Question 1

Mr. Kikubamutwe is an engineer working with Mobile Network Limited (MNL) a telecom company operating in Uganda. The following are his terms of employment effective 1 July, 2018: Monthly emoluments: Shs '000' Basic salary 9,000 meals 220 Medical insurance 1,000 Over time allowance 500 water 50 Meals are not provided on equal terms Additional Information: 1 He was given 2,000 shares in the company valued at Shs 2,000 each under the employee share acquisition scheme and he paid Shs 500,000 for the shares. 2 Due to the increase in the volume of work following the installation of additional computer servers for new clients, he was paid Shs 200,000 to work on one of the weekends. 3 The company provided him with a Toyota double cabin to be used for both official and private purpose. The car was bought in 2018 at Shs 90 million. 4 The company rents for him a house located in Kansanga Shs 36 million per annum and he pays Shs 2 million towards the rent. 5 He participated in the corporate league for MNL's soccer team and was given an award in form of an accolade and Shs 700,000 by the company. 6 In a benchmarking exercise, he travelled to Malaysia for official duties and he was given Shs 3 million for accommodation, Shs 2 million for meals, and Shs 1 million for shopping. 7 The company gave him a loan for furnishing his home of Shs 1.5 million at an interest rate of 6% per annum. The Bank of Uganda statutory rate at that time was 14%.

Required: (a) Compute Mr. Kikubamutwe's chargeable employment income and tax liability for the year ended 30 June, 2019. (16 marks) (b) According to the Income Tax Act Cap 340, explain the meaning of employment.

Question 2 Kale Kale Services Limited (KKSL) is a resident company with its head office in Kisoro District. It deals in the provision of security consultancy services. In the year ended 30 June, 2019 the company's profit before tax was Shs 122 million. Particulars Note Income for period Foreign exchange gain 2 Expenses: Depreciation Staff costs 3 Bad debts 4 Profit Before Tax Shs '000' 1,500,000 10,000 (200,000) (568,000) (620,000) 122,000 KKS offered services to companies in Burundi, Tanzania, and Democratic Republic of Congo and received net incomes equivalent of Shs 120 million, Shs100 million, and Shs110 million respectively. No withholding tax was charged in the respective countries. Notes: 1 The company acquired a building on 1 January, 2018 in Kisoro town at Shs 700 million. The building is used for training both company guards and head office staff. 2 The exchange gain relates to a building loan received in United States dollars equivalent to Shs 70 million that the company obtained to construct a boundary wall around the building, 50% of it was realized. 3 Staff costs included the following: Particulars Relocation costs for staff Staff food served on equal terms National social security fund employer's contribution Guard uniforms Guard boots Guard riffles Walkie-talkies 450 Batonsearch costing Shs 200,000 Total Shs '000' 42,000 40,000 84,000 120,000 110,000 2,000 80,000 90,000 568,000 4 The bad debt account includes the following: (i) Provision for client compensation of Shs 320 million. (ii) Annual staff fraud insurance premium of Shs 300 million. 5 The company had an agreed tax loss brought forward of Shs 55 million as at 1 July, 2018.

6 The company's additions of plant and machinery for the year were as follows: Purchases Office furniture Computers Computer software 1 saloon car 1 station wagon 7 metric ton truck Bullion van Shs '000' 50,000 95,000 45,000 115,000 65,000 80,000 420,000 7 The tax written down values of the company's depreciable assets as at 1 July, 2018 was as follows: Class I Class II Class III Class IV

Required: Shs '000' 25,000 92,000 80,000 260,000 (a) Calculate the corporation tax payable by KKSL for the year ended 30 June, 2019 (16 marks) (b) With examples, explain the following terms per the Income Tax Act Cap 340: (i) Start-up costs (ii) Withholding tax (2 marks)

Question 3 Destiny Limited is a Value added tax (VAT) registered taxpayer dealing in general merchandise. In the month of October 2019, the company imported merchandise and was charged VAT of Shs 52 million. The company made the following sales during the month: Goods sold on credit to Briken Shs 11.8 million VAT exclusive. Goods sold on credit to Maria for Shs 28,220,000 VAT inclusive. Cash sales of Shs 16,660,000 VAT inclusive. VAT exclusive sales Shs 18,440,000. Provided transport from Kampala to Juba and charged Shs 3.2 million. VAT inclusive sales Shs 34.6 million. Sold educational materials to various schools worth Shs 15 million. The company incurred the following administrative expenses in the month of October, 2019: Electricity Telephone Water Labour Shs '000' 3,900 1,300 800 5,000 Note: All administrative expenses are inclusive of VAT where applicable. Required: (a). Compute the VAT payable or claimable for the month of October 2019. (12 marks) (b) With examples distinguish between zero rated and exempt supplies. (c) Describe any four features of a tax invoice (4 marks)

