Taxation Questions and Answers 2008

TAXATION
QUESTIONS AND ANSWERS 2008
by
JONATHAN HORE
[Bsc Econ (Hons-UZ): A.I.C.T.A (Z)]
EDITED BY
ANDERSON SIBANDA
[Bsc Econ (Hons-UZ): A.C.I.S]
Taxation Questions and Answers 2008 Jonathan Hore i

PREFACE
Taxation Questions and Answers 2008 was written to assist all students studying Taxation in
Zimbabwe. The book features 11 past exam papers from the Institute of Chartered Secretaries and
Administrators (C.I.S), 5 from the Zimbabwe Association of Accounting Technicians (Z.A.A.T-
now S.A.A.A), 6 from the Institute of Chartered Accountants of Zimbabwe (I.C.A.Z) and 1 from
the Institute of Administrators and Commerce (IAC).
All the questions were used with the permission of the respective bodies and minor changes were
made to some questions (especially dates and figures) in order for them to be in line with current
legislation and for them to be applicable to 2008 Taxation students. It also features 7 questions set
by the author, mainly to cater for some of the special areas which examiners usually pick on.
Detailed and explained solutions, which make much reference to the Tax Acts and decided tax
cases are also provided. The book can thus be used by any student of Taxation, including those
studying for their I.C.A.Z, C.I.S, S.A.A.A, H.E.X.C.O, A.C.C.A, CIMA and University exams. It
should be emphasized that whilst the book carries past exam papers from the said bodies,
students should attempt all questions, regardless of their respective bodies as the other
questions from the other bodies are relevant. This is so because all questions contained herein
are set upon the same tax legislation and practice.
It is highly recommended that this book be read together with Students Guide to Tax in
Zimbabwe-2006 (formerly Income Tax in Zimbabwe), which book was co-authored by the author
of this book. The text contained herein is modelled upon legislation that was in force as at 31
December 2007, that is it relevant for 2008 Taxation students. It is intended that updated versions
will be produced each year to cater for changes in tax laws. It is acknowledged that rates of tax
changed during the year 2007 and in certain cases two or more rates were enacted. In this text
however, the exempt portion on a bonus or bonuses used for all questions was $75m (although it
was $100 000 up to 31 October 2007) whilst the rates of motoring benefit for the last quarter of
2007 were taken to be the annual rates. Students should however do as their exams instruct.
Taxation Questions and Answers 2008 Jonathan Hore ii

I express my heartfelt gratitude to Anderson Sibanda (Bsc Econ-Hons-UZ; ACIS) of Gweru for
reviewing text on Income Tax and Capital Gains Tax as well as to Victor Ngwenya (BBSct-UZ)
also of Gweru for his contributions on VAT. I am very excited to produce this book, probably the
first Taxation book in Zimbabwe to be published on PDF and on CD/DVD.I am certain that it
will be instrumental in helping students pass their examinations. Every effort has been made to
ensure the accuracy and correctness of the text and figures contained herein but minor errors and
omissions can not be ruled out. I welcome any comments or criticism concerning this text.
Readers can do so by email on sowfin@yo.co.zw or on cell number 011 439 695 (after hours).
The following abbreviations shall stand for the words given against them:
CAP- Chapter SI- Statutory Instrument
CGTA- Capital Gains Tax Act CAP 23.01 Sn- Section
ITA- Income Tax Act CAP 23.06 VAT- Value Added Tax
Para- Paragraph ZIMRA- Zimbabwe Revenue Authority
Author- 1 March 2008
Taxation Questions and Answers 2008 Jonathan Hore iii

ABOUT THE AUTHOR
Jonathan Hore was born on 16 February 1976 in Seke. He did his primary education at St
Hughs primary school before moving to Goromonzi High School in 1990 for his
secondary and high school education. He then enrolled for a Bsc Economics degree at the
University of Zimbabwe in 1996. He joined the then Department of Taxes in July 1999 as
a Tax Officer and then worked as a Revenue Specialist from September 2001 to
November 2007 for the Zimbabwe Revenue Authority (ZIMRA). He joined a leading
chartered accountancy firm on 1 December 2007 as a Tax Supervising Senior, a position
he holds to date. He obtained a Postgraduate Diploma in Taxation in 2008 and is an
associate member of the Institute of Tax Accountants of Zimbabwe (I.C.T.A).
He co-authored the book Students Guide to Tax in Zimbabwe 2006 (formerly Income
Tax in Zimbabwe). He taught Taxation on a part time basis at Speciss College
Chitungwiza (2001), Educare Gweru (2002-2003), Gweru Polytechnic (2004),
Zimbabwe Open University Midlands (2005), Topflight College Gweru (2003-
2006) and City Study Centre Harare (2008).
COPYRIGHT AND SECURITY WARNING
This book is formatted in such a way that it can only be safe when forwarded to any
recipient from the publisher. Onward-forwarding to other persons by anyone who is not
the publisher is not safe. The publisher shall not be held responsible for any damage that
is occasioned by onward-forwarding of this book by unauthorized persons. It is also not
safe to burn or copy the information contained herein without instructions from the
publisher. Copyright subsists in this material. Reproduction in any form or unauthorized
forwarding without the written permission of the author or publisher, in addition to being
unsafe, is illegal.
Taxation Questions and Answers 2008 Jonathan Hore iv

CONTENTS
Questions
Unit 1 Individual Taxation
Unit 2 Business Taxation
Unit 3 Partnerships
Unit 4 Suspensive Sales
Unit 5 Farming
Unit 6 Mining
Unit 7 Capital Gains Tax
Unit 8 Value Added Tax
Unit 9 Administration
Unit 10 Deceased, Lease Improvements
and Double Taxation
Solutions
Tax figures and Facts for 2007
Unit 1 Individual Taxation
Unit 2 Business Taxation
Unit 3 Partnerships
Unit 4 Suspensive Sales
Unit 5 Farming
Unit 6 Mining
Unit 7 Capital Gains Tax
Unit 8 Value Added Tax
Unit 9 Administration
Unit 10 Deceased, Lease Improvements
and Double Taxation
Taxation Questions and Answers 2008 Jonathan Hore v

UNIT 1: INDIVIDUAL TAXATION
1) Jane Mhungu, 60 years old in January 2007 has been recommended for appointment as a non-executive
director for a recently launched financial institution. She has been told that in order for her to be appointed,
she first needs to produce a tax clearance certificate. She approaches you in your capacity as a tax advisor
for assistance in determining her tax status in respect of the tax year ended 31 December 2007 to enable her
to obtain the tax clearance certificate. She provides the following information relating to her earnings in
respect of the 2007 tax year.
1 January to 30 June 2007
During this period, she was employed as a Principal Director in the Zimbabwe Government Ministry of
Finance. On 30 June, she left the Ministry to join Flower Exports (Private) Limited as a Finance Executive.
Earnings from Government $
Gross Salary 1 120 000 000
Representation allowances 24 000 000
Entertainment allowances 6 000 000
Contributions to Government Pension Fund (8 400 000)
Approved Medical Aid Contributions (9 680 000)
Employee’s Tax Deducted (313 600 000)
During this period, Jane Mhungu had the free use of a Government issue vehicle, a Toyota Prado, which
had an engine capacity of 2800cc.
When Jane Mhungu resigned from Government employment on 30 June 2007, she was advised that her
contributions to the Government pension refund amounted to $40 926 315 and as at that date, she was entitled
to $26 000 000, being compensation for leave not taken.
1 September to December 2007

Ms Mhungu joined Flower Exports (Pvt) Ltd, a company operating in the Ruwa Export Processing Zone,
with effect from 01 September 2007. Her earnings from Flower Exports (Pvt) Ltd for the rest of the 2007
year were as follows:
Gross Salary $120 000 000

Employee’s Tax Deducted ($36 000 000)
She was also entitled to aggregate benefits (excluding motoring) of $70 000 000 for the period. The
benefits included $4 000 000 for medical cover. Ms Mhungu also had free use of a company issue vehicle,
a 2 000cc Mercedes Kompressor Sedan.
Taxation Questions and Answers 2008 Jonathan Hore 1

In November 2007, Flower Exports (Pvt) Ltd, incurred $8 000 000 being travel costs for Ms Mhungu who
had to attend a one week long Flower Fair in Brussels. Ms Mhungu extended her stay in Europe by one
week after the flower fair to undertake a private tour of the Benelux countries.
Non-Employment income earned during the 2007 tax year
Company dividends from South Africa (Gross) $12 000 000
(South African Tax Deducted at source: $1 800 000)
Gross rentals re inherited property at Umhlanga Natal South Africa 10 000 000
Gross Royalties from United Kingdom re sales of a book she had
co-authored in Zimbabwe 20 000 000
(United Kingdom tax deducted at source: $5 000 000)
REQUIRED
Compute the taxable income and resultant tax liability of Ms Mhungu in respect of the tax year ended 31
December 2007. [ICAZ 1 of 10.05]
2) Mr. Muhlwa, an accountant with ZESA was retrenched at the end of June 2007. He earned the following
amounts: $
Salary/ month 200 000 000
Bonus 200 000 000
Cash in lieu of leave 15 350 000
Lump sum payments
- Refund of pension contribution (note 1) 680 000 000
- Refund of benefit fund contribution 68 000 000
Severance pay 2 680 000
Other information
1. Mr Muhlwa had used a car with an engine capacity of 2700 cc
2. He had occupied a company house. The open market rental for the house was $24m per month.
The company allowed him to pay only $6m per month.
3. He bought a pair of spectacles for $18m and the Medical Aid company reimbursed him $12m.
4. He contributed $72m for his Medical Aid scheme
5. PAYE deductions amounted to $298, 48m.
6. He made:- ordinary pension contributions $160 000
- NSSA contributions $1 440 000
Notes
1. Ordinary pension contributions allowed over the year amounted to $540 m.
2. The retrenchment scheme was approved by the Minister of Labour and Social Welfare.
Required
Calculate Mr Muhlwa’s minimum tax liability for the year ended 30 June 2007. [CIS 2 of 05.02]
3) Mr Rutata, a Tax Supervising Senior with Dot-com (Pvt) Ltd earned the following during the tax period
ended 30 June 2007.

