Sylvia Charles, was born in Trinidad and educated at UWI St. Augustine. She had been an Engineer in the sugar belt with Caroni Limited and moved to Barbados in 2014 to take up a position with a sugar factor in that country. During 2019, she visited Trinidad and Guyana several times as a consultant. She was paid $18,000(TT) but did not transfer any of the money to Barbados as she has elderly relatives to take care of in Trinidad. She received $200,000 (G) and this was remitted to Barbados. She has 3 children, aged 6, 5 and 2. Her husband, a Barbadian is a civil servant.

Sylvia earns $170,000 per year from the sugar factory; she is provided with a car that cost $90,000 when purchased new in 2016 and the accommodation provided by the factory would normally rent for $1500 per month. She pays a nominal rent of $500 per month. She has paid $6,420 in National Insurance contributions and $1,200 in subscriptions to the Professional Engineers Association, as well as $4,400 to a registered retirement plan. She has a covenant with the Barbados Association for the Disabled, a registered charity, and gives them $100 per month.

She own shares in public companies in Barbados and Trinidad and received dividends of $12,000 (BDD) and $10,000(TT) for the year. The Trinidad dividends are not remitted. Sylvia invested in a fishing boat with her husband in 2018 which cost $300,000. They have an arrangement with a fisherman in Oistins to operate it. The arrangement is that the fisherman takes 40% of what he catches and the Charles provide the diesel. For 2019 fish sales were $135,000. They spent $36,000 for the year on diesel. The Charles use the boat several times during the summer holidays for family outings and Sylvia reports 50% of the income on her tax return.

REQUIRED:

(a) Calculate the tax payable by Sylvia for the year 2019. [15 marks]

(Assume exchange rates of $1.00 (TT) = $0.30 (BDD) and $1(G) = $0.0096(BDD)

Extract from Barbados Revenue Authority website:

Commencement Date and Rates of Tax Effective July 1, 2019. The following rates will apply to Personal Income Tax:

Taxable Income Rate of Tax Up to and including $50,000 12.5% Over $50,000 33.5%

(b) What advice would you give Sylvia to reduce her tax liability? [5 marks]

CASE 3

Tropical Paradise Limited owns a franchise of restaurants on a Caribbean island. An analysis of the financial accounts for the year ended 31 October 2019 was as follows:

Gross profit from restaurant sales $ 14, 721,000

Other Income

Capital Gain from sale of property 343,000

Interest on Government debenture 65,000

Dividends received from local companies 92,000

Bank deposit interest 21,200 521,200

15, 242, 200

Less

Electricity 138,700

Depreciation (1) 148,000

Wages & Salaries 1,245,350

Directors fees 700,960

Advertising 40,500

Postage, telephone and stationery 104,500

Loan interest payable 35,000

Professional fees (2) 136,400

Miscellaneous expenses (3) 36,300

Subscriptions and donations (4) 14,000

Travel and entertainment (5) 50,000

Franchise fee 500,000 3,149,710

NET INCOME $12,092,490

Figures in brackets refer to notes:

(1) Depreciation charged is $50,000 more than the wear and tear allowances allowed by Inland Revenue

(2) Professional fees:

Audit and accountancy 60,000

Cost of successful tax appeal 1,000

Legal fees re collection of bad debts 3,600

Cost of defending action by a former

employee for sexual harassment 25,000

Architects fee for designing a new

Warehouse which was not used 46,800

$ 136,400

(3) Miscellaneous expenses

Expense accounts for overseas

sales persons 24,500

Christmas gifts to office staff by owners 11,800

$ 36,300

(4) Subscriptions and donations

Subscriptions to local newspapers 1,200

Donation to owners alumni university

overseas 7,000

Contribution to local football team 5,800

$ 14,000

(5) Travel and entertainment

Travel by owners to conference in

Miami for restaurant owners 5,000

Entertainment of overseas travel agents 3,000

Purchase of new bus to transport staff 30,000

Maintenance and upkeep of staff bus 12,000

$ 50,000

REQUIRED:

(a) Calculate the corporation tax assessable and payable if these restaurants are located in Jamaica, Trinidad or St Lucia (Select only 1 country) [15 marks]

As part of the calculation, indicate as a note why any item in the financial accounts has been excluded. (You must indicate which country you have selected)

Corporation tax rates

Jamaica 30%

Trinidad 25%

St Lucia 30%

(b) Identify 5 documents that must accompany the corporation tax return when it is filed.