Question 1

A & M ProgressiveSenior School Ltd is a privately registered, day and boarding

secondary school that was licensed by the Ministry of Education and Sports in

2001.The school is owned by two directors Amuge and Masaba. Over the years,

the school has attracted many students because of their good performance in

the national examinations. The school has 2,500 students who study at

bothMukono and Kampala campuses.

The following is an extract of their statement of profit or loss and other

comprehensive income for the year ended 31 December,2017:

Note Shs'000'

Incomes:

School fees 4,200,000

Other incomes 1 525,000

4,725,000

Expenses:

Operating 2 2,997,000

Administrative 3 1,119,000

Finance 4 547,000

(4,663,000)

Net profit 62,000

Notes:

1. Other income comprise of the following amounts:

Note Shs '000'

Hire of school buses 47,000

Donations 345,000

School farm 80,000

Interest (i) 48,000

Miscellaneous income 5,000

525,000

(i) Interest income is gross and was earned from the school's fixed

deposit account in one of the commercial banks in Uganda.

2. Operating expenses:

Note Shs '000'

Depreciation 680,000

Utilities 665,000

Kitchen (ii) 1,025,000

Security 22,000

General provisions 51,000

Travelling expenses 163,000

Entertainment (iii) 81,000

Laboratory 102,000

Donations (Mukono Orphanage Centre) 15,000

Repairs & maintenance (iv) 135,900

Legal & accountancy 19,100

Bad debts (v) 28,000

Other losses 10,000

2,997,000

(ii) Kitchen expenses:

Shs '000'

Foodstuffs 820,000

Beverages 180,000

Provisions (spoilt food) 25,000

1,025,000

(iii) Entertainment expenses:

Shs '000'

Food & drinks (parents day) 60,000

Hire of musical band (parents day) 5,000

Contribution to wedding for the head teacher's son 16,000

81,000

(iv) Repairs and maintenance:

Shs '000'

Kitchen equipment 49,000

Computers, scanners & photocopying machine 22,000

Motor vehicles 48,000

Purchase of laboratory equipment 900

Furniture

5. The written down values of the school's depreciable assets as at 1January,

2017 were as follows:

Class Shs '000'

I 30,000

II 120,500

III 220,000

IV 180,000

6. Motor vehicles:

The school acquired two new 60 seaterIsuzu buses at a cost of Shs 200

million each. These buses were financed by both school savings and loans.

The school replaced the engine of the tractor that is used in the school

farm located in Mukono. The engine cost Shs 38 million.

During the rainy season, a tree fell on one of the mini-buses which was

parked in the school compound. The 14 seater mini-bus which cost Shs 21

million in 2005had a nil bookvalue at the time of the incident. It was

replaced with a similar one at a cost of Shs 70.5 million.

The old Toyota corolla that was used by Masaba with a net book value of

Shs 15 million was sold off at Shs 12.1 million on 30 June, 2017.It had

cost the school Shs 49 million in 2014. The net result of the transaction

was booked in the statement of profit or loss and other comprehensive

income.

7. Computers and accessories:

During the year ended 31 December, 2017 the school installed tracking

devices in all motor vehicles. The software cost Shs 28 million and is

expected to serve the intended purpose for a period of 5 years.

Forty Dell computers were donated to the school by AnilGordino a

renowned Indian businessman as part of his corporate social responsibility.

Each computer was valued at Shs 1.2 million.They sold off eighteen of the

old computers which had a totalnet book value of Shs 3 million at Shs 4.21

million. The net loss or gain was posted to the statement of profit or loss

and other comprehensive income.

The school also purchased three photocopying machines at a total cost of

Shs 15 million.

8. Furniture and fittings:

The school acquired new furniture at a cost of Shs 29 million.They also

installed wooden partitions to subdivide the dormitory at a cost of Shs 2.8

million.

9. Other assets:

The residue of expenditure of the school building was Shs 1,500,800,000

as at 31 December, 2016.The construction of the school parking lot at

Mukono campusthat started on1 February, 2016 was finally concluded on

31 December, 2016 and made available for use to teachers, parents and

other visitors on 1 January, 2017. It cost the school Shs 27 million.

Required:

(a) Compute the chargeable income and tax payable for A & M

Progressive Senior School Ltd for the year ended 31 December,

2017.

(25marks)

(b) Advise A&M Progressive Senior School Ltd on:

(i) the due dates for filing provisional and final returns for the

year ended 31 December, 2017.

(1 mark)

(ii) penal tax for failing to maintain proper records.

(1 mark)

(iii) tax treatment of non-cash income earned by the school.

(3 marks)

(c) Explain the meaning of 'exempt organisation' as per the Income Tax

Act Cap 340 Laws of Uganda.

(5 marks)

(d) The directors of A & M Progressive SeniorSchoolLtd intend to start

an orphanage centre to support children within the community with

food, water and health care services. They have approached you

seeking advice on how they can successfully obtain income tax

exemption from the Uganda Revenue Authority.

Required:

Advise the directors on the process of obtaining income tax

exemption.

Question 2

Matagi Uganda Limited (MUL) imports and sells Toyota motor vehicles from

Japan. In addition, they also own and use some of the vehicles and later sell

them as used vehicles on the local market.

In January 2015, MUL bought a brand new Toyota Prado Shs 200 million for

use by the marketing manager. In January 2017, the vehicle developed a

mechanical problem and the company decided to sell it off at Shs95 million.The

company's depreciation policy is that all motor vehicles are depreciated at 20%

per annum on straight-line basis.

