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Question 2 (a) Explain the following principles of taxation: (i) simplicity. (1 mark) (ii) convenience. (1 mark) (h) Tukolebukozi (U) Ltd is located in lganga town. Its statement of profit or loss and other comprehensive income for the year ended 31 December. 2017 is as follows: Shs '000' Sales 1.400.000 Less cost of sales 1.220.000 Gross profit 180.000 Other income Bad debt recovered 2.000 Profit on sales of furniture 200 182.200 Less: Operating expenses Salaries 11,900 Staff meals (canteen equal terms) 3.100 Telephone (10% is for private use) 3.000 Loss on sale of motor vehicle 204 Water and electricity 2.900 Office expenses 2.800 Trading license 500 Generator expenses 1.100 Stationery and printing 2.300 Director's remuneration 20,000 Bad debts written off 2.000 Rent 3.200 Maintenance 3.500 Subscriptions and donations 1.800 Depreciation 6.000 Legal and accountancy fees 3.000 Net Profit 114.796 Question 5 (a) (i) Define the term 'bonded warehouse. (2 marks) (ii) Briefly explain the procedures of licensing of bonded warehouses before approval by the Commissioner. (8 marks) (b) (i) Define the term re-exportation. (2 marks) (ii) Identify goods for re-export which qualify for exemption from import duties as per Section 115 of East African Community Customs Management Act 2004. (2 marks) (c) Mention the issues which are looked into during the examination of parcels imported by post. (6 marks) (Total 20 marks) Question 6 (a) Explain the role of small and medium - size business to the development of an economy. (7 marks) (b) Explain the disadvantages of a partnership form of business ownership. (7 marks) (c) (i) Define the term franchising. (1 mark) (ii) Explain the advantages of franchising to the franchisee. (5 marks) (Total 20 marks) Notes: Shs '000' 1 Office expenses include the following: Staff travelling expenses (van) 2,300 Entertaining expenses 500 2 Maintenance Beatifying the existing premises 600 Renovations of premises to the usable state 3,000 3 Legal and accountancy fees Company debt collection services 400 Staff contract agreements 450 50 year lease agreement fees on new premises 650 Accountancy fees 700 Tax consultancy for the director's wife project 800 Total 3,000 4 Subscriptions and donations include: Donation to political party 900 Subscription to Uganda Manufacturers Association 500 Trade fair fees 400 Total 1,800 5 0n 1 January, 2017 the tax written down values of plant and machinery were as follows: Class 1 3,400 Class II 14.600 Class IV 52,000 6 The company purchased the following assets in the year: Photocopier 1 August, 2017. 22.500 Furniture 1 December. 2017 14.400 Required: Compute the tax obligation for the period ended 31 December, 2017. (18 marks) (Total 20 marks) Question 3 (3) Explain the VAT terms below as required by the VAT Act Cap 349: (i) Input VAT. (2 marks) (ii) Output VAT (2 marks) (iii) Identify the rates used when registered persons make supplies of goods or services. (3 marks) Question 4 (a) Explain what industrial building deductions are as per the income tax Act Cap 340. (2 marks) (b) Kampala Arcade Lid constructed a commercial building on Kampala Road at a cost of Shs 2.5 billion. The building was completed and put to use on 1 October, 2017. Required: Compute the industrial building deductions (IBD) Kampala Arcade Ltd will be entitled to claim for the year ended 31 December, 2017. (4 marks) (c) Madiopei Lid constructed a three-storied commercial building at a cost of Shs 1.7 billion in Arua Town. The building was put to use on 1 November, 2017. The company uses part of the third floor for personal work and its construction is valued at Shs 120 million. Note: Assume the year has 365 days. Required: Compute the industrial building deductions (IBD) Madiopei Lid will be entitled to claim for the year ended 31 December, 2017. (5 marks) (d) Towa Bus Yako Lid commenced business in December 2017. Before commencement, it incurred the following expenses: Shs '000' Land registration Stamp duty 16,000 Registration of land 12,000 Registration of company 