Salary/month $ 40 000 000
CILOL 100 000 000
Loan (Note 1) 100 000 000
Fees (Note 2) 3 000 000
Maid (Note 3) 3 000 000
House (Note 4) 20 000 000
Gratuity (Note 5) 100 000 000
Security Benefit 949 900 000
Overtime 90 000 000
Tax assistance from employer 10 000 000
Holiday allowance 300 000 000
Cellphone allowance (Note 6) 20 000 000
Part-time Lecturing – Speciss College 100 000 000
General Upkeep allowance 10 000 000
Electricity benefit 40 000 000
CABS Class ‘C’ shares interest 30 000 00
LSP (Pension) (Note7) 500 000 000
POSB Interest 20 000 000
Retrenchment Package (Note 8) 5 800 000 000
Econet Dividends 40 000 000
He incurred the following expenses

Tax and interest thereon 70 000 000
Medical aid contributions 50 120 000
Spectacles (40% of which was paid by CIMAS) 30 000 000
Pension (NSSA) 40 000 000
Retirement Annuity Fund contributions 40 000 000
Travelling to work 3 000 000
Mr Rutata is married to Tina who is unemployed and blind. He owns a book-shop and made a profit of
$100 000 000 from its operations for the year
NOTES
1) 40% of the loan was used for the education of Tinashe, his son at Midlands State University and
10% for prescribed drugs. The loan was granted to him on 01 January 2007.

2) The company pays school fees of $2 million for Munashe, his daughter per each of the three
school terms of every year
3) The company pays a domestic worker who is specifically allocated to Mr Rutata
4) He occupies his employer’s house in Mt Pleasant towards which he pays $10 million rent to his
employer. However, the open market monthly rentals in the area is $20 million
5) The gratuity was received from Ancol Pvt Ltd , his former employer
6) 30% was spent on the business of the employer
7) He joined the fund on 30 June 1960 and had rules not changed, the fund would have paid him $12
million
8) He was retrenched on 30 June 2007 and the payment was made from a fund approved by the
Minister of Labour. Included in the amount is CILOL of $100 million.
He used the company’s Mazda 626 with an engine capacity of 2500cc from 01 January 2007 to 30
June 2007. PAYE remitted to ZIMRA was $2 billion
Calculate his tax liability. [J. HORE 2008]

UNIT 2: BUSINESS TAXATION
1) Mafrika (Private) Limited is a company which manufactures adhesives at Ruwa Growth Point near
Harare. The company has a 31 December year-end.
The income statement of the company in respect of the year ended 31 December 2007 reflected a net profit
of $2 850 000 000. The profit was arrived at after deducting expenses and crediting income which included
the following items:
EXPENSES $ $
*Depreciation of assets 25 000 000
*Donations:
-Methodist Church 5 000 000
-National Bursary Fund 120 000 000
-Ministry of Health and Child Welfare for the purchase of
drugs at Harare Government Hospital 150 000 000
-Ministry of Education and Culture for the building of a library
at Mzilikazi Government School 150 000 000
-Standards Association of Zimbabwe 20 000 000 425 000 000
*Entertainment:
-Prospective clients 10 000 000
-Staff Xmas party 2 500 000 12 500 000
INCOME
*Profit on sale of printing machine 7 200 000
The printing machine was acquired in the 2006 tax year for $16 million and was sold for $30 million in the
2007 tax year
ASSETS ON HAND AS AT 1 JANUARY 2007 INCOME TAX VALUE 1

JAN 2007
Industrial building: Cost $29 million in 2003 tax year Nil

Plant and machinery: Cost $150 million in the 2002 tax year Nil

Printing machine: Cost $16 million in the 2006 tax year $8 000 000
Furniture and fittings: Cost $5 million in the 2004 tax year Nil
Factory canteen: Cost $25 million in the 2005 tax year $6 250 000
Commercial vehicles: Cost 120 million in the 2006 tax year $60 000 000
CURRENT ADDITIONS $
Delivery truck – Mazda B1800 70 000 000
Nissan Almera Sedan for use by the Finance Manager 25 000 000
Second hand printing machine 80 000 000
New computer 5 000 000
1 unit of staff housing 46 000 000
1 unit of staff housing 10 000 000
REQUIRED
1. Compute the company’s taxable income/assessed loss in respect of the tax year ended 31
December 2007 assuming the company claims the maximum tax allowances available.
2. When is the provisional tax due? [CIS 1 of 5.05]
2) Mr Tima commenced a manufacturing business on the 1 st of January of the current year of

assessment after spending six months building the factory premises (factory buildings). His profit and
loss account for the current year ended 31 December shows a profit of $150 000 after charging the
following:
1. Depreciation of assets $350 000
2. Bursaries to a cousin $10 000 and $ 8 000 to his step sister’s husband to enable them to take a
technical course related to Mr Tima’s trade
3. An ex-gratia once-and-for-all allowance of $25 000 to a dependent of a former employee who
died during the year.
4. Pension payments of $36 000 (i.e. 9 months at $4 000 per month) to an employee who had
been injured at work and who retired on the grounds of ill health. These are obligatory
payments arising from the employee’s contract of service.
5. Contributions of $2 000 to the Standard Association of Central Africa.
6. Travelling expenses of $10 000 being the cost of sending an employee to purchase a lathe
machine in South Africa.
7. Donation of $500 to a sports club that had purchased goods manufactured by Mr Tima
8. Repairs including $15 000 made up as follows:
i) Removal of a tree threatening the foundation of the factory building - $2000
ii) Underpinning of foundation so that a crack which had appeared in a wall could
be repaired successfully for $13 000.
9. Fencing of property for $10 000.
10. Installation costs of lathe machine purchased during the year - $2 000.
You are given the following further information

A: Fixed assets
- The factory buildings which are accepted as industrial buildings, cost $5 000 000 excluding
interest on money borrowed for its construction.
- During the year construction work commenced and was completed on the following separate
buildings
a) Staff canteen cost: $600 000
b) Showroom - $200 000 used exclusively to display manufactured goods.
c) Storeroom for finished products - $300 000
B. Plant
The following plant was purchased
(i) Lathe $120 000
(ii) Electric drills 15 000
(iii) Angle grinders 32 000
Total 167 000
C. Industrial tractor - $ 600 000 used exclusively to transport finished products to store -room. This was
reconditioned before purchase and at that time was as good as new according to the seller.
D. Mercedes Benz - $800 000. Mr Tima used this vehicle and it was agreed that 25% of its use was private.
The agreed portion of petrol, oil, licenses, insurance and repairs has been eliminated in the accounts.
E. Mr Tima incurred the following expenditure during the previous year of assessment, which has not been
debited in the accounts.
a) Interest on money borrowed to construct the factory - $160 000 all paid prior to completion.
b) Interest on money borrowed to purchase raw materials - $50 000.
c) Salaries of all staff - $200 000
d) Connection of telephone $600; Water and light $1 200
Required
You are asked to calculate the taxable income of Mr Tima for the current year of assessment after granting
all possible allowances, which he can claim. [CIS 1 of 05.02]
3) The profit and loss account of Kee Lambado (Private) Limited, a retail and investment company, for the
current year is as follows: -
Gross Profit 1 650 000
Profit on sale of motor vehicle 5 000
Interest from Standard Chartered Bank 11 000
Interest from Oak Lambado (Private) Limited 21 000
Company dividends 3 520
1 700 400
Less: Administration expenses
Depreciation 180 000
General expenses 36 800
Rent 60 000
Bad debts 9 700
Donations 2 900
Advertising 14 600
Interest paid 6 000

Salaries and wages 340 000
Provision of Director’s fees 200 000
Motor vehicle and travelling expenses 450 000
Telephone, electricity and stationery 240 000 1 540 000
Trading profit $160 400
You are provided with the following additional information:
1. Profit on sale of shares - the company, which deals in shares, bought and sold the shares in
question within two months.
2. Interest received ($21 000) – interest on a loan the company advanced Oak Lambado (Private)
Limited
3. Included in general expenses of $36 800 are :
(a) $3500 finance charges on purchase of furniture
(b) $6 000 life assurance premiums on the life of the Managing Director. The policy is ceded
to the company.
(c) $9 000 to Open Way Enterprises (Private) Limited under an agreement whereby only
goods supplied by Kee Lambado (Private) Limited are to be sold by Openway
Enterprises (Private) Limited.
(d) $500 fine imposed by ZIMRA; one of the company’s employees used the wrong tariff
code when filling out a bill of entry for the importation of trading stock.
(e) $980 being the balance of company formation costs written off.
(f) $220 pilferage of cash by an ex-employee
(g) $900 valuation fees for fire insurance.
4. Included in rent of $60 000 is: -
(a) $10 000 being a premium paid for the right of use of trading store for fifteen years
(b) $2 000 rent for an empty shop
5. Included in bad debts of $9 700 is
(a) $1 200 loan to a deceased employee
(c) $5 000 general provision for doubtful debts
6. Donations comprise: -
(a) $1 900 to an AIDS orphanage
(b) $1 000 to a charitable trust administered by the Ministry of Labour.
7. Interest paid comprises: -
(a) $4 000 on a loan secured to buy shares in a listed company.
(b) $2 000 on a loan secured to finance working capital.
8. The motor vehicle was bought on 01 January 2005 for $120 000 and sold in the
current year for $ 108 000. Special initial allowance was not claimed. The deemed cost for a
passenger motor vehicle was $1m.

