANCE 1.1 MembersPresent No. Name Position 1 . Ronaldo de Lima Board Chairman 2 . RonaldinhoMorera Managing Director 3. Calvados de Souza Board Secretary 4 . Manuel Pele Finance Director 5 . Francisco Tandera Board Director 6. Roberto Cafu Board Member 7 . Fabiano Santos Board Member 8 Carlos da Silva Board Member MIN. 2AGENDA Adopted the agenda as follows: 1. Opening prayer 2 . Adoption of the Agenda 3. Welcome remarks from the Chairman 4 . Review of the previous minutes 5 . Expanding into Ugandan market 6 . Appointing a tax agent 7. Closure of meeting MIN.3 OPENING PRAYER Opening prayer was led by Cafu.A company may incur different costs in acquiring depreciable assets and repairing them, putting up buildings either for factory or office and that sometimes such costs are not deductible. An office building which is likely to have an extra space rented out to other people may be taxed differently. They even intend to use such a building as accommodation for some managers. it is their company's policy to grant their senior management an option to acquire shares under an employee share acquisition scheme. if a production facility were to be set up in Uganda. it would be expected to have a lot of transactions with its parent company or head office. it would be likely to import the services of experts, acquire or lease some assets. get financing in terms of loans and buy some raw materials from the parent company or head office. KASAhave learnt that a person who helps in the development of an industrial park or free zone is likely to benefit and they are wondering whether this will affect the sugar sector. Social media and mobile money transactions in Uganda are taxed. They are perturbed by the Ugandan law that when you understate provisional tax estimates you are penalised and in case you object, the burden is on you to prove that the assessment is excessive. The board chairman has requested you to consider the above facts in the briefing notes and the minutes of the board meeting and prepare for him a report responding to the following technicaltax issues relating to the proposed expansion into the Uganda market. He does not require any computations at this stage but requires full legislative references which are relevant to support your findings, advice. conclusions and recommendations. Required: (a) (b) (C) If KASA wants to incorporate a company and adopt the idea of the Chairman Board of Directors (Ronaldo) to start up a sugar producing plant inArua;advise on the tax implications of the issues raised above in relation to capital deductions. (10 marks) According to the Board Secretary's (Calvados de Souza) argument, MASA can open up a branch or a subsidiary in Uganda; advise on the salient features of taxing a branch of MASA in Uganda. (10 marks) The company expects to have a lot of transactions in case it starts a factory in Uganda with its head office. Given that it is likely to import the (i) If one of the employees. Rosa. whom KASA wants to employ. owns property that he constructed using a bank loan. mortgaging his property and has been earning rental income since January 2019. Given that Rosa is a Ugandan citizen who has been living in Uganda. and KASA wants to make an informed decision on this transaction; advise them on Rosa's rental tax obligations and the associated allowable deductions. (5 marks) (Total 85 marks) Question 2 You are a tax expert at PAPO Consultancy Limited (POL). a certified tax agency. Recently you were engaged by MNE Ltd. a multi-national company. and were willing to pay an annual engagement fee of Shs 200million. This would form over 90% of your annual income. Your duty is to advise them on the tax issues. In the process of doing your work you discover that MNE Ltd has been using creative accounting to misrepresent profits. which has made them under-report income and inflate deductions and expenses. In a spontaneous conversation. one of the employees confides in you that MNE Ltd has been dodging taxes. The confidant further informs you should you report the matter to Uganda Revenue Authority. the latter will pay you 10% of the recovered taxes. The confidant is even annoyed of the discrimination at the workplace and the unsafe working conditions. You are sure that according to the current economic situation. it is very hard to obtain such a client. The managing director has assured you that they will be increasing your professional fees every year by 20% and if you can help them reduce on the tax they have provided. they will give you 30% of the saved tax. Required: (a) Explain the ethical issues highlighted in the scenario. (5 marks) (b) Identify the challenges that you many encounter in performing the above duties. (5 marks) (c) Suggest the possible measures to address the challenges identified in (b) above. (5 marks) (Total 15 marks) 5. One Board member (Cafu), was of the view that KASAshould acquire a Ugandan company for ease ofpenetrating the Ugandan market much faster. 6. Another Board member (Fabiano) argued that it was cheaper to carry on production in Kenya and then export to Uganda. 7. Another Board member (Carlos) preferred securing an outlet in Uganda to sell their products. MIN.7 APPOINTING A TAX AGENT Appointed AZIZ Associates, a firm of certified public accountants, to be their tax agent in Uganda. MIN.8 CLOSURE OF MEETING Closed with a prayer led by FabianoSantos. You are a tax manager at AZIZ Associates and the tax partner Ms. Cynthia Owor has briefed you about a potential new client, KASA. She has forwarded to you briefing notes following a meeting held with Mr. Ronaldo de Lima, the Chairman Board of Directors ofKASA, for your consideration and advice. Briefing notes: To: The Tax Manager From: Ms. Cynthia Owor - Tax Partner Date: 10 July, 2018 Dear Sir/Madam, SUBJECT: KASA'S TAX IMPLICATIONS Refer to the above subject and a brief with you today morning. The management of KASA have raised various tax issues considering the way they intend to do business in Uganda and they are not sure of their treatment for tax purposes. These include: 1 . Whenever a person derives a benefit in kind or a deductible outlay in kind or an asset acquired or disposed of for consideration given in kind, it is a taxable benefit in Uganda. 2. A company may have recouped expenditure, compensation receipts, indirect payments and benefits. 3. According to Ugandan tax laws, there are different carry forward losses which are totally different from those of Brazil.(d) (8) (f) (9) (h) 0) services of experts; discuss how such imported services should be treated for tax purposes. (6 marks) if KASA decides to put up a factory in Kenya and get an independent company in Uganda to sell their products;explain how such sale to a Ugandan company would be termed according to East African Community Customs Management Act (EACCMA) and advise KASA on the different forms of smuggling in Uganda and the problems associated with it. (12 marks) Assuming that after commencing business KASA sells goods on credit to John but John fails to pay despite taking all the reasonable steps to recover the money and such a debt is later written off. If KASA makes losses in the first years and subsequently John pays; advise them(KASA) on the treatment of the above issues for tax purposes. (7 marks) KASA expects to construct a factory or building with 6 floors. using a loan that will be obtained from KASA Group of Companies. However, according to their plan, such a building will not be used to full capacity in the first years. Given that they intend to use one floor for accommodation of senior staff, let out 2 floors to any other person and use the remaining for manufacturing; advise them if there are any tax implications and how they would be treated. (10 marks) KASA plans to be doing business with the branch or a subsidiary it will establish in Uganda. Most of the raw materials will be purchased from the head office. Given that there is likelihood in future,that the head office will support the subsidiarylbranch by advancing it a loan in case there is need.; discuss the tax treatment of transactions between associates and the measures that have been put in place by the Ugandan government to ensure that transactions between associates are at arm's length. (10 marks) KASA's subsidiary will import plant and machinery that will be used to produce sugar. However, they have learnt that when one imports machinery.they do not pay import value added tax (VAT); advise them on who qualifies for such tax relief and how such facility can be terminated. (10 marks} KASA is likely to use social media as part of its means of communication.Given that it is also proposed that the company will pay its employees using mobile money; explain to board of KASA the likely tax implications, quoting relevant laws