The transfer of funds back to the partner represents a flow of cash but it has no relevance to income or earnings so it isn't taxable to the partner receiving the repayment and the amount flowing out of the business doesn't qualify as a deductible expense.
Kagwimah answered the question on June 22, 2019 at 06:14
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(i) Motor vehicle licences
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(i) Motor vehicle licences
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- Mr. Anania Tajiri is a prominent businessman owning several residential houses located in upmarket areas, Commencing 1 February 2008, he rented out three of his...(Solved)
Mr. Anania Tajiri is a prominent businessman owning several residential houses located in upmarket areas, Commencing 1 February 2008, he rented out three of his houses at a monthly rental of Sh.85,000 each. The tenants were required to pay a three months deposit before occupying the houses
The following expenses were incurred by Mr. Tajiri in February 2008:
- Furnishing of the houses - Sh.200,000 per house.
- Legal fees for drawing rental agreements - Sh.13.000 per agreement Valuation fee for the three houses - Sh.33,000.
- Insurance premium for the three houses for the period I February 2008 to 31 January 2009 – Sh60,000
The insurance policy for the houses was renewed on 1 February 2009 at the same rate and terms
Mr. Tajiri has provided the following additional information for years 1008 and 2009:
1. Land rates paid for 2008 amounted to Sh. 150,000 while for 2009 the amount paid was Sh.165,000
2. The cost of garbage collection per house was Sh.250 for each month that the house was occupied. The rental agreement provided that the landlord was responsible for paying this amount to the garbage collection company.
3. The three houses were served by three watchmen and one gardener who were each paid Sh.5,500 per month by the landlord This amount was increased by 11% with effect from 1 May 2009 following a directive by the government en minimum wage levels.
4. The rent for each month was collected by an estate agent on behalf of the landlord. The estate agent charged a fee equivalent to 2.5% of the rent collected.
5. Interest charged on a loan used to develop the three house amounted to Sh.660,000 in 2008 and Sh624,000 in 2009.
6. In December 2008, the- landlord repainted the houses at a cost of Sh.60,000 and repaired a side road leading to the houses at a cost of Sh. 100,000.
7. The Landlord bas signed contract with a local firm of architects and engineers for inspection of his properties in December of each year. The annual inspection fee charged by the firm for the three houses is Sh15,000.
8. In March 2009, Sh.160,000 was incurred by the landlord to repair a leaking roof in one of the houses.
9. In April 2009, one of the tenants passed away. The tenant had rent arrears of four months, including April 2009, which the landlord partially set-off against the three- months deposit paid by the tenant. The balance of the debt was written off as unrecoverable. The house remained vacant until a new tenant moved in on 1 June 2009. The monthly rent (for the new tenant only) was increased to Sh.90,000. The landlord spent Sh.14,000 as legal fees in relation to a rental agreement with the new tenant.
10. In August 2009, the landlord spent Sh.8,500 in erecting a signboard at the junction of the side road leading to the houses and tile main road.
11. In November 2009, the landlord completed the construction of a common swimming pool for the three tenants at a cost of Sh.2,000,000. He agreed with the tenant, that the rent for each house would be increased by Sh.l5,000 per month with effect from December 2009 in view of the additional facility.
Determine Taxable rental income of Mr. Anania Tajiri for the years ended 31 December 2008 and 31 December 2009.
Assume that the watchmen and gardener are not allocated to a particular house but serve the three houses as a unit.
Date posted: February 15, 2019. Answers (1)
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i) Royalties
ii) Dividends from co-operative societies
iii) Pension income
iv) Interest on housing development bonds(Solved)
Explain the taxation of each of the following incomes
i) Royalties
ii) Dividends from co-operative societies
iii) Pension income
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Date posted: February 15, 2019. Answers (1)
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i) Dividend income
ii) Interest income
iii)Rent income(Solved)
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i) Dividend income
ii) Interest income
iii)Rent income
Date posted: February 15, 2019. Answers (1)
- Explain the taxation of each of the following incomes received by a resident person:
i) Pension income.
ii) Interest on housing development bonds.
iii)Dividends from co-operative societies(Solved)
Explain the taxation of each of the following incomes received by a resident person:
i) Pension income.
ii) Interest on housing development bonds.