9. Director’s fees were fixed at an AGM in January 2008
10. The asset schedule is as follows: -
ITV
31/12/07 ADDITIONS
Furniture & Fittings 16 200 6 500
Delivery Truck 800 000
S I A was never claimed in the past.
Required
Commencing with the net profit per the profit and loss account, compute the taxable income of Kee
Lambado (Private) Limited for the year giving explanations, where necessary for the items adjusted in your
computation.
Your computation should be drawn to ensure minimum tax payable. [ZAAT 1 of 05.01]

UNIT 3: PARTNERSHIPS
1) Tago Associates, a partnership of Messrs Tatenda and Gomo, sold its business to Tago (Pvt) Ltd, a
company in which they held fifty percent (50%) of the issued share capital. Tago Associates’ financial
statements for the eight-month period ended 31st August 2007 showed a profit of $420 million (Mr
Tatenda $252 million and Mr Gomo $168 million) after charging the following:-
1 Depreciation 6 400 000

2 Partners’ Living Expenses – Mr Tatenda 48 000 000
- Mr Gomo 32 000 000
3 Medical Aid Contributions – Mr Tatenda 900 000
- Mr Gomo 600 000
4 Insurance premiums - Loss of profits 4 000 000
- Joint life policy 11 160 000
Life policies(see note) – Mr Tatenda 6 000 000
- Mr Gomo 3 600 000
5 Motor vehicle expenses - Mr Tatenda 15 000 000
- Mr Gomo 12 200 000
6 Interest on capital - Mr Tatenda 5 200 000
- Mr Gomo 3 800 000
7 Bad Debts (see note) 20 000 000
8 General expenses (see note) 1 300 000
NOTES:
i) Life policies are for each partner’s benefit
ii) General expenses comprise – National scholarship fund contributions $1 000 000
- Parking fines $300 000
$1 300 000
iii) Each partner owned a motor vehicle which he used for both private and business purposes, it
was agreed with each partner’s Regional Manager (ZIMRA) that forty percent (40%) of the
expenses related to the partner’s private use.
iv) Of the total amount of bad debts, $5 million relates to a debt that arose when Mr Tatenda was
a sole proprietor. The partnership took over all assets and liabilities at its inception.

v) Mr Gomo borrowed funds to purchase his share in the partnership. Interest payable by him
during the eight-month period amounted to $2 800 000
vi) In terms of the sale agreement, the business was sold as a going concern, the company taking
over all assets and liabilities. The agreed allocation of the sale price of assets was as follows:
Office equipment $35 million
Furniture and fittings $25 million
The Income Tax values of the assets as at 1st January 2007 were:
Office equipment $18 035 000 (original cost $31 mn).
Furniture and fittings $20 250 000 (original cost $25m).
The partnership never availed itself of the special initial allowance election.
vii) The company, which started trading on 1st September 2007, adopted a 31st December
accounting year. During the year end 31st December 2007, the company incurred, inter alia ,
the following expenses:-
Salaries: Mr Tatenda $120 million
Mr Gomo $120 million
Medical Aid Contributions: Mr Tatenda $6 million
Mr Gomo $4 million
viii) The company did not have an ordinary pension scheme and consequently the joint managing
directors joined Old Mutual Retirement Annuity Fund and contributed, in addition to the
compulsory National Social Security Authority contributions of $1 440 000 each, the
following amounts
Mr Tatenda $12 million
Mr Gomo $10 million
REQUIRED:
Calculate Messrs Tatenda and Gomo’s taxable incomes for the tax year ended 31 December 2007 [ZAAT 1
of 06.98]
2) Wadzanai and Florence are in partnership in the business of mining, trading as Gold Finger Mine. The
partners share the profits equally. The balance of unredeemed capital expenditure at 31 December 2006 is
$75 500. Gold and silver sales during the current year amounted to $4 million and the following expenses
were incurred by the partnership:
$
Shaft sinking 360 000
Staff housing (one unit) 50 000
Wages and rations 230 000
Mine buildings 800 000
Salaries 800 000
Repairs 30 000
Headgear replacement 40 000
Medical Aid 750
Insurance 8 800

Bonus – Wadzanai 10 800
Further Notes
1. Insurance
Public liability 3 000
Joint life policy 2 500
Life policies: Wadzanai 1 600
Florence 1 700
8 800
2. Medical Aid
Staff 300
Wadzanai 150
Florence 300
Total 750
3. Retirement Annuity paid by the
partners
Wadzanai 19 600
Florence 7 100
4. Sales of mine plant 61 750
5. Ore valued at $60 000 is on hand at 31 December 2007.
6 a) Wadzanai is married with two minor children. Her husband received interest from CABS of
$940. This is his only income.
b) Florence is single.
7. The partnership has made an election to claim the Capital Redemption Allowance in terms of
paragraph 4(2) of the 5th Schedule to the Income Tax Act. The life of mine is estimated (and
accepted by the Commissioner) at five years as at 01 January 2007.
8. Wadzanai and Florence earned the salary of $400 000 each.
REQUIRED
Calculate each partner’s taxable income and tax payable allowing the maximum deduction and
credits for the year ended 31 December 2007. [CIS 2 of 05.98]
3) Mufaro and Audrey are partners who run a tax consultancy firm in Gweru. They prepare their
books up to 31 August of each year. Profits and losses are shared equally. The income tax value of
their assets as at 1 September 2006 was $200m. The original cost of these assets (all movable and
always used 100% for trade) was $350m. On 30 August 2007, they admitted Julian into the
partnership. The new partnership took over the assets at an agreed value of $420m. Mufaro and
Audrey’s trading for the year ended 31 August 2007 registered a net profit of $800m. Both Audrey
and Mufaro received salaries of $300m.The two partnerships have always sought to minimize
their tax liabilities.
REQUIRED
i) Calculate the tax liability of Mufaro and Audrey for the year ended 31
December 2007
ii) Advise the new partnership of the elections they can make, considering the
change in the partnership, in order for them to minimize their tax liability.
[J HORE 2006]

UNIT 4: SUSPENSIVE SALES
1) Houses For All (Private) Limited, a company registered in Zimbabwe with a 31 st December year end,
acquired 50 hectares of land with the intention of developing residential stands for resale.
Cost of land in February 2002 $24 000 000

Survey fees in April 2002 $6 000 000
Expenditure on roads, water reticulation e.t.c $60 000 000
100 residential stands became available for resale from the land
70 stands were sold on 30th June 2003 at $15 million ach
The terms were 50% deposit payable immediately with a further 25% payable on 1 st January 2004 and 1st
January 2005. Interest at 60% per annum was payable on amounts outstanding.
A further 30 stands were sold on 30th September 2004 at $25 million each.
Again a 50% deposit was payable immediately with a further 25% payable on 1 st January 2005 and 1st
January 2006 respectively. Interest at 75% per annum was payable on amounts outstanding.
The following administration expenses (all tax deductible) were incurred:
Year ended 31st December 2003 $ 800 000

Year ended 31st December 2004 $ 950 000
Year ended 31 December 2005
st
$2 500 000
Year ended 31 December 2006
st
$6 500 000
REQUIRED
Compute the company’s taxable income/assessed loss in respect of the tax years ended 31 December 2003
to December 2006, assuming that all terms of the agreement were met by the purchasers. [CIS 1 of 11.05]

2) Ebenezzer (Private) Limited constructed a factory building in December 2006 at a cost of $35 million.
The company’s records reveal that architects fees of $5 million had been incurred in December 2006. The
company had claimed maximum capital allowances. The building was sold on 1 June 2007 for $10 bilion
under the following conditions:-
- 60% deposit payable on 01 June 2007 and the balance on 01 January 2008. No interest was
chargeable on outstanding amounts.
- Ownership would only pass after payment of full purchase price.
Capital gains withholding tax of 15% of the selling price had been withheld and paid to ZIMRA
REQUIRED:
a) Determine the tax payable or refundable in each of the two years of assessment ended 31
December 2007 and 31 December 2008.
b) Determine the tax payable or refundable in 2008 assuming that the purchaser defaulted in paying
the last installment, resulting in the sale being cancelled and the paid amounts being forfeited.
[J. HORE 2008]
3) Matko TV Sales Mania is a retailer of televisions based in Mutare. It has in the past sold televisions
strictly on a cash basis but due to the continued decline in the economy, it is considering credit sales.
The Sales Executive advises that:
-Sales per annum on a cash basis for 2006 amounted to $100 bn, a 30% drop from the previous year’s
figure
-If the credit sales basis is considered for 2007, sales are expected to rise by 120%, i.e. to $264 bn, but
if the cash basis is maintained, a total profit for the whole year of $125 bn is likely to be achieved.
-The terms of sale under the credit sales basis will be 60% deposit in the first year and the balance of
40% in the following year. Interest at 70% will be chargeable on outstanding amounts in each year.
-The company has over the years achieved a gross profit percentage of 80%.
Required
Advise the company of the anticipated taxable income and tax thereon for 2007 and whether or not the
credit sales basis should be adopted. [J HORE 2008]

