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Concept of residence for incorporated entities.
A limited company is considered residence in Kenya if:
i) It was registered in Kenya
ii) It was not registered in Kenya but the board meetings took place in Kenya i.e. management and control was exercised in Kenya
iii) It was declared residence by the minister of finance through a notice in the Kenya Gazette
Deductions allowed against rental income.
Rent is an income from rights granted to another person for use or occupation of any property.
Allowable deductions on rent income
- Expenses incurred on structural alterations to the premises where such alteration are necessary to maintain the existing rent
- Maintenance expenditure on the up keeps of the property which includes land rent and rates.
Salary and wages insurance, repairs etc.
- Bad debts in the form of unrecoverable rent
- Interest on mortgage taken to set up the property
- Legal cost on debt recovery and in defense of property rights.
- Legal cost in respect of acquisition of a lease for a period of not more than 99 years
- Capital allowances related to the use of the building
- Reasonable advertising and promotional costs
- Management fees or commission paid to property agents
- Expenditure incurred in the regular inspection of premises by the landlord or his agent
Wilfykil answered the question on February 13, 2019 at 13:43
- Companies undergoing the process of liquidation are required to address a number of issues, one of which concerns taxation of the income received by the...(Solved)
Companies undergoing the process of liquidation are required to address a number of issues, one of which concerns taxation of the income received by the company or distributed to shareholders as dividend.
In the context of the above statement, briefly explain the taxation of the following:
i) Income received by company under liquidation.
ii) Dividend distributed to shareholders during the process of liquidation.
Date posted: February 13, 2019. Answers (1)
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The following Information was extracted from the financial records of the...(Solved)
Linda Insurance Company Ltd. provides motor vehicle and fire insurance covers to its policy holders
The following Information was extracted from the financial records of the company for the year ended 31 December 2009:
Prepare:
i) The taxable profit / loss for Linda insurance Company limited for the year ended 31 December 2009
ii) Tax payable (if any) by the company for the year ended 31 December 2009
Date posted: February 13, 2019. Answers (1)
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The Commissioner for Domestic Taxes may require certain persons either in their individual or official capacity to furnish a return of income to the revenue authority at any time. List two categories of such persons.
Date posted: February 13, 2019. Answers (1)
- Rift Valley Ltd. is in the business of farming. The following income statement was obtained from the books of the company for the year ended...(Solved)
Rift Valley Ltd. is in the business of farming. The following income statement was obtained from the books of the company for the year ended 31 December 2009:
Prepare:
(i) A statement of adjusted taxable profit (or loss) for the year ended 31 December 2009.
(ii) Tax payable (if any) by the company
Date posted: February 13, 2019. Answers (1)
- Malipo Pole Traders sells television sets on hire purchase terms. The firm purchases the television sets at Sh.20,000 per unit. The terms of sale require...(Solved)
Malipo Pole Traders sells television sets on hire purchase terms. The firm purchases the television sets at Sh.20,000 per unit. The terms of sale require a deposit of Sh.4,000 per unit and seven monthly installments of Sh.3,000 each.
- For the year ended 31 December 2010, the business reported the following: 120 units were sold.
- 10 units were repossessed after two months' installments had been paid.
- Another 10 units were repossessed after three months installments had been paid. All the repossessed units were valued at Sh. 16,000 per unit.
- Total cash collected during the year was Sh.2,000,000.
- Salaries and wages for the year amounted to Sh.200,000.
Prepare Taxable profit or loss for Malipo Pole Traders for the year ended 31 December 2010.
Date posted: February 13, 2019. Answers (1)
- Amos Mamboleo has not been filing his annual income tax returns since he was employed. The revenue authority has issued him with an assessment for...(Solved)
Amos Mamboleo has not been filing his annual income tax returns since he was employed. The revenue authority has issued him with an assessment for the year 2010 of Sh.1,200,000 which he refutes. He has approached you for advice and has provided the following details:
1. Basic salary Sh.120,000 (pay as you earn tax Sh. 17,500) per month.
2. The employer contributed for him Sh.8,000 per month to his children‘s education insurance policy.
3. He had salary arrears for the year 2009 of Sh400,000 which he was paid on 1 July 2010. His gross salary during the year 2009 was Sh960,000 (pay as you earn tax Sh184,000)
4. He secured a bank loan on 1 October 2010, of sh.4,800,000 at 15% interest per month which he used to purchase a house. He leased the house to the employer at a monthly rental income of Sh 80,000 which effect from 1 November 2010.
5. He is housed by the employer in a leased house where the company pays rent on quarterly basis of Sh300,000 per quarter.
