COASTER UGANDA LIMITED BUSINESS PLAN EXTRACT Objectives Increase sales to more than Uganda Shs 5.7 billion by the end of 2020. Maintain gross margin above 50% through the planning period. Equity will be tripled and capital adequacy attained by 2020. Return on capital will be maintained above 20% after attaining capital adequacy. . Institutional capacities and staff competencies will be increased by 50% by end of 2020. Products and services Coaster Uganda Limited will provide a range of differentiated products that are innovatively and uniquely designed and delivered to meet customer demands in a holistic manner that enables the company to capture the market niche. Market environment Coaster Uganda Limited will specialize in offering unique products and capturing a market niche and customer loyalty and we are aware that competition in the specialized industry requires highly specialized, technically competent and innovative workteams in different areas of service provision and product supplymanagement. Management The management team will consist of the chief executive officer, chief operations manager. business development manager. marketing team and administrative staff. The company plans to recruit technical manager. internal auditor, finance a administration manager. operations manager and other technical officers. Financial requirements and sourcing of funds The main source of funding for Coaster Uganda Limited will be equity. The company will also seek financial support from social investors and concessionary loan providers, development and commercial banks; to help it lay a strong foundation and expand its service delivery. The other sources will be mainly management of creditors and debtors. The following is the summarized financial plan: 1. Commercial loan of Shs 200 million. 2. Equity finance of Shs 100 million. 3. Concessionary loan of Shs 800 million; and 4 Development loan of Shs 1 billion. Additional information We have also been advised by a local investor to acquire an already established company as one of the fast means of entering the Ugandan market. Research carried out in Uganda by the group has so far established a local company.Still Uganda Limited (SUL) that has been in a similar business since 2009, though on a small scale. SUL has been making losses for the last 4 years. Its current assessed loss as at 31 December. 2017 is Shs 210 billion. Management of SUL was considering a possible liquidation by selling all the company assets and pay all its liabilities or form a merger with another well-established company. SUL is registered for income tax. value added tax, pay as you earn, and withholding tax. The company is currently exempted from withholding tax on its supplies. We are unsure of this option as we do not have experience in this market and we have not been provided with copies of the financial statements of SUL for the last few years. Still Uganda Limited uses a substituted year of income. We would like to minimize our tax burden while meeting the requirements of Ugandan tax laws and not endangering our corporate reputation. Coast Group of Companies Structure Coast Group of Companies (CGC) (Netherlands) Coaster SA (Malaysia) (South Africa) (100%) (100%) Coaster Uganda Limited (Uganda) (100%) Briefing notes To: The Tax Manager - Link Consultants From: CEO. Coast Group of Companies (CGC) Date:31 May. 2018 Dear Sir/Madam Subject: Coaster Uganda Limited Reference is made to the above subiect and thebrief meeting I had with you on the May 2018.Please find below in summary the planned investment in Uganda. We intend to set up the manufacturing plant either in Namanve-Kampala or Kasese district in western Uganda. 60% of the raw materials will be from Uganda and the 40% of the raw materials will be imported from Kenya. 85% of our products will be exported to Europe and 15% will be sold in the local market GL. one of the subsidiaries of Coast Group of Companies,will provide support functions such as human resource function. procurement function. finance. IT support and marketing to Coaster Uganda Limited. The company will use both expatriate staff and local staff. The estimated investment in plant and machinery within the first two years of operation is USD 1 million. The company will be funded using share capital, development bank loan. a loan from its associate in Malaysia. short term loans and retained earnings. The company will also acquire computers and computer software. goods and passenger vehicles for staff. construction of the factory premises. andadministration block, staff quarters, furniture. fixtures and fittings among other assets. Some of the construction equipment like bulldozer. forklift, crane and pavement saws will be shipped from the head office in Netherlands, and returned after construction of all industrial buildings. The company is expected to start operations in Uganda on 4 June. 2018 with estimated startup costs of Shs 66 million. The company will immediately register for income tax, value added tax.pay as you earn. withholding tax, stamp duty. local service taxand customs duties. (i) In relation to the services provided by GL to Coaster Uganda Limited, discuss the tax treatment of the transactions between associates in Uganda. (5 marks) (Total 85 marks) Question 2: Tax Practice - Professional Rules and Guidelines Answer the following questions in form of short notes regarding the expected conduct of a Certified Tax Advisor (CTA) who is in practice. providing professional services of tax advice and tax consultancy to his or her clients. (i) As a certified tax advisor. what would you consider when issuing a fee note to a client for services rendered? (5 marks) (ii) Who is a \"tax agent" according to the Tax Procedures Code Act 2014 and who are the members of the Tax Agents' Registration Committee (TARC) as laid out in the Tax Procedures Code (TPC) Act 2014'? (5 marks) (iii) What are the liabilities and obligations of a registered tax agent as per the Tax Procedures Code (TPC) Act 2014? (5 marks) (Total 15 marks) Question 1: Case study Coast Group of Companies (C60) is a company resident in Netherlands for tax purposes. The company was incorporated in 2007 under the Companies Act of Netherlands. CGC was established to provide efficient. manageable and cost effective means in the manufacturing industry. The promoters of the company included; engineers and financial professionals who combined their skill and competency to ensure the company responds to the needs of its clients. It keenly implements new technologies, products and services that effectively addresses all customer needs. CGChas several subsidiary companies across the globe. The board of directors of Coast Group wishes to extend their business operations in Uganda by starting a jewelry manufacturing plant in Uganda and incorporating a subsidiary; Coaster Uganda Limited (CUL). Jewelry will be made out of gemstones and other materials such as amber. coral from both the domestic market and imports from outside Uganda. Their interest started with a business tour in Uganda by the CEO of one of its subsidiaries in South Africa the subsidiary in South Africa is also engaged in manufacture and export of jewelry. During their visit in Uganda, they were forwarded to Link Consultants. one of the authorized tax agents in Uganda. by the team at Uganda Investments Authority (UIA) for advice. One of their main interests is the tax benefits available to foreign investors in Uganda. You are the tax manager at Link Consultants and you have had a brief meeting with the team. Among other things you have been provided with are; the structure of Coast Group of Companies. an extract from the business plan, and briefing notes from the CEO as provided below. Required: You are not required to make any computations at this stage but you are required to make full legislative references and case law references where relevant to support your findings, advice, conclusion and recommendations. (a) (b) (C) (d) (8) (f) (9) ('1) Explain how a corporate body like Coaster Uganda Limited is taxed under the Income Tax Act of Uganda. (10 marks) Advise the management of Coast Group of Companies on various options available to set up a business in Uganda. (10 marks) With regard to their nature of business and their proposed plan. and the briefing notes from the CEO. explain to management of Coast Group of Companies the tax reliefs available in Uganda. Your discussion should be limited to income tax, value added tax and customs. (15 marks) The management of CGC has discovered that Uganda is a member of COMESA, SADC. and EAC Customs Union. Explain to CGC, the meaning of East African Community rules of origin and the would be effect on their business. (10 marks) Advise the management of Coast Group of Companies on the tax and other benefits of acquiring Still Uganda Limited. Comment on the tax treatment of accumulated tax losses. (10 marks) Explain to management of Still Uganda Limited the tax implications of disposal of individual assets of the company. merger with another resident company and/or the company undergoing voluntary liquidation. (10 marks) Explain to the management of Coast Group of Companies. the tax implications of borrowing from an associate. (5 marks) The management of Coast Group of Companies would like to know the diSpute resolution mechanism available to a company like Coaster Uganda Limited in case of any dispute with the tax authorities. Reference should be made to the relevant tax statutes and case law. (10 marks)