CPA
Advanced Leval
Advanced Tax November 2018
Suggested Solutions

Maendeleo ltd Computation of taxable profit or loss for the year ended 2017

Net profit Add back: Disallowable expenses Management fee to export have bal, Purchase of furnitures Penalties on overdue VAT Impairment loss Goodwill written off Depreciation Input vat on purchases 174,000 × 16 / 116 Less: Non taxable incomes Insurance recovery for motor vehicle Proceeds from sale of factory extension Bad debt (3,000 × 80% × 10%) Less: Allowable expenses Capital allowance W1 Taxable profit

Sh. 000 1,381,886 4,840 420 164 150 162 1,480 24,000 (968) (4,690) (240) (2,272.5) 1,404,932

(ii) Tax liability for the year

Tax payable 30% x 1,404,932 = 421,479.6

(iii) Any other payable by the company

Disposal proceeds Less: cost of the asset Repainting cost Revaluation fee Capital gain	2,800 75 146.8	4,690 (3,021.8) 1,668.2

Capital gain tax 5% × 1,668,200 = 83,410

Working for capital allowance

(i) ID was provided for year 2016 and it occur once

IBD
Item Staff quarter Godown Retail shop Show room Staff canteen	Qualifying cost Sh"000" 7,600 800 400 800 1,900	Rate 10% 10% 25% 25% 10%	Allowance 760 80 100 200 190 1,330

Wear and tear
Delivery van Forklift Furnitures	25% x 1,750 37.5% x 980 12.5%(680 + 420)		437.5 367.5 137.5 942.5

The capital allowance 1,330 + 942.5 = 2,272.5

(i) Deductible input tax.

Input tax Purchases of standard rate Purchase of delivery van and fuels Repair of office furniture Audit fees Purchase of stationery Electricity bill Legal fees Debit note received Imports Output tax Sales at standard rate Export to Egypt Sales at zero rate Bad debt Credit note issued Total supplies Standard rate supplies Zero rate supplies Exempt supplies

4,060,000 x 16 / 116 371,200 x 16 / 116 23,200 x 16 / 116 60,320 x 16 / 116 55,680 x 16 / 116 46,400 x 16 / 116 40,600 x 16 / 116 580 x 16 / 116 180 x 120% x 16% 6,960,000 x 16 / 116 1,200,000 x 0% 400,000 x 0% 139.2 x 16 / 116 29 x 16 / 116 6,960 - 960 1,200 + 400

Sh 000 560,000 51,200 3,200 8,320 7,680 6,400 5,600 80 34.56 642,514.56 Sh 000 960,000 0 0 (19.2) (4) 959,976.8 6,000,000 1,600,000 1,500,000 9,100,000

(ii) Output tax.

Output tax Sales at standard rate Export to Egypt Sales at zero rate Bad debt Credit note issued

6,960 × 16/116 1,200,000 × 0% 400,000 × 0% 139.2 x 16 / 116 29 × 16 / 116

Sh 000 960,000 0 0 (19.2) (4) 959,976.8

(iii) Value added tax payable

VAT Payable = Output tax - Input tax

959,976,800 - 536,605,567 = 423,371,233

(iv) Additional information to enquire

• Details about the court relying on the debtor who was declared bankrupt

• Original vouchers and receipts for all sales and purchases at standard rate

(i) Total value of goods imported.

Cost of goods Custom duty Additional duty Railway levy Secondary education less Higher education less Total value of good

20% x 500,000 15% x 500,000 (2% × 675) (2% x 675) (1% × 675)

500,000 100,000 75,000 675,000 13,500 13,500 6,750 708,750

(ii) Total duty payable.

100,000 + 75,000 + 13,500 + 13,500 + 6,750 = 208,750

(i)

Mafuta petroleum company Itd Computation of taxable profit or loss for the year 2017
Incomes Sales Of Crude Oil - Export Sale Of Natural Gas Other Incidental Income Credit MOU Less: Allowable Expenses Production Expenses Adm. Cost Intangible Drilling Cost Non Profitable Royalties On Export Royalties On Local Sales Petroleum Investment Allowance Production Expenses (Note 3) Capital Allowance Taxable Profit	217,800 290,400 45,375 18,150 4,537.5 1,815 13,612.5 36,300 54,450	Sh 000 834,900 43,375 4,537.5 18,150 (682,440) 218,522.5

(ii) Tax liability

Tax liability 30% x 218,522,500 = 65,556,750

(iii) Significance off Memorandum of Understanding (MOU) in petroleum industry

it is granted to encourage investment in petroleum industry.