6. He controls 18% of the share capital issued by the employer. During the year ended 31 December 2010, he received dividends on the shares of Sh.95,000 net of withholding tax.
7. He uses a company car of the employer has leased at a monthly charge of Sh40,000.
8. His other income comprised:
Prepare:
(i) Taxable income and the tax thereon for Amos Mamboleo for the year ended 31 December 2010.
(ii) Advise Amos Mamboleo on whether he should object to the assessment issued by the revenue authority.
Date posted: February 13, 2019. Answers (1)
- Malipo Ltd. is in the business of packaging flowers for the export market. The following is the draft statement of comprehensive income for the year...(Solved)
Malipo Ltd. is in the business of packaging flowers for the export market. The following is the draft statement of comprehensive income for the year ended 31 December 2010:
Prepare:
(i) A statement of adjusted taxable profit or loss for the company for the year ended 31 December 2010.
(ii) Tax payable (if any) by the company for the year ended 31 December 2010.
Date posted: February 13, 2019. Answers (1)
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Outline four roles of professional ethics in tax practice
Date posted: February 13, 2019. Answers (1)
- Charles Temo is expecting to retire from employment after six months. He will be sixty years of age at the time retirement. He expects to...(Solved)
Charles Temo is expecting to retire from employment after six months. He will be sixty years of age at the time retirement. He expects to receive both a lump sum amount on the date of retirement and an annuity payable over the next ten years or until his death, whichever occurs first.
He is aware that the government has introduced certain changes impacting on the taxation of pension income. He approached you for advice on how these changes could affect the taxation of his pension income.
Required:
With reference to the tax rules and regulations in force as at 31 December 2010, advise Charles Temo on taxation of pension income.
Date posted: February 13, 2019. Answers (1)
- Alex Karama is employed by Ziada Ltd. as a sales manager. He has provided the following information relating to his income for the year ended...(Solved)
Alex Karama is employed by Ziada Ltd. as a sales manager. He has provided the following information relating to his income for the year ended 31 December 2010
1. His monthly basic salary was Sh.50,000 (pay as you earn (PAYE) Sh.14,800 per month).
2. He was also entitled to a commission of 5% based on average monthly sales made in a year. The average sales per month during the year amounted to Sh.l04,400 inclusive of value added tax (VAT) at the rate of 16%.
3. He lived in a company house until 30 September 2010 and paid a nominal rent of Sh.5,000 for the house. The market rental value of houses in the estate was Sh.50,000 per month.
4. He was provided with a company car of 2400 cc whose cost at the time of purchase was Sh.800,000. The car was purchased in year 2008. Depreciation on motor vehicles is at the rate of 20% per annum on cost
5. The education fees for his two daughters amounting to Sh360,000 were paid by the company The company had not debited the fees in the statement of comprehensive income for the year ended 31 December 2010
6. He purchased a house and moved in on 1 October 2010, through a mortgage loan of Sh.5,000,000 at an interest rate of 12% per annum. The initial deposit of Sh.1,400,000 was advanced to him by the company at an interest rate of 8% per annum. The market interest rate during the period was 10% per annum.
7. He is a member of a home ownership savings plan, and contributed Sh.5,000 per month up to the acquired the mortgage loan.
8. He has a life assurance policy where the company paid Sh.10,000 for him per month.
9. He holds 12% of the share capital of Ziada Ltd. while his wife controls 6% of the share capital in the company
10. Both Mr Alex Karama and the wife contributed to a registered pension scheme Sh.36,000 per month while the employer contributed an equal amount.
11. He received dividends from Chai Co-operative Society Ltd. of Sh.34,000 (net) and interest on 30 year infrastructure bonds of Sh.36,000 (gross) during the year.
12. He received a monthly pension ofSh.25,000 from a previous employer.
13. His other income during the year included:
- Professional loss for the year Sh.64,000 (part-time consultancy).
- Rental income Sh.420,000 excluding cost of purchase of furniture Sh.90,000.
- Farming loss Sh.124,000.
Compute for Mr Alex Karama for the year ended 31 December 2010:
(i) Taxable income.
(ii) Tax liability.
