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Thin capitalization (see 16 (2) (i). A firm is said to be thinly capitalized if its debt / equity ratio is more than 3 times. For a thinly capitalized firm, controlled by 4 or less non-resident individuals, the interest expense associated with debt capital is restricted as allowable expense to the extent which the CIT may consider to be just and equitable. For the purpose of determine thin capitalization, debt capital will consist of.-
- Long term debt / loan
- short term loans
- Bank overdraft
- trade creditors
- Overdrawn bank accounts
Wilfykil answered the question on February 25, 2019 at 09:52
- List four circumstances under which duty paid on imports is refundable(Solved)
List four circumstances under which duty paid on imports is refundable
Date posted: February 25, 2019. Answers (1)
- The following information relates to Vuma Limited. For the year ended 31 December 2004,(Solved)
The following information relates to Vuma Limited. For the year ended 31 December 2004,
1. The company's operating profit before tax amounted to sh. 2,000,000, excluding sh. 400,000 from investment activities
2. The company intends to distribute sh. 200,000 as dividend for the year ended 31 December 2004.
3. The corporate tax is 30%,
Required:
Compute the shortfall tax payable by Vuma Limited for the year ended 31 December 2004.
Date posted: February 25, 2019. Answers (1)
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Under what circumstances are imported goods considered to have been dumped in your country.
Date posted: February 25, 2019. Answers (1)
- The following details were extracted from the books of Abib Traders. VAT No.A11146789P for the month of December 2005.(Solved)
The following details were extracted from the books of Abib Traders. VAT No.A11146789P for the month of December 2005.
Date posted: February 25, 2019. Answers (1)
- Mr. A. Wakaba started a retail business on 1 January 2000. He has not been filling income tax returns for the six years to 31...(Solved)
Mr. A. Wakaba started a retail business on 1 January 2000. He has not been filling income tax returns for the six years to 31 December 2005.
An investigation of his affairs revealed the following:
1. The balance sheet of the retail business as at 31 December 200 was as shown below:
Date posted: February 25, 2019. Answers (1)
- Zawadi Ltd is a Nakuru based company dealing in a variety of VAT designated goods. The following transactions were recorded for the month of September...(Solved)
Zawadi Ltd is a Nakuru based company dealing in a variety of VAT designated goods. The following transactions were recorded for the month of September 2006:
Date posted: February 25, 2019. Answers (1)
- Mr. Dickson Maelfu is a-businessman with interests in the manufacturing sector. He is facing a back duty investigation by the revenue authority which suspects that...(Solved)
Mr. Dickson Maelfu is a-businessman with interests in the manufacturing sector. He is facing a back duty investigation by the revenue authority which suspects that he has been under - declaring income four years from year 2003 to year 2006.
You are the head of the team from the revenue authority conducting this investigation. Maelfu has submitted to you records of his private and business assets and liabilities from 1 January 2003 to 31 December 2006 as shown below.
Date posted: February 25, 2019. Answers (1)
- Mr. Elias Hodari is a businessman dealing in both vatable and non vatable goods. He is registered for value added tax (VAT) purposes.
The following transactions...(Solved)
Mr. Elias Hodari is a businessman dealing in both vatable and non vatable goods. He is registered for value added tax (VAT) purposes.
The following transactions relate to his business during the month of April 2008:
7 April: Imported men's suits from Dubai (United Arab Emirate) for sh. 3,600,000.
9 April: Purchased motor vehicle spare parts from a local dealer for sh. 500,000.
10 April: Exported motor vehicle spare parts to Uganda and received sh. 800,000.
14 April: Sold ten bales of second hand clothes to retail traders at a local market for sh. 80,000 per. bale,
14 April: Purchased materials to construct a godown at Nairobi's Industrial area for sh. 960,000.
17 April: Paid the godown construction firm a deposit of sh 800,000 to commence the construction.
The contract price was agreed at sh. 1,800,000 with the balance being payable on completion of the" go- down construction.
21 April: Sold men's suits to a local trader for sh. 4,800,000.
22 April: Supplied motor vehicle spare parts worth sh. 600,000 to the Armed forces of Kenya.
25 April: Purchased women's clothes from a local fashion designer for sh. 1,200,000.
25 April: Supplied non-vatable goods to a VAT registered trader for.sh. 900,000.
26 April: Some of the men's suits imported from Dubai were found to be of poor quality and returned to the exporter in Dubai. A credit note of sh. 450,000 was issued by the exporter to Mr. Hodari.
30 April: The Company's hired godown was broken into and men's suits valued at sh. 720,000 were stolen.
Transactions are stated as VAT inclusive where applicable
The standard rate of VAT is 16%.
