On 5 January 2020, Faith Namusonda was appointed a director of Moneybags Plc on a threeyear contract of service. Her appointment came with a gross monthly salary of K80,000. On 1 August 2022, Moneybags Plc dismissed Faith in circumstances which she alleged amounted to breach of her contract of service, and she commenced an action for arrears of salary, unpaid bonuses and damages for breach of contract. This action was eventually settled in September 2022 by a settlement agreement under which Moneybags Plc agreed to pay Faith K160,000 in respect of salary arrears, K200,000 in respect of unpaid bonuses, a lump sum payment of K1,500,000 in full and final settlement of all claims against Moneybags Plc and a further payment of K50,000 in consideration of Faith agreeing to keep the details of the settlement confidential (except in so far as she may be required to make disclosures by law). These amounts are payable by 30 October 2022. Required: (a) Advise Faith whether each of the payments under the settlement agreement will be liable to income tax. (10 Marks) (b) Calculate the tax payable by Faith in respect of the payments under the settlement agreement. (10 Marks) QUESTION TWO (20 Marks) Answer both questions (a) and (b): (a) ABC Inc., a Swedish company headquartered at Stockholm, not having a permanent establishment in Zambia, set up a liaison office in Kitwe in April 2022 to look after its day-to-day business operations in Zambia, spread awareness about the company's products and explore further opportunities. The liaison office takes decisions relating to

day-to-day routine operations and performs support functions that are preparatory and auxiliary in nature. The significant management and commercial decisions are, however, in substance made by the Board of Directors in Sweden. Determine the residential status of ABC Inc. in Zambia for tax year 2022. (10 Marks) (b) Examine the taxability of the following receipts with reference to Income tax Act, Cap 323. Provide reasons and relevant authorities for each answer: (i) Maintenance allowance received by a spouse pursuant to a judicial order in matrimonial proceedings. (2 Marks) (ii) Medical allowance received by an employee, the entire amount of which has been spent by him for medical treatment. (2 Marks) (iii) Receipt of a cash gift of K60,000 from a friend on the occasion of wedding anniversary. (2 Marks) (iv) A dividend received by Bwezani Phiri, a Zambian resident, from a company incorporated in Delaware, United States of America in which he owns shares. (2 Marks) (v) The emoluments of A, a Swedish National holding the office of First Secretary Commercial and Political Affairs at the Swedish Embassy in Zambia. (2 Marks)