UNIT 5: FARMING
1) Mr Angus Farmer, who is 52 years of age, carries on farming operations in Zimbabwe. He furnishes you
with the following information and asks you to prepare his income tax computation for the year ended 31
December 2007 and calculate any tax liability.
Livestock On Hand at 31 Dec 06 On Hand at 31 Dec 07
Bulls 2 3
Cows 60 45
Oxen 20 -
Heifers 40 75
Tollies 10 40
Calves 50 30
Totals 182 193
He sold 70 head of cattle for a total of $2 100 000 000

10 cows died and 30 calves were born
He purchased the following livestock
One Bull for $45 000 000
20 Heifers for a total of $400 000 000
$445 000 000
He inherited the following livestock from his late brother

Fixed standard value of Value for estate Value for estate duty
late brother duty (Each) (Total)
15 Cows at $350 000 each $5 250 000 $20 000 000 $300 000 000
25 Heifers at $200 000 each 5 000 000 $15 000 000 375 000 000
40 10 250 000 675 000 000
The fixed standard values of Mr A. Farmer’s livestock are as follows:
Bulls* $10 million each

Cows $70 million each

Oxen $60 million each
Tollies & Heifers $30 million each
Calves $10 million each
*The Zimbabwe Revenue Authority has always accepted that the fixed standard values of bulls are their
cost.
Mr Farmer provides you with an income and expenditure account excluding his livestock account.
INCOME $000 $000
Maize sales 3 300 000
Sale of manure 65 000
Interest – tax reserve certificates 4 500
Dividend – Zimbabwe company 1 500
3 371 000
EXPENDITURE
Dip and livestock fees 749 000
Fertilizer and seed 136 000
Repairs 124 000
Staff housing – one unit 263 000
Interest
- Bank 300 000
- ZIMRA (late payment of tax) 2 200 302 200
Legal expenses (see schedule) 66 000
Medical aid-Mr A. Farmer 140 000
Motor vehicle expenses 226 000
Sundry expenses (see schedule) 194 000
Telephone 48 000
Wages 906 000
3 154 200
Excess of income over expenditure 216 800
Legal expenses
Objection to land designation 60 000
In connection with water rights 6 000
66 000

Sundry expenses
Aerial survey 15 000
Loan raising fee 24 000
Cost of new spectacles – Mr A. Farmer 120 000
Life Insurance – A Farmer 35 000
194 000
You are given the following additional information

1. The loan on which interest was paid and on which the raising fees were charged was used 25% to
finance the staff house and 75% to build an extension to Mr Farmer’s homestead.
2. Mr Farmer purchased a second hand Isuzu van on 1 January 2007 for $2 billion. He advises you
that he uses it 80% for business purposes.
3. Mr Farmer informs you that the private use of his telephone is 10%. This had previously been
accepted by the Zimbabwe Revenue Authority.
4. Mr Farmer constructed a temporary farm road at a cost of $133 million
5. Included in wages is Mr Farmer’s gardener to whom he paid $120 million
6. Mr Farmer had an assessed loss of $1.1 billion for the previous year
7. Mr Farmer is in receipt of the following pensions:
a) United Kingdom Department of Social Security, this has
been converted to Zimbabwe Dollars at the official rate $237 million
b) Pension from Zimbabwe Government by whom he had
been employed previously $90 million
$327 million
The pensions were received November 2007.
8. Directors fees from a Zimbabwe Registered Company
amounting to $97 million
You are required to prepare Mr A Farmer’s livestock trading account and to prepare his income tax
computation arising from his farming operations. Also calculate his total tax liability, if applicable.
[ICAZ 2 of 10.03]
2) Mr Murimi carries on business as a farmer and general dealer. He renders the following accounts for the
year ended 31 December 2007.
LIVESTOCK ACCOUNT

Opening Stock 190 Sales 3 800 0000
1 Bull@40 000 40 000 5 Deaths -
2 Bulls@20 000 40 000 1 Own Consumption - tolly -
150 Cows@10 000 1500 000 1 Donation to church, heifer -
60 Oxen@8000 480 000
30 Heifers@4000 120 000
30 Tollies@3000 90 000
20 Calves@2000 40 000
2 310 000 Closing Stock
Purchases 1 Bull@40 000 40 000
1 Bull 35 000 3 Bulls @20 000 60 000
5 Cows 75 000 135 Cows@10 000 1350000
4 Heifers 34 000 144 000 125 Oxen@8000 1000000
28 Heifers@4000 112 000
150 Births 19 Tollies@3000 57 000
100 Inherited oxen 45 Calves@2000 90 000
Wages 395 000
Rations 625 000
Livestock Profit 3035 000
553 6509 000 6 509 000
PROFIT AND LOSS ACCOUNT
Accountancy 185 000 Livestock Profit 3 035 000

Depreciation 75 000 Store Profit 784 000
Interest 15 000 Maize sales 37 000
Legal Expenses 120 000 Tobacco Sales 2 400 000
General Expenses 30 000 Rent 30 000
Wages and Rations 385 000 Sale of timber 50 000
Seed and Fertilizer 500 000 Dumping Rights 125 000
Tobacco Levy 36 000 OK Zim Ltd Dividends 25 000
Motor Vehicle 785 000 Directors Fees 55 000
Profit before tax 4 410 000
6 541 000 6 541 000
Notes

1. The ITVs of assets at the beginning of the year were : Farm Improvements ( Cost $200 000) $120
000 :Farm Equipment Nil :Tractor Nil :Mazda 323 (Cost $400 000) Nil
2. The following additions/disposals were made during the year:
Additions $
Dam 2 400 000
Maize Store 1 500 000
Fencing Erected 100 000
Peugeot 306(20% private use) 2 500 000
Staff House (one unit) 450 000
Sales
The Mazda 323 which was acquired in the year ended 31 December 2003 was used 10% for private use. It
was sold during the year for $380 000.
3. The oxen were inherited from his father’s estate together with a farm on which timber had been grown
for sale. Mr Murimi sold the farm immediately after he had inherited it and the sale was $ 2 000 000 for
land and $50 000 for growing timber. The estate valuation of the oxen was $750 000 whilst the testators
FSV for oxen was $7 500.
4. Directors fees of $50 000 were earned in South Africa for attendance at quarterly meetings at head office
there. Mr Murimi is an executive director.
5. Interest of $1 000 was paid on capital borrowed to buy OK Zimbabwe shares. The rest was for farming
purposes.
6. Legal Expenses $
Application for new liquor license 25 000
Application to build service station 20 000
Application to extend store trading hours 35 000
Debt Collection 40 000
120 000
7. General Expenses
Acquisition of right to a supply of water in perpetuity9 000
Livestock sale: entertainment 6 000
Insurances: farm buildings 15 000
30 000
8. Dumping rights of $125 000 were received from a local firm of builders for the right to dump rubble for
a period of five years.

9. $80 000 of the motor-vehicle expenses relate to private motoring
10. Mr Murimi paid $ 50 000 to a retirement annuity policy
REQUIRED
Compute the minimum tax payable for Mr Murimi for the year ended 31 December 2007.
3) The act recognizes natural hazards to which farmers are exposed and accords them special relief should
these hazards occur. What types of relief are available? Outline the relevant provisions of the Act. [ZAAT
4 of 05.01]
UNIT 6: MINING
1) Sendekera (Private) Limited, a company controlled by three individuals, commenced regular production
of platinum on 1 January 2007 on a mine which it owns.
You are given the following information for the year of assessment ended 31 December 2007.
1. Profit before tax but after debiting the following was $55 000 000
a) Depreciation 7 850 000
b) Mining Claims written off 15 000 000
c) Unrealized exchange loss 10 000 000
d) Interest on money borrowed to finance working
capital 18 000 000
e) First installment of company formation expenses 250 000
2. Capital expenditure incurred during the year was:
a) Dwelling for Mr Chioniso the majority shareholder
& Managing Director of the company 5 500 000
b) Plant 15 000 000
c) Dump Truck 25 000 000
d) Peugeot 406 (Sedan) 18 000 000
e) Railway line 5 000 000
f) Shaft Sinking 10 000 000
3. Proceeds from the sale of a Peugeot 306 Sedan were $10 milion. (Original cost in 2004 was
$14 500 000 and assume that the deemed cost for passenger motor vehicles was then $10
million
4. The balance of unredeemed capital expenditure as at 31 December 2006 was $108 000 000

5. The estimated life of the mine as at 31 December 2007 is 19 years
REQUIRED:
Calculate taxable income or assessed loss of the company using each of the three methods of
determining capital redemption allowances. [IAC 2 of 10.04]
2) Quarry Investments Pvt Ltd is a company controlled by two individuals and carries on mining
operations on a “new mine” as defined, which it owns. The company reached the production stage on 1
January 2007 and you are given the following information for the year ended 31 December 2007.
$
a) Platinum sales amounted to 9 150 000
b) Net profit after debiting the
following was 157 000
i) Depreciation 25 000
ii) Mining Claims Written Off 125 000
Capital expenditure during the year was:
(1) Fencing 22 000
(2) Railway lines 150 000
(3) Plant $ 415 000 of which $60 000
was a replacement of a boiler which burnt out
(4) Training equipment 250 000
(5) House for use by one of the directors
who controls the company. It was completed and occupied in January 2007 at a cost of $200 000
(a) Sales of a Mazda pick –up truck

