Questions

Question 5 (a) Afande Towabasi, a VAT registered taxpayer made the following transactions for the month of March, 2018: Purchases: Goods worth Shs 16,900,000 VAT inclusive. Goods worth Shs 18,450,000 VAT exclusive. Goods worth Shs 14,640,000 VAT exclusive. 15 Goods worth Shs 22,450,000 VAT inclusive 28 Goods on credit from Mwandu Shs 33,340,000 VAT inclusive. Sales: Goods on credit to Balwanyi Shs 18,800,000 VAT exclusive. A WON Goods on credit to Mary for Shs 38,220,000 VAT exclusive. Goods cash Shs 21,660,000 VAT inclusive. 10 VAT exclusive sales Shs 18,440,000 15 Provided transport from Kampala to Mombasa Shs 48,000,000. 16 VAT inclusive sales Shs 24,644,000. 30 Sold medical equipment to various hospitals Shs 52,000,000. Required: Compute the VAT payable or claimable for the month of March, 2018. (8 marks) (b) As per the VAT Act Cap 349, explain the powers of the Commissioner General which enables him/ her to access the books, records and computers of a taxpayer. (4 marks) (c) Explain the methods of accounting and how they differ as per the VAT Act Cap 349. (4 marks) (d) Explain what is meant by the term 'Person' for purposes of VAT registration. (4 marks) (Total 20 marks)Question 2 Mr. Kamba is a Kenyan working in TAT (U) Ltd. He was appointed Financial Controller from 1 July, 2017. This is his first assignment and his terms of employment are as follows: (i) Monthly salary: Shs 6,000,000. Kshs 171,429 payable directly to his account in Kenya. (ii) Medical allowance Shs 700,000 per month. (iii) Accommodation in company house with a market value of Shs 1,000,000 per month. He contributes Shs 350,000 per month. (iv) A company car that cost Shs 70,000,000 when first provided. He uses the car for official and private purposes. (v) Utility bills for Shs 355,000 per month. He contributes Shs 55,000 towards the costs. (vi) A security guard who earns Shs 500,000 per month. (vii) 2 gardeners who earn Shs 300,000 each a month. (viii) The company provides staff lunch worth Shs 2,000,000 per month. (ix) The company reimbursed Shs 700,000 to Mr Kamba which he spent on business lunch meeting with accountants from other companies. Additional information: Exchange rate 1 Kshs to Shs 37. 2 . In November, 2017 Mr. Kamba participated in the MTN marathon and won a prize of Shs 5,000,000 3. School fees of Shs 3,000,000 were paid by the company to Raintye International School for Mr. Kamba's children. 5. Shs 880,000 was paid by TAT (U) Lid for air tickets for Mr. Kamba's family to travel from Kenya to Uganda on 1 July, 2017. Note: Assume the year is 365 days. Required: (a) Compute Mr. Kamba's tax liability for the 6 months ending 31 December, 2017. (16 marks) (b ) Basing on the Income Tax Act. Cap 340; explain why some items have not been included in the computation of the tax liability in (a) above. (4 marks) (Total 20 marks)3 Legal and accountancy charges include: Shs '000' Staff contract agreements 45,000 Accountancy fees 50,000 Total 95,000 4. 0n 1 July 2017, the tax written down values of plant and machinery were as follows: Shs '000' Class 1 3,400 Class II 14.600 Class 111 15.550 Class IV 52.000 5 The company purchased the following assets in the year: Shs '000' Computers 28,500 Furniture 14,400 Land cruiser 102,000 Pick up Toyota Hilux 72,000 Required: Compute the tax obligation for the period ended 31 December, 2017. (18 marks) (b) Define the following terms: (i) substituted year of income. (1 mark) (ii) transitional year of income (1 mark) (Total 20 marks) Question 6 (a) Differentiate between 'customs union' and 'common market' as per the East African Community Customs Act, 2004. (4 marks) (b) Explain the benefits a country receives when it joins a common market. (6 marks) (c) (i) Explain the meaning of 