(b) SBFL purchases fruits from local commercial farmers. These commercial farmers grow these fruits on a large scale. Statistics indicate that each of the commercial farmers from whom the fruits are purchased makes monthly sales of aboveShleO million. Required: Discuss whether commercial farmers would be required to charge VAT on the invoices to Sukari Best Fruit Ltd. (5 marks) (c) In May 2019, SPL disposed of both residential and commercial properties. SPLearnedShs 350 million on the sale of residential houses and also disposed of commercial properties worth Shs 700 million in the same month ofMay 2019.The sale amounts are exclusive of VAT. Required: Discuss, with reference to the VAT Act. the VAT treatment of the sale made by SPL in May 2019 and compute the output VAT (it any) payable by SPL. (5 marks) (d) SECL plans to import educational materials like text books. for primary education level,from UK at a cost of USD 200,000 to expand the schools'libraries. Required: Discussthe VAT treatment of the educational materials at importation. (5 marks) (e) SHL has recently undergone a VAT audit by URA and most of the input VAT claimed in its VAT returns was disallowed on grounds that the input tax is not supported by preper tax invoices. Required: Advise the group CFO, with reference tothe VAT Act, on the particulars of a proper tax invoice. (5 marks) (Total 25 marks) Question 4 Write short notes on the following concepts as applied to the VAT Act. (a) (b) (C) (d) (8) Application to own use of business goods or services. (5 marks) VAT treatment of sale or disposal of business asset. (5 marks) Taxable supplies excluded from input VAT credit. (5 marks) Place of supply of goods. (5 marks) Standard Alternative Method of Apportionment. (5 marks) (Total 25 marks) Question 1 Fast Fuel Led (FFL) is a company incorporated andVAT registered in Uganda. FFL is an importer and distributor of petroleum products that include petrol, diesel, kerosene and other motor oils. FFL owns and manages a number of fuel stations across the country. The Board of directors of FFL have hired your firm as tax consultants to review the VAT status of the company's transactions forApril 2019 and advise on the VAT compliance status of FFL. The following information has been availed to you: (i) During April 2019, FFL made petrol and diesel fuel sales of Shs 2 billion. (ii) FFL owns shops at the fuel stations that it rents out to third parties. FFL collected rental income of Shs 300 million (exclusive of VAT) from these shops during April 2019. (iii) FFL incurred fuel marking expenses of Shs 50 million (exclusive of VAT) during April 2019. (iv) In April 2019, FFL received tax consultancy services of Shs 80 million (exclusive of VAT) from JT Consultancy, a tax firm in Uganda. (v) FFL was charged VAT of Shs 5 million on telephone expenses for the month of April 2019. (vi) FFL incurred an expense of Shs 25 million (exclusive of VAT) in April 2019for meals consumed by top management of FFL while in a meeting at Hotel Africana. (vii) FFL made sales of Lubricants of Shs900 million (exclusive of VAT) during April 2019. (viii) FFL paid VAT of Shs 25 million at importation of IT equipmentduring April 2019. (ix) In April 2019, FFL also paid VAT of Shs 9 million at importation of lubricants. (x) FFL disposed of a residential property in April 2019 for Shs 150 million. (xi) In April 2019, FFL also incurred an expense of Shs 50 million (exclusive of VAT) as payment to Sano Pty, a South African company to assist in IT equipment installation services. (xii) During April 2019, FFL hosted its premium customers at Serena hotel, Kigo. VAT of Shs 5 million was incurred for this event. (xiii) All purchases of FFL were made from VAT registered suppliers who issued valid tax invoices to FFL. (xiv) In April 2019, FFL incurred a debt write off expense of Shs 15 million. The bad debt resulted from the sale of a company truck to Tumwebaze, whodespite several reminders from FFL has failed to pay due to financial difficulty. Tumwebaze has since disappeared. The debt has been outstanding for a period of 365 days. (xv) FFL has neither filed the VAT return nor paid the VAT for April 2019 to date. Required: (a) Determine the: (i) Output tax for April 2019. indicating the basis of your treatment. (14 marks) (ii) Input VAT credit for April 2019 and comment on each item. (27 marks) (iii) VAT payable I claimable for April 2019 (3 marks) (b) Advise FFL on the possible interest charge and penalty URA may apply (calculation not required). (6marks) (Total 50 marks) SECTION B Attempt any two questions in this section Question 2 (a) Bella Limited (BL) is a tax resident in Uganda that deals in the supply of feasibility studies and engineering designs. The company's client portfolio includes hospitals, schools, government ministries. hotels and other businesses.Among the customers of BL is MK medical centre, aGrade IV Government health centre situated in Kiruhura District. In January 2014. the Board of MK medical centre approved an expansion budget for the children's ward which was contracted to BL. The expansion project is a 6 year proiect expected to end in May2019 owing to the complexity of the project and availability of funds.The contract amount agreed between MK medical centre and BL was USD 1.0 million (exclusive of VAT) and the contract commencement date was 1 April 2014. The invoicing structure was that BL would invoice MK medical centre in phases. The first invoice was raised in May 2014 as 20% of the total fee at the commencement of the proiect and the final invoice was issued on 14 May 2019 as the final 20% of the contract amount. BL has been VAT registered since January 2014. However. BL has not accounted for VAT on the supply to MK Medical Centre.They haveapproached you as their tax advisor on the VAT implications of the invoicesissued to MK Medical Centre since 2014. Required: (i) Advise on whether the first invoice of BL to MK medical centre issued in May 2014 is subject to VAT, with reference to the VAT act. (5 marks) (ii) Discuss whether BL is liable to VAT, in regard to the final invoice raised in May 2019 (5 marks) (b) ABC Limited deals in the supply of animal feeds. ABC Lid sells 60% of its feeds in Uganda and exports 40% to Kenya and Tanzania markets. ABC Ltd is currently undergoing a URA audit that has queried the documentation maintained by ABC Lid in support of the 40% exports made to Kenya and Tanzania. Required: Discuss, with reference to the VAT Act and case law, the documentation required to be maintained by ABC Ltd in order for the exports made to Kenya and Tanzania to qualify for zero rating (15 marks) (Total 25 marks) Question 3 Sukari Holdings Lid (SHL) is a group of companies offering a variety of goods and services in Uganda.Sukari Financial Ltd (SFL) offers financial services. Sukari Best Fruit Lid (SBFL) deals in the purchase and export of fruits like mangoes, water melon, pineapples among others.Sukari Properties Lid (SPL) deals in real estate;it owns, rents out and sells both residential and commercial properties. Sukari Education CentreLed (SECL) runs a chain of schools in Kampala offering educational services. The group Chief Finance Officer (CFO) is analysing the VAT concerns forSHL inUganda and has a number of queries regarding VAT. Thegroup CFO is facing challenges and has approached you for advice on how to handle the following situations: (a) SFLoffers a variety of financial services such as loans, guarantees and custody services. The group CFO would like to understand the VAT treatment of each of these financial products offered by SFL. Required: Examine the VAT treatment of each of the financial products offered by SFL.