Required:

(a) Explain what you understand by 'gains and losses' on disposal of business

assets as per the Income Tax Act, Cap 340.

(2 marks)

(b) Discuss the income tax treatment of gains or losses that arise on the

disposal of business assets.

(2 marks)

(c) Compute MUL's accounting and tax gains or losses on disposal of the

Toyota Prado. Explain clearly how the gain or loss on disposal should be

treated for tax purposes.

(8 marks)

(d) KabongaUganda Limited (KUL) bought a building in Ntinda industrial area

for Shs1 billion in 2008. The building was used as a warehouse for raw

materials for their factory and was first put to use on 1 July, 2008. At the

time of purchase, KUL engaged a professional valuer who put the value of

the land at Shs 300 million. KUL sold the land and building to Twekambe

Limited on 30 June, 2017 at Shs 1.5 billion. This was to enable them buy

land in Nakasongoladistrict to construct a new factory that is in conformity

with the environmental laws.

Required:

Compute the capital gain or loss realisedby KUL on the disposal of the land

and building in 2017.

Question 3

Nalumansi runs a retail shop in Bulindo-Wakiso district. She sells household

items, plastics, soft drinks fresh fruits and vegetables. The retail shop has grown

over the years and has supported her family. She managed to construct a

commercial building from which she derives income.

The following is a summary of her transactions for the period January to

December 2017:

Expenses Shop Building Total

Shs '000' Shs '000' Shs '000'

Utilities 800 21,000 21,800

Rent 25,000 - 25,000

Transport 1,800 - 1,800

Trading license 500 500

Ground rent 9,000 9,000

Wages 10,700 10,700

Security 50,000 50,000

Medical 2,800 2,800

Repairs 700 5,700 6,400

Painting 3,000 18,000 21,000

Lighting 200 800 1,000

Fuel 1,000 700 1,700

96,500 55,200 151,700

Income:

Month Shop Building Total

Shs '000' Shs '000' Shs '000'

January 4,000 8,000 12,000

February 6,500 6,500

March 7,500 7,500

April 13,500 8,000 21,500

May 5,400 5,400

June 8,120 8,120

July 8,240 8,000 16,240

August 7,542 7,542

September 8,810 8,810

October 12,100 8,000 20,100

November 11,000 11,000

December 12,100 12,100

104,812 32,000 136,812

Net profit/ loss:

Shs '000'

Shop 8,312

Building (23,200)

Total (14,888)

Required:

(a) Advise Nalumansi on:

(i) her chargeable income and tax payable for the year ended

31December, 2017.

(11 marks)

(ii) the due dates for filing and paying both provisional and final tax for

the year ended 31December, 2017.

(4 marks)

(b) With examples, explain the meaning of 'advance assessment' as per the

Tax Procedures Code Act 2014.

(5 marks)

(Total 20 marks)

Question 4

(a) Explain the term 'bill of lading' and state at least threeimportance of a bill

of lading in international trade. (5 marks)

C

(b) Discuss the term 'Authorised Economic Operator' (AEO) and explain any

three benefits of the scheme to businesses. (5 marks)

(c) Explain the punishment given to a taxpayer convicted of removing or

tampering with customs seal under the East African Community Customs

Management Act, 2004. (2 marks)

(d) Mujama is a car dealer in Kampala, Uganda and has imported 5 vehicles

from Japan each at a cost of USD1,240 cost, insurance and freight (CIF) to

Mombasa and the exchange rate during the date of transaction was USD 1

toShs 3,650.

Assume the following rates for:

Rate (%)

Import duty 25

Withholding tax 6

Value added tax 18

Environmental levy 35

Required:

Compute the taxes payable by Mujamafor the 5 vehicles he imported from Japan

Question 5

Baltonez Logistics International is a transport and logistics company with its

headquarters in Paris, France.The company has a Ugandan branch that has been

in operation since 2007, with its main activities being transport and logistics.The

Ugandan branch is registered for VAT and had the following transactions during

the month of December 2017:

1. 2 December: received rental invoices for office rent and managing

director's residence Shs 2 million and Shs 750,000respectively.

2. 4 December: transported goods from Kampala to Nairobi Shs 65 million.

3. Power and water bills for the office for the month amounted to

Shs500,000.

4. Purchased brand new Toyota Prado for the managing director Shs 169

million.

5. 10 December: transported goods from Nairobi (Kenya) to Mbarara

(Uganda) for Shs 18,900,000.

6. Received an invoice for telephone charges for office for the month Shs 1.9

million.

7. 20 December: was contracted by World Food Programme (Kampala office)

to transport food supplies to Adjumani (Northern Uganda) for Shs 208

million.

8. Purchased 10 computers from a VAT registered supplier on credit at

Shs35.1 million.

9. Transported petroleum products forShs 117 millionfrom Mombasa to South

Sudan via Uganda.

10. Purchased 2 extra trucksShs 78 million each. One truck was for cash and

the other on credit.

11. Disposed of office furniture worth Shs 26 million during the month.

Assumptions:

Purchases are VAT inclusive where applicable.

Sales are VAT exclusive where applicable.

Required:

(a) Determine the amount of VAT payable or claimable by Baltonez

Logistics International for the month of December 2017.

(10marks)

(b) Explain at least four circumstances under which a VAT registered

taxpayer may claim for VAT refund. (8 marks)

(c) Briefly explain the penalty a VAT registered taxpayer would suffer

for late submission and payment of VAT.