'withholding tax' as per the Income Tax Act Cap 340. (2 marks) (ii) Identify the responsibilities of a withholding tax agent in the accountability for withholding tax according to the Income Tax Act Cap 340. (8 marks) (Total 20 marks) Question 1 (a) Bwambale Suppliers (U) Ltd located in Kasese town deals in general merchandise. Its profit and loss account for the year ended 31 December, 2017 is as follows: Shs '000' Shs '000' Sales 2,600.000 Less cost of sales MM Gross profit 1.410.000 Other income: Bad debt recovered 30.000 Proceeds from sale of motor vehicles 20.000 50,000 1,460,000 Less: Operating expenses: Salaries and wages 21.900 Staff meals served according to rank 7,100 Telephone (10% is for private purposes) 5,000 Loss on sale of motor vehicle 2,040 Electricity 12.900 Office expenses 12.600 Generator purchase cost 5,100 Stationery 4,300 Bad debts written off 6,000 Rent 14.200 Repairs 47.600 Legal and accountancy fees 95.000 233.940 Net profit M Notes: 1 Office expenses include the following: Shs '000' Travelling non reimbursable expenses 12.000 Entertaining expenses 800 Total 12.800 2 Repairs are made up of: Shs '000' Painting the building 32.600 Repairs of the building to the usable state 15.000 Total 47.600 Question 4 (a) (b) (0) (d) (i) Explain the term 'capital gains tax' as per the Income Tax Act Cap 340. (1 mark) (ii) Explain any three ways a taxpayer is treated as having disposed of an asset. (3 marks) Describe what is meant by cost base of an asset in an arm's length transaction. (2 marks) (i) Identify any three expenses associated with the disposal of an asset. (3 marks) (ii) Mrs. Pepe incurred the following costs to acquire an asset: Shs 'million' Purchase price 400 Valuation fees 50 Legal tees 40 Stamp duty 4 Advertising 5 Commission to property managers 40 10% oi the purchase value was commission for Mr. Pepe for representing Mrs. Pepe's interest during drafting of the purchase agreements. Required: Determine the cost base of the asset. (7 marks) A resident individual taxpayer in Mukono town owned a building with a cost base of Shs 4.5 billion which was destroyed by fire. It has been confirmed by the insurance company that it is going to compensate him Shs 3.6 billion. The replacement of the same building is expected to cost Shs 4.8 billion. Required: Compute the cost base of replacement of the building. (4 marks) (Total 20 marks) Question 3 (a) (b) (C) (d) (i) Explain any four roles of taxation in Uganda. (4 marks) (ii) Explain the following terms as used in tax administration: Simplicity. (1 mark) Convenience. (1 mark) Certainty. (1 mark) Economical. (1 mark) Ability to pay. (1 mark) Namakwa Commercial Plaza is an approved commercial building. It was constructed at a cost of Shs 1.8 billion and put to use 2 years ago. They constructed an extension at Shs 150 million and was put to use on 1 January. 2017. This extension is now used as a private office for the proprietor. Note: Assume the year has 365 days. Required: Compute the industrial building allowance for the year ended 30 June. 2017. (5 marks) Nawandala Investment Ltd is a resident company based in Kamuli district. It earns rental income from various sources as shown below. Country Income Expenses Shs '000' Shs '000' Malawi 440.000 214.000 Uganda 325.000 194.000 Nigeria 296.000 186.000 Required: Compute the rental tax obligation for the period ended 30 June. 2017. (2 marks) Zartai a resident individual operates a retail shop in Nakawa Division with an annual turnover of Shs 48.5 million. Her expenses for the year ended 31 December. 2017 include: Shs '000' Assistant's salary 600 Personal drawings 500 Hire of transport 350 Required: Compute the tax payable by Zartai on the income from her retail shop. (4 marks) (Total 20 marks)