iii)Dividends from co-operative societies
Date posted: February 15, 2019. Answers (1)
- Potea Limited has received an assessment of sh. 260,000 from the tax authority representing fines and penalties for failure to comply with tax regulations during...(Solved)
Potea Limited has received an assessment of sh. 260,000 from the tax authority representing fines and penalties for failure to comply with tax regulations during the year ended 31 December 2007 Information available from the company‘s records for year 2007 revealed the following:-
1. The company failed to deduct sh. 300,000 as pay as you earn (PAYE) from allowances paid to the directors of the company during the year
2. The company underestimated the installment tax for year 2007 by sh. 200,000
3. The balance of the corporation tax for the year ended 31 December 2006 amounting to sh. 180,000 was due for payment on 30 April 2007. However, this tax had not been paid as at 31 December 2007
4. The company had not displayed the value added tax (VAT) registration certificate as required under the VAT Act (Cap 476)
Verify the accuracy of the above assessment by the tax authority as at 31 December 2007 and advice Potea Limited as appropriate
Date posted: February 15, 2019. Answers (1)
- With reference to the customs and Excise Act (Cap, 272), distinguish between the following terms
i) Customs warehouse and bonded warehouse
ii) Prohibited goods and restricted goods(Solved)
With reference to the customs and Excise Act (Cap, 272), distinguish between the following terms
i) Customs warehouse and bonded warehouse
ii) Prohibited goods and restricted goods
Date posted: February 15, 2019. Answers (1)
- The entries in the sales ledger and purchases ledger of Jamaa traders for the months of March and April 2008 were as follows:-
Any value added...(Solved)
The entries in the sales ledger and purchases ledger of Jamaa traders for the months of March and April 2008 were as follows:-
Any value added tax (VAT) due to the tax authorities is remitted by Jamaa Traders on the Interest date specified in the VAT Act (Cap 476).
Note: Entries in the ledger accounts were exclusive of VAT. The standard rate of VAT is 16%
Determine A VAT account showing separately the VAT payable (or refundable) for the months of March and April 2008
Date posted: February 15, 2019. Answers (1)
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In August 2008, the company imported goods costing sh. 2,400,000 excluding freight charges of sh. 60,000
The company then incurred sh....(Solved)
Biashara Limited is registered for VAT
In August 2008, the company imported goods costing sh. 2,400,000 excluding freight charges of sh. 60,000
The company then incurred sh. 400,000 to transport the goods from the port to its warehouse
The processing costs were 20% of the relevant costs incurred up to the point of processing The goods were subsequently at a profit margin of 33 1/3%
Determine The VAT payable on the above transaction (Use a VAT rate of 16% and customers duty rate of 25%)
Date posted: February 15, 2019. Answers (1)
- The following transactions represent the sales and purchases of Thurugen Traders for the six months period ended 30 June 2008
Determine The total VAT payable by...(Solved)
The following transactions represent the sales and purchases of Thurugen Traders for the six months period ended 30 June 2008
Determine The total VAT payable by (or refundable to) Thurgem Traders for six month period ended 30 June 2008
Date posted: February 15, 2019. Answers (1)
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State four conditions under which import duty may be offset against income tax
Date posted: February 15, 2019. Answers (1)
- With reference to the operations of the customs and Excise Act, write brief notes on the following
i) Duty free shop
ii) Excusable goods
iii) Bonded warehouse(Solved)
With reference to the operations of the customs and Excise Act, write brief notes on the following
i) Duty free shop
ii) Excusable goods
iii) Bonded warehouse
Date posted: February 15, 2019. Answers (1)
- Sabina and Associates, a consultancy firm, provided vatable services to the following clients over the eight month period ended 31 August 2009. The terms of...(Solved)
Sabina and Associates, a consultancy firm, provided vatable services to the following clients over the eight month period ended 31 August 2009. The terms of contract allowed clients to pay for the services either before or after the provision of service
Determine VAT payable by (or refundable to) Sabina and Associates for each of the months shown above. Although VAT contributes significantly to government revenue, it has limitations which impact on the government, taxpayers and the economy at large.
Explain six of these limitations.
Date posted: February 15, 2019. Answers (1)
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Date posted: February 15, 2019. Answers (1)
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(i) Mr Jan Philips is an expatriate working for a...(Solved)
As a tax specialist, briefly explain how you would treat the following issues for tax purposes:
(i) Mr Jan Philips is an expatriate working for a non-resident company in your country. During the year ended 31 December 2008, he received a passage allowance of Sh400,000 to enable him visit his family in his horn country. He did not include the passage allowance as part of his employment income for the year ended 31 December 2008.
(ii) Trans Country Bus Services Ltd. runs a public service transport business in your country. The bus company also undertakes transport business across the borders to the neighbouring countries. The company did not include the revenue arising from cross- border transport amounting to Sh.2,000,000 in its tax returns for the year ended 31 December 2008.
(iii) During a business trip to Dubai, Mrs Agnes Latoya, a resident of your country, purchased ten suits for her husband's use at a cost of Sh.300,000. However, upon her return the husband did not like the suits.
Mrs Agnes Latoya thereafter sold the suits and realised a profit of Sh.50,000. She included this profit with her other income for the year ended 31 December 2008.
(iv) Rahani Hotels Ltd. offered the following services to foreign tourists for which it did not charge VAT:
- Restaurant services.
- Game drives.
(v) The revenue authority has written to the hotel demanding payment of the VAT on the above services.
Date posted: February 15, 2019. Answers (1)