(the pick up truck cost $ 290 000) $40 000
(e) The unredeemed balance of capital expenditure at 31st December 2006 was $216 000
(a) The estimated life of the mine is 14 years from the end of the Current year of assessment.
Required
Calculated the taxable income or assessed loss of the company for the year ended 31 December 2007
in each of the following circumstances:-
i) On the assumption that the company claims capital redemption allowance on the “life of
mine” basis, making the election allowed under paragraph 6 of the fifth schedule to the Act in
respect of the replacement of plant.
ii) On the assumption that it is not “new mine’ as defined but the company claims capital
redemption allowances in terms of paragraph 4(2) of the fifth schedule to the Act i.e. “mixed
basis” [ZAAT 2 of 11.00]
(3a) Rimne Private Limited mines iron in Mazowe and commenced full scale operation on 01 January
2007. The following expenditures were incurred during the year 2006 (Period of non-production)
On-shaft sinking $900 000 000
Administration Costs $500 000 000
Buildings $600 000 000
$2 000 000 000

The company sold a truck at $300 million (Original cost $350 million). Capital expenditure incurred during
the year constituted of:
Nissan Hardbody Twincab $3 000 000 000
Dwelling for 1 of the 3 Shareholders $16 000 000
School $8 000 000 000
Mules $ 100 000 000
Staff House (One Unit) $16 000 000
Equipment ($200 000 replacement) $1 000 000
The company recorded a net profit of $10 billion after deducting the following expenses.
Mining Claims Written Off $6 000 000 000
Depreciation $3 000 000 000
Prospecting Expenses $1 000 000 000
Goodwill Written off $2 000 000 000
Sales of iron for the year amounted to $50 billion. Ore valued at $500 million was at hand on 31 December
2007 and had not been considered in the accounts.
The company estimates its life of mine to be 9 years form the end of year of assessment and elects CRA to
be granted using Paragraph 2 of the 5th Schedule to the ITA. It also elects the allowance in terms of
paragraph 6 of the same schedule.
Determine the mine’s taxable income for the year ended 31 December 2007. [J. HORE 2008]
(3b) Your advice has been sought by various clients on sundry tax matters. These all relate to the December
2007 year of assessment.
In each instance, your reason for giving relevant advice must be briefly given. A simple yes/no is not
sufficient.
1. Mr A. Moyo intends opening a quarry to extract sand and stone and wishes to know whether he
would be regarded as carrying on mining operations.
2. Sansole (Private) Limited is considering purchasing the right to extract gold by the cyanide
process for $75 000. It wishes to know whether it will be regarded as carrying on mining
operations.
3. Mr M Nzira bought three mining claims in the current tax year at a cost of $200 000 each as he
heard that there was nickel in the area. He has now been offered $10 000 000 for the claims and

wishes to know whether this is taxable and if so on what basis he will be assessed. [ICAZ 5 of
10.03]
UNIT 7: CAPITAL GAINS TAX
1) Jane and Jullien Gumpo are an elderly couple in their late forties and in January 2005 they moved into a
town house in Gunhill in respect of which they had signed a purchase agreement at a price $9 250 000 000
in December 2004. Although they had not yet paid the purchase price, they were planning to settle the
purchase price once proceeds from the sale of their previous principal private residence in Mount Pleasant,
Harare, which they had sold in December 2003 for $19 950 000 000 was released after the determination of
their capital gains tax status. The couple had originally purchased the house in July 2000 for $12 000 000.
The couple had incurred the following expenses on the Mount Pleasant house:
a) Between January and March 2002, they had erected a stone wall around the property at a cost
of $20 000 000
b) Between July and November 2003, they had added a swimming pool, and constructed
permanent paving around the house at a total cost of $50 000 000
c) In November 2003, they had painted the house to make it attractive for sale before appointing
an estate agent to market the property. The cost of painting was $30 000 000.
d) The agent’s commission amounted to $68 000 000
e) The couple also agreed to pay 50% of the sale legal fees and this portion amounted to $50 000
000
The couple has approached you for advice on their capital gains status and how they can minimize capital
gains tax liability, given the above transactions.
REQUIRED
a) Write a brief report on the tax advice you would give the couple.
b) Compute the minimum tax payable by the couple in relation to the transaction outlined above.
[ICAZ 4a of 10.05]
2) Grange (Private) Limited is a company incorporated in Zimbabwe and has a 31 December year-end.
In October 2007, the company sold a retail shop stand 437 Bulawayo for $900 000 000.A tax clearance was
obtained and the full price paid on 15 October 2007. The company purchased stand 437 Bulawayo and
erected buildings on the stand in September 2003 at a cost of $3 300 000. The income tax value of the

building and wall at 31 December 2006 was $2 970 000. In December 2006, the company erected a wall at
the rear of the property at a cost of $2 000 000
You are required:
To calculate any capital gains tax arising from the sale of the asset.
[ICAZ 1 of 10.04]
UNIT 8: VALUE ADDED TAX
1. Modern Plastics (Pvt) Ltd carries on business as a manufacturer of plastics in Harare. The company
prepares its accounts up to 31 December. The company is registered for Value Added Tax (VAT) as
category C and has been submitting returns on a monthly basis since January 2007.
The following transactions were carried out in July 2007

$
i) Purchase of office furniture exclusive of $ 1 500 000 VAT 10 000 000
ii) Purchase of Mazda 323 sedan for the sales representative; price
exclusive of $4 500 000 VAT 30 000 000
iii) Purchase of Mazda B1800 delivery vehicle at a price exclusive
of $9 000 000 VAT 60 000 000
iv) ZESA electricity bills paid at a price exclusive of $150 000
VAT 1 000 000
v) Lunch at Meikles hotel with a potential customer at a price
exclusive of $60 000 VAT 400 000
vi) The following motor vehicles are used by the company’s employees:
Managing Director Mecerdes Benz 3200cc
Finance Director Mazda B2500 twin cab 2500cc
Marketing Director Nissan Hardbody twin cab 2400cc
Sales Representative Mazda 323 1600cc
viii) Standard rated sales for the month 200 000 000

VAT thereon 30 000 000
viii) Standard rated purchases 80 000 000
VAT thereon 12 000 000
REQUIRED
Calculate the company’s VAT liability for July 2007. [CIS 3 of 05.05]
2) a) Give three situations in which value added tax(VAT) input tax may not be claimed
b) Give 4 instances where goods or services would be zero-rated for VAT.
c) Give 4 examples of exempt supplies of goods or services
d) What particulars must a VAT tax invoice contain in order for it to be valid for input tax deduction
claims? [CIS 3 of 11.05]
3) Rachie Pvt Ltd is a general merchandiser and registered operator. During November and December
2007, the following transactions took place. All standard rated goods or services are shown VAT
inclusive.
Sales $
Cell-phones 6 000 000 000
Televisions (Note 1) 2 000 000 000
Exports of water-glasses 600 000 000
Airtime-Recharge Cards 850 000 000
Chairs (Note 2 ) 500 000 000
Milk served as part of meals 100 000 000
Bread 60 000 000
Purchases
Cell-phones 39 000 000

Televisions (Note 3) 1 000 000 000
Chilled Mushrooms 20 000 000
Maize Flour 80 000 000
Cattle Tongues 60 000 000
Pork 10 000 000
Notes
1. The total selling price of televisions was $2 bn before a trade discount of $200m

2. The company sold the chairs to Willot Pvt Ltd at S500m but later discovered that it had
under-invoiced by $100m.To correct the position, the company issued a debit note of
$100m.
3. Televisions were purchased from Jaggers and the initial tax invoice was for $1 bn.The
supplier however, issued a credit note of $200m after discovering that it had over-
invoiced Rachie Pvt Ltd
OTHER NOTES
A. The company recovered $600m previously claimed as bad debts in preceding

VAT returns. The amount relates to sales of televisions to BB Pvt Ltd.
B. The company gathered through its lawyers that $200m being the balance
remaining payable to it for television sales to CC Pvt Ltd would not be
recoverable. Further, sufficient evidence of the irrecoverability of the amount
is available for presentation to the Commissioner General, should he request
such
C. On 15 November 2007, the company donated two computers to ZAOGA
church .Their market value at the time of donation was $80m and they had
cost $70m on purchase
REQUIRED
Determine the VAT refundable/ payable for the November to December 2007 tax
period. [J HORE 2008]