Question 4 Mutaasa Gafeero Limited (MGL) is a registered Company dealing in real estate and plumbing business. For the year ended 30 June, 2019 its financial performance was as follows. Income from plumbing works Gross rental income Expenses: Electricity and water Maintenance and cleaning Salary and wages Bad debts Notes Shs '000' 500,000 1 400,000 2 30,000 3 80,000 4 80,000 5 30,000 Shs '000' 900,000 680,000 Notes: 1 Rental income is received from the company's commercial building located in Jinja Town which is occupied by shops and offices. Included is rent received in advance from one of its major tenants of Shs 40 million. Withholding tax of Shs 8 million was deducted and remitted to Uganda Revenue Authority by its tenant NSSF. 2 Included in electricity and water is Shs 5 million which was incurred at their plumbing office located in Kampala. 3 Maintenance and cleaning includes Shs 17 million for partition of walls built on the second and third floor of its commercial building. In addition, Shs 3 million relates to cleaning and maintenance of the plumbing office. 4 Included in salary and wages is Shs 30 million paid to staff of the real estate business. 5 Bad debts relates to tenants who left with rent arrears which the company failed to recover despite taking all the reasonable steps.

Required:

(a) Compute MGL's chargeable rental income and rental tax payable for the year ended 30 June, 2019. (14 marks)

(b) Mrs. Gafeero runs a small wholesale business in Mini-Price located in down town Kampala which sells children's shoes. During the year ended 30 June, 2019 he had a gross turnover of Shs 80 million.

Required:

Compute her tax payable for the year ended 30 June, 2019. (c) Under the Income tax Act Cap 340 explain: (i) the circumstances under which a taxpayer can be allowed a tax credit to offset his final tax. (2 marks) (ii) how a taxpayer can be elected under the presumptive tax regime. Question 5

In August 2019, Tropical Fish Factory Limited (TFFL) imported an advanced fishing boat from Japan and it incurred the following costs: Cost (Free on board) Transport cost from Komatsu to Nagoya port of Japan Handling charges at Nagoya port Insurance cost from Komatsu factory to the port of Mombasa Transport cost from Nagoya to Mombasa Additional Information: Import duty 15% Withholding tax 6% Value added tax 18% The exchange rate at the time was USD 1 =Shs 3,500.

Required: US Dollars 114,000 1,000 300 500 2,000 Determine the customs value of the fishing boat and customs duty payable for the month of July 2019. (10 marks) (b) According to the East African Customs Management Act 2004, explain (i) the term customs bonded warehouse (2 marks) (ii) any four customs procedures for bonded warehouses regarding receipt/delivery of goods.

Question 6

Maji-Moto (MM) is a freelance journalist who was formerly employed by the Old Vision Newspaper until March 2015. MM's major income sources include shares held in publicly listed companies, investing in Bank of Uganda (BOU) treasury bills and bonds, holding fixed deposit accounts with major commercial banks, owning rental properties in Nairobi Kenya and a part time job with the Observant Newspaper (Observant). During the year ended 30 June, 2019, MM earned the following incomes; (a) Invested in BOU treasury bills and bonds and earned interest income of Shs 16 million net of 20% withholding tax. (b) In October 2012 when Uganda's sole power distributor, Umama Ltd floated its shares to the public through an Initial Public Offering, MM bought 100 shares. Umama Ltd declared and paid dividends of Ushs 10,000 per share for the year ended 30 June, 2019. All dividends paid to shareholders are subject to a 10% withholding tax. (c) MM has a dollar account in Silver Trust Bank (STB) and as of 31 May, 2019 MM had USD 1,074,450 which translated to about Shs 3.76 billion. On 30 June, 2019, STB paid interest to MM at 12% per annum less withholding tax of 15%. (d) MM also received rental income of KShs 800,000 from his rental properties located in Nairobi Kenya. The withholding tax rate in Kenya applicable to such type of income is 15%. The exchange rate at the time was KShs 1 = Ushs 30. (e) The Observant pays MM a retainer salary of Shs 5 million per month from which pay as you earn (PAYE) is deducted by the Observant and remitted to Uganda Revenue Authority on a monthly basis.

Required:

(a) Compute the withholding tax deducted from each payment made to MM during the year ended 30 June, 2019 (10 marks) (b) Explain to the withholding agents (BOU, Umama Ltd, STB and the Observant Newspaper) on the due dates for remitting the withholding tax deducted from MM to the Uganda Revenue Authority. (2 marks) (c) What penalties would be imposed on the withholding agents for failing to deduct withholding tax from MM. (d) Explain any four principles of a good tax system. (2 marks)