Required:
The VAT payable (or refundable) by Mr. Hodari for the month of April 2008 (ignore customs duty and restrictions on deductible input tax).
Date posted: February 25, 2019. Answers (1)
- Samia Ltd. reported the following income during the year ended 31 December 2007:(Solved)
Samia Ltd. reported the following income during the year ended 31 December 2007:
Date posted: February 25, 2019. Answers (1)
- Alexus Mumila has not maintained proper books of account for his business since commencing operation in year 2005.
An investigation of his personal and business assets...(Solved)
Alexus Mumila has not maintained proper books of account for his business since commencing operation in year 2005.
An investigation of his personal and business assets and liabilities revealed the following balances at the end of each of the years specified below:
Required:
i. Capital statements for each of the years ended 31 December 2005, 2006, 2007 and 2008
ii. Taxable income (if any) of Alexus Munila for each of the years ended 31 December 2006, 2007 and 2008
iii. Comment on any issues that you may wish to seek clarification on from Alexus Munila based on your analysis in (i) and (ii) above.
Date posted: February 25, 2019. Answers (1)
- Mwanzo Ltd made sales to Mwisho Ltd. as shown below during the month of October 2009.(Solved)
Mwanzo Ltd made sales to Mwisho Ltd. as shown below during the month of October 2009.
Mwisho Ltd. was wound up on 30 October 2009 by which date the company had paid Sh. 5,000,000 to Mwanzo Ltd in relation to the transaction for October 2009.
Assume the payments by Mwisho Ltd. were made in proportion to the nature of sales
Amounts are reported as exclusive of VAT at the rate of 16% where applicable.
Required:
Determine the bad debt relief due to Mwanzo Ltd. in relation to the above transaction
Date posted: February 25, 2019. Answers (1)
- Briefly explain two conditions under which bad debt relief on VAT might be provided(Solved)
Briefly explain two conditions under which bad debt relief on VAT might be provided
Date posted: February 25, 2019. Answers (1)
- Makosa Maingi has not been maintaining proper books of accounts since inception of the business in the year 2007. The following balances were obtained from...(Solved)
Makosa Maingi has not been maintaining proper books of accounts since inception of the business in the year 2007. The following balances were obtained from the available business records for the four-year period ended 31 December 2010
Date posted: February 25, 2019. Answers (1)
- Your client, Malipo Enterprises, had been operating since 1 January 2008 without filing income tax returns. The rapid but unexplained growth of the firm was...(Solved)
Your client, Malipo Enterprises, had been operating since 1 January 2008 without filing income tax returns. The rapid but unexplained growth of the firm was brought to the attention of the tax-officers through die public media. The revenue authority officers lodged investigations from the period I January 2008 to 31 December 20] I and filed the following details from the business records:
Date posted: February 25, 2019. Answers (1)
- Assume that you are a senior tax assessor with the revenue authority of your country. You have been conducting back-duty investigations on a taxpayer and...(Solved)
Assume that you are a senior tax assessor with the revenue authority of your country. You have been conducting back-duty investigations on a taxpayer and are now about to make your final recommendations on the action to be taken against the taxpayer.
Required:
Discuss five factors that you would take into account in making your final recommendations
Date posted: February 25, 2019. Answers (1)
- Explain The main tax incentives available to investors setting up companies in the Export Processing Zones (EPZs) in Kenya(Solved)
Explain The main tax incentives available to investors setting up companies in the Export Processing Zones (EPZs) in Kenya
Date posted: February 25, 2019. Answers (1)
- Charitable trusts are nonprofit making organizations formed with the objective of promoting the social well-being of the general public. With reference to sections 25 and...(Solved)
Charitable trusts are nonprofit making organizations formed with the objective of promoting the social well-being of the general public. With reference to sections 25 and 26 of the income tax act (cap 470), explain the tax treatment of the charitable trusts
Date posted: February 25, 2019. Answers (1)
- Bima Insurance Company Limited is registered in Kenya to carry out life and general insurance business. From its general ledger and other records for the...(Solved)
Bima Insurance Company Limited is registered in Kenya to carry out life and general insurance business. From its general ledger and other records for the year ended 31 December 2003, you have been able to extract the following information:
Date posted: February 25, 2019. Answers (1)
- The management of Shamrock Bank Ltd. Has sought your professional guidance in determining the Bank’s tax liability for the year ended 31 December 2003.(Solved)
The management of Shamrock Bank Ltd. Has sought your professional guidance in determining the Bank’s tax liability for the year ended 31 December 2003.
The income statement of Shamrock Bank Ltd. For the year ended 31 December 2003 is given below:
Date posted: February 25, 2019. Answers (1)
- Alpha 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...(Solved)
Alpha 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 2004:
Date posted: February 25, 2019. Answers (1)