UNIT 9 ADMINISTRATION
1a) State with brief reasons how you would treat the following expenses for income tax purposes.
i) Architect’s fees in connection with the erection of new factory premises by manufacturers
ii) Acquisition by a farmer of the right to a supply of water in perpetuity
iii) Expenditure on the construction of and realigning of temporary farm roads
iv) Cost of preparation of Income Tax and Capital Gains Tax returns and computations
v) Entrance fees for business associations or societies
vi) Expenditure incurred by the taxpayer for the purpose of restraining any other person from
selling goods other those supplied to him by the taxpayer.
vii) Expenditure incurred on entertainment
viii) Any grants or scholarships or bursaries to enable a person to take courses in technical
education related to the trade of the taxpayer
ix) Expenditure on experiments and research related to the taxpayer’s trade
x) Preliminary expenses incurred in establishing any businesses
b) Explain the instances in which assessed losses from previous years cannot be carried forward. [CIS
3 of 05.02]
2) Set out with supporting reasons, the extent to which the expenditure in each of the following cases
would be deductible for income tax:
a) Your client informed you that he has incurred removal expenses in connection with the transfer of
trading stock, plant and machinery from the light industrial sites to the heavy industrial sites. Your
client would like to know whether the expenses are deductible for income tax purposes
b) Under what circumstances are provisions for doubtful debts deductible for income tax purposes
c) On 30th December 2007, your client pays insurance premiums of $200m. The payment relates to
the motor vehicle insurance cover in respect of the period 1 st January 2007 to 31st December 2007.
Your client wants to know whether the insurance payment of $200m payable in advance is
allowable for tax during the year ended 31 December 2008.
d) Your client advises that during the year ended 31 st December 2007, the company’s financial
director embezzled $2m from the business. Your client wants to know whether this amount is tax
deductible.
e) During the year ended 31 December 2007, your client incurs $500m in seeking legal advice on
employee disputes. Is this amount allowable for tax?

f) Your client’s driver has been fined $1m for failing to display a valid licence disk. Is this amount
allowable for tax? [CIS 4 of 11.03]
3) How much, if any is liable to tax in each of the following circumstances. Give reasons where appropriate
or quote supporting legislation.
a) Mr Chaponda who has served his employer for 5 years resigned with effect from 30 June 2007. Of
his pension of $150 000, he used $50 000 to purchase an annuity on retirement. You are informed
that during his last two years of employment, $15 000 of his pension contributions was not allowed
as deduction.
(b) Giant Minerals (Pvt) Ltd acquired a mine in Mozambique and transferred some of its mining
equipment to the mine. Regrettably the mine failed to produce and it dispose of the equipment there on 1
March 2007 for $400 000. The equipment originally cost $200 000 in Zimbabwe.
You are informed that the balance of unredeemed capital expenditure at time of transfer was nil.
(c) An employee received an interest free loan of $ 25 000 from his employer to enable his daughter to
attend a course in computer maintenance.
(d) Mr Jones who is employed by Mercantile Exports (Pvt) Ltd which operates in an Export Processing
Zone has free use of the company’s 3.5 Diesel Twin Cab Nissan.
(e) A bar waitress receives a $ 3m tip from an impressed tourist.
(f) Mr. Benson, a Zambian national who was chauffer of the Zimbabwe High Commissioner to Zambia for
30 years receives, in 2007 a monthly pension of $ 15m [ZAAT 4 of 11.00]

UNIT 10 DECEASED ESTATES, LEASE IMPROVEMENTS AND DOUBLE TAXATION
1) Mr Dube died on 31 March 2007. In terms of his will, he bequeathed the following
a) a farm in Banket to his son together with $30m cash
b) a block of flats to his daughter plus $20m cash
c) the remainder of the estate was left to the testator’s brother
The executor’s Final Liquidation and Distribution account was confirmed by the Master of the High Court
on 30 November 2007.
REQUIRED
Giving brief reasons, you are required to advise on what amounts and operations may result in taxable
income accruing to each of the following, indicating the date when such income may accrue:
a) Mr Dube’s son
b) Mr Dube’s daughter
c) Mr Dube’s brother
d) Mr Dube’s estate [CIS 5 of 05.05]
2) The lease agreement stipulates that Advanced Company Pvt Ltd shall erect a building to the value of
$500m and use it for the purposes of a café. The lease covers a period of 7 years with effect from 1st
January.
Half way through the construction, the building clause in the agreement is varied and costs are increased
from $500m to $630m with the approval of both the lessee and lessor, J.D Pvt Ltd and the City Council.

Construction of the building is completed in two years and the building is put to use at the commencement
of the third year of the lease.
a) What section of the Act

i) Allows for the deduction of costs incurred on lease improvements
ii) Brings to tax improvements under a lease agreement?
b) How much is allowable as a deduction to Advanced Company Pvt Ltd during
the fourth year of the lease?
c) How much is taxed in the hands of J.D Pvt Ltd and in which year? [CIS 5 of
05.98]
3) Didyer Munro , who was ordinarily resident in Zimbabwe during the 2007 tax year, received the
following amounts:
Econet Zimbabwe Company Dividends $ 35 m
Bulgarian Company Dividends (Note 1) 12m
South African Company Dividends (Note 2) 13m
Australian Company Dividends 20m
Notes
1. The $12m was net after deducting $1m telephone charges and $2m Bulgarian tax
2. The $13m was also net after deducting $3m South African tax
REQUIRED
Determine his tax liability for the year ended 31 December 2007 [J HORE 2008]

SOLUTIONS
Introduction
The solutions to the questions contained herein are modelled upon legislation that was in force as at 31
December 2007, i.e. designed to help students studying and sitting for their Taxation exams in 2008.
Below are some of the tax rates and facts as at 31 December 2007.
1. Sliding Scales for Income from Employment
TAX BRACKETS
1 JAN- 30 JUNE 07
INCOME $ DIFFERENCE Rate% TAX/BRACKET CUMULATIVE TAX
0-600 000 600 000 0% 0 0

600 001-1 200 000 600 000 25% 150 000.00 150 000.00
1 200 001-1 800 000 600 000 30% 180 000.00 330 000.00
1 800 001-6 000 000 4 200 000 35% 1 470 000.00 1 800 000.00
6 000 001-18 000 000 12 000 000 40% 4 800 000.00 6 600 000.00
18 000 001-30 000 000 12 000 000 45% 5 400 000.00 12 000 000.00
Above 30 000 000 47.5%
1 JULY- 31 AUG 07
0-3 000 000 3 000 000 0% 0 0

3 000 001-6 000 000 3 000 000 25% 750 000.00 750 000.00
6 000 001-10 000 000 4 000 000 30% 1 200 000.00 1 950 000.00

10 000 001-22 000 000 12 000 000 35% 4 200 000.00 6 150 000.00
22 000 001-36 000 000 14 000 000 40% 5 600 000.00 11 750 000.00
36 000 001-50 000 000 14 000 000 45% 6 300 000.00 18 050 000.00
Above 50 000 000 47.5%
1 SEPT -31 DEC 07

0-16 000 000 16 000 000 0% 0 0

16 000 001-32 000 000 16 000 000 25% 4 000 000.00 4 000 000.00
32 000 001-48 000 000 16 000 000 30% 4 800 000.00 8 800 000.00
48 000 001-120 000 000 72 000 000 35% 25 200 000.00 34 000 000.00
120 000 001-200 000 000 80 000 000 40% 32 000 000.00 66 000 000.00
200 000 001-280 000 000 80 000 000 45% 36 000 000.00 102 000 000.00
Above 280m 47.5%
2. Credits
Credit Title Amount / annum ($)
Elderly Person 120 000

Blind Person 120 000
Mentally and Physically Disabled Person 120 000
Invalid Appliances and Medical Expenses 50% of cost
3. Pension and Retirement Annuity Fund Contributions (Sn 15(2)h of ITA )
Maximum allowable deduction is $900 000/employee/annum when paid by employee or employer.
4. Motor-Vehicle Benefits (Sn 8(1) f of ITA)
Engine Capacity Annual Benefit
0 - 1500 cc $2.4m
1501 – 2000 cc $4m
2001 – 3000 cc $5m
3001 cc and above $6.7m
5. Loans (Sn 8(1) f of ITA)
Amount Rate
Up to $35 12,5%
Above $35 16%

6. Other Rates
Description Rate
Income from trade or investment 30% + 3% AIDS levy
Foreign Company Dividends 20%
Growth Point Investment Allowance (GPIA) 15%
Special Initial Allowance (SIA)- General 50% for 1st year, Accelerated W& T at 25% for 2nd
year and 25% for 3rd year
- S.M.Es 100% for 1st year, Accelerated W& T at 25% for 2nd
and 25% for 3rd year.
VAT on Standard rated goods and services 15%
VAT on cellular telecommunications services 22.5%
7. Withholding Taxes
Income (a) Non Residents Tax on Fees Sn19- Fin Act 20%
Tax (b) Non Residents Tax on Remittances Sn20- Fin Act 20%
(c) Non Residents Tax on royalties Sn21- Fin Act 20%
(d) Non Residents Tax on Interest Sn18- Fin Act 10%
(e) Tobacco levy Sn 22A - Fin 1.5% WEF 01.03.05
Act
(f) A.T.M Levy Sn 22B - $2 500 per withdrawal
Fin Act
(g) Residents Tax on Interest Sn 22- 20%
Fin Act
(h) Residents Shareholders Tax & Non Sn 15 & 17 15% (ZSE) & 20% (other)
Residents Shareholders Tax Fin Act
(i) Informal Traders Presumptive Tax Sn 22C 10%. Became Presumptive Tax
Fin Act with effect from 01.09.05
i) Capital Gains Withholding Tax Sn 39 Fin Act
- Immovables - 15%
- Marketable Securities - 5%
9. Presumptive Taxes
i) Taxi-Cabs And Omnibuses
Description Sitting Capacity 2007/Qtr $

Taxi-Cab 0-7 9m
Omnibus 8-14 90 000
Omnibus 15-24 90 000

Omnibus 25-36 180 000
Omnibus Above 36 180 000
ii ) Driving Schools/Goods Vehicles
Description Capacity/Class 2007/Qtr