Date posted: February 13, 2019. Answers (1)
- State the cardinal rule in taxation of employment income in your country(Solved)
State the cardinal rule in taxation of employment income in your country
Date posted: February 13, 2019. Answers (1)
- Comment on the treatment of the following items for tax purposes
i) Education fees paid by an educational institution for income employees‘ dependents attending the institution
ii)...(Solved)
Comment on the treatment of the following items for tax purposes
i) Education fees paid by an educational institution for income employees‘ dependents attending the institution
ii) Income received for disabled persons
iii) Non-cash benefits
iv) Medical benefits provided to non-whole time service director
v) Registered employee share ownership plans
Date posted: February 13, 2019. Answers (1)
- Ms Sharon Olembo is a citizen of Kenya while Mr Pierre Antoine is a citizen of Cameroon. Both individuals earn various investment income from Kenya....(Solved)
Ms Sharon Olembo is a citizen of Kenya while Mr Pierre Antoine is a citizen of Cameroon. Both individuals earn various investment income from Kenya. For the past three year period ended 31 December 2010, MsOlembo has been in Kenya for an average of 230 days per year, while Mr Antoine has been In Kenya for an average of 59 days per year.
Required:
i) Withholding tax payable in Kenya by Mr Olembo and Mr Antoine for the year 31 December 2010.
ii) Summarize three challenges of administering withholding tax in your country
Date posted: February 13, 2019. Answers (1)
- Ojwang, Awino and Ochieng are partners trading as Okode Enterprises. Ojwang and Awino are active partners while Ochieng is a sleeping partner. The partnership agreement...(Solved)
Ojwang, Awino and Ochieng are partners trading as Okode Enterprises. Ojwang and Awino are active partners while Ochieng is a sleeping partner. The partnership agreement was silent on the profit and loss sharing ratio.
The partners have presented the following statement of comprehensive income for the year ended
Required:
(i) The adjusted partnership profit or loss for the year ended 31 December 2011
(ii) Distribution schedule of the profit or loss calculated in (i) above
Date posted: February 13, 2019. Answers (1)
- Abiud Kageni is an employee of Tala Ltd. He has provided the following details relating to his employment income and other benefits for the year...(Solved)
Abiud Kageni is an employee of Tala Ltd. He has provided the following details relating to his employment income and other benefits for the year ended 31 December 2011.
1. Monthly salary Sh 124,000 (PAYE tax Sh34,100)
2. School fees for his daughter amounting to Sh.64,000 was paid by the employer and deducted as an expense
3. His monthly salary was increased on 1 December 2011, by Sh.20,000 and backdated to 1 September 2011.
4. The company provided him with airtime worth Sh.5,000 per month. It was estimated that 50% of his calls were non-business related.
5. Passages to facilitate his family to move from South Africa to Kenya amounted to Sh.150,000
6. A fully furnished house whose cost of furniture was Sh.240,000.
7. A life insurance cover whose annual Insurance premium amounted to Sh.72,000.
8. A motor vehicle (2000 cc) whose cost was Sh.600,000 at the time of purchase on 1 January 2008.
9. AbiudKageni controls 15% of the share capital of the company. The company gave the wife free gifts valued at Sh.25,000 during the end of year party.
10. He is a member of the company's registered pension scheme where he contributes 20% of his basic salary. The employer contributes an equal amount.
11. The company gave AbiudKageni a loan of Sh.5,000,000 at an interest rate of 4% per annum. The market interest rate is 9% per annum.
12. The company paid medical bills amounting to Sh.1,200,000 following hospitalization of his son.
13. AbiudKageni's other incomes included: Farming loss Sh.194,000
Rental income Sh.240,000
Compute the following for the year ended 31 December 20 I I:
(i) Taxable income for Abiud Kageni.
(ii) Tax liability (if any) on the income in (i) above.
(iii) Fringe benefit tax.
Date posted: February 13, 2019. Answers (1)
- The management of Ndimu Ltd. has presented the following statement of comprehensive income for the year ended 31 December 2011
Required:
(i) Adjusted taxable profit or loss...(Solved)
The management of Ndimu Ltd. has presented the following statement of comprehensive income for the year ended 31 December 2011
Required:
(i) Adjusted taxable profit or loss for Ndimu Ltd. for the year ended 31 December
(ii) The tax thereon (if any).
Date posted: February 13, 2019. Answers (1)
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Outline four conditions which must be fulfilled for passage to be excluded from taxation of an employee's income.
Date posted: February 13, 2019. Answers (1)
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Limuru Enterprises Ltd. operates a hotel complex in Nairobi. The hotel presented the following set of data from the accounting records for the year ended 31 December 2011:
Prepare A statement of adjusted taxable profit or loss for Limuru Enterprises Ltd for the year ended 31 December 2011.
Date posted: February 13, 2019. Answers (1)
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i) The income of a taxable person is assessed on another person.
ii) A married woman might be called upon to bear...(Solved)
Highlight three circumstances under which:
i) The income of a taxable person is assessed on another person.
ii) A married woman might be called upon to bear a tax burden.
Date posted: February 13, 2019. Answers (1)
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Briefly explain what is meant by a cascade tax.
Date posted: February 13, 2019. Answers (1)