4,000 Feasibility 20,000 Surveying 14,000 Bribe for quick registration 6,000 Required: Compute the allowable startup costs which Towa Bus Yako Ltd should claim in its tax computation for the year ended 31 December, 2017. (5 marks) (e) Name and explain any three categories of deductions allowed on capital expenditure. (4 marks) (Total 20 mark)(b) For VAT to be levied on a local supply there are four fundamental principles that must be satisfied. Required: Identify the four fundamental principles that must be satisfied. (4 marks) (c) Bonga Ltd is VAT registered company that deals in standard rated goods. During the month of April 2018, the following transactions took place: April 2 Sold goods worth Shs 20,000,000 inclusive of VAT. 10 Purchased goods of Shs 70,000,000 inclusive of VAT. 10 Sold goods of Shs 15,000,000 exclusive of VAT. 12 Donated goods to Sayuni Babies Home of Shs 25,000,000 inclusive of VAT. 15 Purchased goods worth Shs 7,000,000 exclusive of VAT. 16 Sold goods worth Shs 17,000,000 inclusive of VAT. 19 Received a telephone invoice from Pax Communications Lid for Shs 725,000 VAT exclusive for the month March. The company had made a prepayment of Shs 600,000 in the month of March. 20 Was contracted and transported goods to Juba in Southern Sudan for shs 60,000,000. 20 Sold medical equipment worth shs 40,000,000 to Arus Referral Hospital. 21 Sold goods of Shs 35,000,000 exclusive of VAT. 22 Purchased goods worth Shs 45,000,000 exclusive of VAT. Shs 10,000,000 worth of goods were damaged before sales were made. 27 Paid for water Shs 50,000 inclusive of VAT 29 Sold goods for Shs 17,000,000 exclusive of VAT. 30 Paid rent of Shs 900,000 inclusive of VAT to Property Masters Ltd. Required: Compute VAT payable or claimable for the month of April 2018. (9 marks) (Total 20 marks)RATES OF TAX Resident Individuals Chargeable income Rate of tax Not exceeding Shs 2,820,000 (Shs 235,000 pm) Nil Exceeding Shs 2,820,000 (Shs 235,000 pm) but not 10% of the amount by which chargeable income exceeding Shs 4,020,000 (Shs 335,000 pm) exceeds Shs 2,820,000 (Shs 235,000 pm Exceeding Shs 4,020,000 (335,000 pm) but not Shs 120,000 (10,000 pm) plus 20% of the amount exceeding Shs 4,920,000 (Shs 410,000 pm) by which chargeable income exceeds Shs 4,020,000 (Shs 335,000 pm) (a) Shs 300,000 (Shs 25,000 pm) plus 30% of the amount by which chargeable income exceeds Shs 4,920,000 (Shs 410,000 pm) and Exceeding Shs 4,920,000 (Shs 410,000 pm) (b) Where the chargeable income of an individual exceeds Shs 120,000,000 (Shs 10,000,000 pm) an additional 10% charged on the amount by which chargeable income exceeds Shs 120,000,000 (Shs 10,000,000 pm). Non-resident Individuals Chargeable income Rate of tax Not exceeding Shs 4,020,000 (Shs 335,000 pm) 10% Exceeding Shs 4,020,000 (335,000 pm) but not Shs 402,000 (Shs 33,500 pm) plus 20% of the exceeding Shs 4,920,000 (Shs 410,000 pm) amount by which chargeable income exceeds 4,020,000 (Shs 335,000 pm). Exceeding Shs 4,920,000 (Shs 410,000 pm) (a) Shs 582,000 (Shs 48,500 pm) plus 30% of the amount by which chargeable income exceeds Shs 4,920,000 (Shs 410,000 pm) and (b) Where the chargeable income of an individual exceeds Shs 120,000,000 (Shs 10,000,000 pm) an additional 10% charged on the amount by which chargeable income exceeds Shs 120,000,000 (Shs 10,000,000 pm). Small Business Taxpayers Gross Turnover Tax Payable Where the gross turnover of the taxpayer exceeds Shs 937,500 or 1.5% of the gross turnover, Shs 50 million but does not exceed Shs 75 million whichever is lower. per annum. Where the gross turnover of the taxpayer exceeds Shs 1,312,500 or 1.5% of the gross turnover, Shs 75 million but does not exceed Shs 100 million whichever is the lower. per annum. Where the gross turnover of the taxpayer exceeds Shs 1,687,500 or 1.5% of the gross turnover, Shs 100 million but does not exceed Shs 125 million whichever is the lower. per annum. Where the gross the turnover of the taxpayer Shs 2,062,500 or 1.5% of the gross turnover, exceeds Shs 125 million but does not exceed Shs whichever is the lower. 150 million per annum