Class 4 Class 4 only 18m
Vehicles
Class 1 & 2 Whether or not offered together with other 24m
classes
Goods 0-10t, towing 1 or more trailers in a 24m
Vehicles combined capacity of not > 15t but < 20t
Above 10t but < 20t 24m
20t and more 48 m
UNIT 1 INDIVIDUAL TAXATION
1. MS MHUNGU
DETERMINATION OF TAX LIABILITY FOR MS MHUNGU FOR THE YEAR ENDED 31
DECEMBER 07
$
$
Government Employment- [Jan-Jun 07]

Gross Salary 1 120 000 000
Representation Allowance *1 -
Entertainment Allowance *1 -
Motor Vehicle *1 2 500 000
Leave not taken 26 000 000
Pension Fund Contributions (6/12 x $900 000) (450 000)
1 148 050 000
Tax on the first $30m 12 000 000
Excess at 47.5% ( $1 118 050 000) 531 073 750
543 073 750
Less Credits
- Elderly Persons Credit ($120 000 x 6/12) 60 000
543 013 750.00
3% Aids Levy 16 290 412.50
559 304 162.50
PAYE (313 600 000)
Tax payable for period 245 704 162.50
Add Tax on LSP
47.5% x $40.93m * 4 19 440 000
Tax Payable 265 144 162.50

Flower Exports (E.P.Z)- [Sept-Dec 07]
Gross Salary 120 000 000
Benefits aggregate ($70m-$4m) *2 66 000 000

Motor Vehicle (4/12 x $4m) 1 333 333.34
Medical Cover -
Dual Purpose Trips (1/2 x $8m) 4 000 000
71 333 333.34
Para 4(q) Exemption (50% x $120m) *3 60 000 000 11 333 333.34
131 333 333.34
Tax on the 1st $120m 34 000 000

Excess @ 40% ($131 333 333.34 – 120 000 000) 4 533 333.33
38 533 333.33
Less Medical Credit
(50% x $9,6m) (4 840 000)
Elderly Persons Credit (4/12 x $120 000) (40 000)
33 653 333.33
+ 3% AIDS Levy 1 009 600

34 662 933.33
Less PAYE 36 000 000

Tax Refundable (1 337 066.67)
Non-Employment
$ $
(a) Company Dividends 12 000 000
Tax @ 20% 2 400 000
Less Foreign Tax 1 800 000
Payable 600 000
(b) Foreign Rentals *5 -
(c) Foreign Royalties

($20m x 30% ) 6 000 000
3% AIDS Levy 180 000
6 180 000
Less Foreign Tax 5 000 000 1 180 000
Tax Payable- Non employment 1 780 000

Special Notes
*1. Most benefits granted to a person in the full time service of the state (civil servant) are exempt
from the tax in terms of para 4(d) of the 3rd Sch to the ITA . The motoring benefit is however only
exempt to certain persons, such as judges.
*2. Medical cover is exempt from tax in terms of para 8 of the 3rd Sch to the ITA.
*3. Benefits to employees of an EPZ operator (licensed investor) are exempt from tax to the extent to
which they do not exceed 50% of the taxable income (excluding the benefits) in terms of para 4(p) of
the 3rd Sch to the ITA.
*4. LSPs are taxable at the highest rate of tax suffered by the last dollar of other income and in this
case, it is 47.5%.
*5. The source of income from immovable property is the place where the immovable property is
situated.
2.MR MUHLWA
DETERMINATION OF TAX LIABILITY FOR MR MUHLWA FOR THE TAX PERIOD ENDED 30
JUNE 07
$ $
Salary ($200m x 6) 1 200 000 000

Bonus ($200m - $75m) 125 000 000
CILOL 15 350 000
Severance Pay *1 -
Motoring Benefit *2 2 500 000
House Occupancy ($24m - $6m x 6) 108 000 000
Less Pension Contribution *3 (450 000 )
1 450 400 000
12 000 000
Tax on the 1 $30m
st
674 690 000
Excess @ 47.5% ($1 450 400 000 - $30 000 000)
686 690 000
Less CREDITS
Spectacles ($18m - $12m) 6 000 000
Medical Aid Contributions 72 000 000
78 000 000
39 000 000
50% of Total
647 690 000
19 430 700
+ 3% AIDS Levy
667 120 700
298 480 000

Less PAYE
368 640 700
Tax Payable before tax on LSP

Tax on Lump Sum Payments
$
LSP- Pension 540 000 000
LSP- Benefit ($68m- $8.40) * 4 67 999 991.60
607 999 991.60
Tax @ 47.5 % *5 288 799 996.01

Tax payable before LSP 368 640 700.00
Total Tax Payable 657 440 696.01
Special Notes
*1. The exempt portion on a severance pay (retrenchment package) payable from a fund approved by the
Minister of Labour is the greater between $25m or 1/3 of the first $100m (subject to a maximum exemption
of $ 33.33m) as follows:
Amount 2 680 000

Exemption ($25m or 1/3 of the 1st $100m) 2 680 000
Taxable -
If the amount received is more than $100m, then the exemption will be limited to $33.33m but if it is equal
to or less than $100m, then the exemption shall be 1/3 of the actual amount received or $25m, whichever is
greater. In simple, the exemption thus ranges from a minimum $25m and can not be more than $33.33m. If
the amount received as a retrenchment package is less than $25m, then the full amount is exempt from tax.
* 2. Motoring benefit: 6/12 x $ 5 000 000, 00 = $2 500 000.00
* 3. The maximum amount allowable for contributions to approved pension or retirement annuity funds
(including arrear contributions and NSSA contributions) is $900 000 per person per month. For the 6
months in question, it is $0.9m x 6/12 months = $0.45m. Disregard the excess contributions.
*4. A statutory $8.40 is deducted from LSPs from benefit funds where the mentioned are new funds.
*5. LSPs are taxable at a special rate, which is the highest rate of tax suffered by the last dollar of the other
income. In this instance, the other income (comprising salary, bonus etc) was taxable at 47.5%.

3. MR RUTATA
DETERMINATION OF TAX LIABILITY FOR MR RUTATA FOR THE YEAR ENDED 31.12.07
Employment
$
Salary ($40m x 6) 240 000 000
CILOL 100 000 000
Loan *1 4 000 000
Fees ($3m x 2) 6 000 000
Maid 3 000 000
House Occupancy ($20m - $10m x 6) 60 000 000
Gratuity 100 000 000
Security Benefit 949 900 000
Overtime 90 000 000
Tax assistance *2 10 000 000
Holiday Allowance 300 000 000
Cellphone Allowance ($20m x 100% - 30%) 14 000 000
Part-time lecturing 100 000 000

General Upkeep Allowance 10 000 000
Electricity benefit 40 000 000
CABS Class “C “shares (exempt) -
POSB Interest (exempt) -
Econet Dividends (exempt) -
Retrenchment Package *3 5 666 666 666.67
Motoring Benefit (6/12 x $5m) 2 500 00
Less Allowable Deductions 7 696 066 666.67

RAF + NSSA *4 450 000
7 695 616 666.67
Tax on the 1st $30m 12 000 000

Extra $7 665 616 666.67 @ 47.5% 3 641 167 916.67

3 653 167 916.66
Less Credit
Medical *5 39 060 000
Blind Person’s Credit (Wife) 60 000 (39 120 000)
3 614 047 916.67
Add 3% AIDS Levy 108 421 437.50
3 722 469 354.16
Less PAYE 2 000 000 000
Tax Payable 1 722 469 354.16
(b)Tax on the LSP
Amount of LSP 500 000 000

Less Had rules not changed 12 000 000
488 000 000
Tax @ 47.5% 231 800 000
No Aids Levy is chargeable on LSPs.
( c)Tax on Income from Trade
$
Profit from Shop 100 000 000
Tax @ 30% 30 000 000
+3% AIDS Levy 900 000
30 900 000
Total tax on all income
Employment 1 722 469 354.16
LSP 231 800 000
Trade 30 900 000
1 985 169 354.16
Special Notes
*1 .Loan - $ 100m x (100% - 40% - 10%) x 16 % x 6/12

= $ 4 000 000.
*2. Tax assistance received by an employee from his employer is a taxable benefit
*3. Retrenchment Package $5 800 000 000
Less – CILOL 100 000 000
Ranking for Exemption $5 700 000 000

Exemption 33 333 333.33
Taxable 5 666 666 666.67
See comment 1 in Solution 1 above.

*4. The maximum amount allowable for contributions to approved pension/retirement annuity funds is
$900 000 per employee per annum.
*5. Medical Aid Contributions $50 120 000
Spectacles ($30m – (100% - 40%) 18 000 000
Loan – Prescriptions ($100m x 10%) 10 000 000
78 120 000
Credit is 50% x $78m 39 060 000
UNIT 2 BUSINESS TAXATION
1.MAFRIKA PVT LTD

Workings
W1 SCHEDULE OF CAPITAL ALLOWANCES (ASSETS ON HAND AT 01.01.07)

Asset Industrial Plant and Furniture Canteen Commercial Total
Building Machinery and Vehicles
Fittings
Rate of 5% 10% 10% 5% 20%
W&T
Cost 29,000,000 150,000,000 5,000,000 25,000,000 120,000,000
ITV - - - 6,250,000 60,000,000

01.01.07
Acc W & T - - - 6,250,000 30,000,000 36,250,000
ITV - - - - 30,000,000
31.12.07
W2. Recoupment
(a) Printing Machine

$
ITV 01.01.07 8 000 000
Selling Price 30 000 000
Potential recoupment $ 22 000 000
Capital Allowances 8 000 000

($16m - $8m)
Actual Recoupment is the lesser between capital allowances previously granted and potential recoupment.
In this case it is $8m.
W 3. SCHEDULE OF CAPITAL ALLOWANCES (ADDITIONS) DURING 2007
Asset Mazda Printing Nissan Computer Staff Staff Total

B1800 machine Almera House 1 House 2
Cost 70m 80m 25m 5m 46m 10m
D. Cost - - 10m - 16m -
SIA (50%) 35m 40m 5m 2.5m - 5m $87.5m
ITV 35m 40m 5m 2.5m - 5m -
31.12.07
GPIA *1 *1 - 0.75m - 1.5m $2.25m
(15%) *2
DETERMINATION OF TAXABLE INCOME/ASSESSED LOSS FOR MAFRIKA PVT LTD FOR

THE YEAR ENDED 31 DECEMBER 2007

$ $
Net Profit 2 850 000 000

Add Back Depreciation 25 000 000
Donations - Methodist (benevolent)*3 5 000 000
- Hospital ($150m-$25m) 125 000 000
- School ($150m-$25m) *3 125 000 000
- NBF -
- Standards Association -
Entertainment – Xmas party -
- Clients 10 000 000
Recoupment (w 2) 8 000 000 298 000 000
3 148 000 000
Less
- Profit –printing machine *4 7 200 000
- Acc W & T (w1) 36 250 000
- SIA (w3) 87 500 000
- GPIA (w3) 2 250 000 133 200 000
Taxable Income 3 014 800 000
2. Provisional Tax (Quarterly Payment Dates (QPDs)
Provisional Tax (based on the taxpayer’s estimated tax liability) for the 2007 tax year is required to be paid
as follows, on or before the dates mentioned below: -
25.03.07- 10%
25.06.07 - 25%
25.09.07 - 35%
20.12.07- 30%
Once an assessment is done by ZIMRA, the total due is to be made good and the issue of installments falls
away. The dates mentioned above are commonly known as Quarterly Payment Dates (QPDs) and they
replaced Annual Payment Dates (APDs).

Special Notes
* 1. The deemed costs for 2007 are summarized as follows:
Asset Deemed Cost Comment
PMVs (Passenger Motor $10m Disregard Excess

Vehicles)
Staff Houses(1 unit) $16m Do not treat as staff house if cost
exceeds $16m
Hospital, Clinic, Nursing home, Total Cost is allowable No more deemed costs
School.
The GPIA is not granted on motor vehicles.
* 2. The essence of the question is to separate staff houses where one is below the restricted cost whilst the
other is above that cost. In the case where the cost is $10m, the total cost as incurred would be used for
capital allowances. In the latter case, the cost would be deemed to $16m being the current deemed cost for
1 unit of a staff house. Where the cost is above $16m, the building is not treated as a staff house; hence the
full cost does not rank for capital allowances.
* 3. The donations to the Standards Association of Zimbabwe and National Bursary Fund are allowable in
full. Those to the Ministry of Health and Child Welfare and to the Ministry of Education and Culture are
allowable subject to an annual maximum of $25m. The donation to the Methodist Church is benevolent and
can thus not be allowed.
* 4. The profit on the printing machinery is capital in nature and is thus not taxable. Recoupment is taxable
instead.
2. MR TIMA
Workings
W1.Capital Allowances
(i) Industrial Building (ii) Storeroom

Cost 5 000 000 Cost 300 000
Interest 160 000 S I A (50%) 150 000
Fencing 10 000
5 170 000 150 000
S I A (50%)*1 2 585 000
2 585 500
(iii)Plant (iv) Tractor
Cost 167 000 Cost 600 000
+ Transport 10 000 S I A-50%*3 300 000
+ Installation*2 2 000 300 000
179 000
S I A (50%) 89 500
89 500

(v)Benz (vi)Canteen
Cost 800 000 Cost 600 000
W & T (20%) 160 000 S I A-50% 300 000
640 000 300 000
75% x160000=120000 *4
.
(vii) Showroom
Cost 200 000

W &T –2,5% *5 5 000
195 000
COMPUTATION OF TAX LIABILITY FOR TIMA FOR THE YEAR ENDED 31/12/07
$ $
Net profit per accounts 150 000
Add
Depreciation 350 000
Bursaries – Cousin -
-Stepsister *6 8 000
Ex-gratia *7 23 000
Pension (allowable) -
SACA (allowable) -
Travelling – capital 10 000
Donation -
Repairs –Tree 2 000
-Underpinning *8 -
Fencing 10 000
Installation 2 000 405 000
555 000
Less
S I A (w 1)-Para –2-4th Sch (3 424 500)
W & T (w 1)- Para 3- 4th Sch (125 000)
Section 15 (2) t-Preliminary *9

-Interest – Raw materials (50 000)
-Salaries (200 000)
-Connection (600 + 1200) (1 800) (3801300)
ASSESSED LOSS ( 3246300)
Special Notes
*1 Interest on money borrowed to acquire capital assets is capitalized if incurred before the asset is brought
into the business of the taxpayer. The interest which is payable for the same purpose after the asset has
been brought into the business of the taxpayer is allowable as a deduction. In the case of C.I.R v Genn &
Co Pvt Ltd 20 S.A.T.C 113 A.G.R p43, it was held that “interest paid on money borrowed …..constituted
expenditure…in the production of income whether the loan was for the acquisition of fixed or floating
capital”. The cost of fencing or erecting a durawall can be capitalized to the cost of the main building.
*2 Costs incurred in the acquisition, transportation and installation of capital assets form part of the cost of
such assets.
*3 SIA can still be granted on second-hand movables but cannot be granted on second-hand/purchased
immovables.

*4 SIA is not granted on movables which are used to the extent of less than 90% for trade. The W & T in
this case is further apportioned on the basis of business usage.
*5 A showroom is a Commercial building and cannot be granted SIA except if it is located in a designated
growth point area. The rate of W & T for Commercial Buildings is 2.5%.
*6 Such bursaries are allowable as deductions in terms of Sn 15(2) p of the ITA .The person taking up the
training should not be a person “connected to the taxpayer” (see the mentioned section). In cases like this
where the taxpayer is a near relative, the person attending the course should not be the taxpayer himself or
his near relative, like the husband of Mr Tima’s step-sister. However, a cousin is not a near relative as per
the definition of the term in Sn 2 of the ITA.
*7 Ex-gratia payments are allowable in terms of Sn 15(2)q of the ITA , subject to the following limits
(which are now merely academic due to inflation):
-Ex-employee/Partner $3 per annum
-All dependants of ex-employee or partner $2 per annum
Notice that if the payments made under similar circumstances to ex-employees or partners who retired due
to injury, infirmity or old age where such payments are obligatory (usually as provided for in the contract
of employment), the amounts are not limited to the stated figures. Notice also, that the pension payments of
$36 000 do not take the same form of pension contributions, which are limited to $900 000. These are
payments made to a former employee.
*8 The removal of a tree is not a repair but an improvement as pointed out in the case of Rialto and Varialli
v C. of T.J.343 I.T.C 1213,36 S.A.T.C AHB p47, where it was held that “the felling…..must be categorized
as an improvement”
*9 Preliminary expenditure is allowable in terms of Sn 15(2)t of the ITA provided that it is revenue in
nature, is claimed in the first year of trade and was incurred not more than 18 months prior to the
commencement of trade.
3) KEE LAMBADO PVT LTD
COMPUTATION OF TAXABLE INCOME FOR KEE LAMBADO (PVT) LTD FOR THE YEAR
ENDED 31.12.07
$ $
Profit per accounts 160 400
Add: Depreciation (capital
allowance granted instead) 180 000
General expenses: Finance charges
(capital) 3 500
Insurance premium (ceded) 6 000
Restraint agreement (capital) 9 000
Fine (not allowed) 500
Company formation (capital) 980
Pilferage (allowable) *1 -
Valuation fees (allowable) *2 -
Rent: Premium (9/10 x 10 000) 9 000
Unproductive rent (not used for trade) 2 000
Donations: Aids orphanage (benevolent) 1 900
Trust (allowable) *3 -
Bad debts: Loan (not for trade) 1 200
Provision 5 000
Interest: Share loan 4 000
Working capital (allowable) -
Directors' fees :(allowable) -
Recoupment 31 200 254 280
414 680
Less: Profit on sale of shares

(revenue-intention) -
Profit on sale of vehicles
(capital) 5 000
Bank interest (exempt) 11 000
Interest from Oak Lambado
(Pvt) Ltd (revenue) -
Dividends *4 3 520
Capital Allowances (w1) 406 620 426 140
ASSESSED LOSS (11 460)
Workings
Capital Allowances
W1 : Furniture and Fittings
ITV 31/12/06 16 200
W&T 1 620
ITV 31/12/07 14 580
Furniture and Fittings: Additions

Cost (6 500 + 3 500) 10 000
SIA - 50% 5 000
ITV 31/12/07 5 000
Motor vehicle
Cost 120 000
W & T 2005 at 20% 24 000
ITV 31/12/2005 96 000
W & T -06 at 20% 19 200
ITV 31/12/06 76 800
Sale proceeds 108 000
Recoupment 31 200
Truck
Cost 800 000
SIA - 50% 400 000
ITV 31/12/07 400 000
Total capital allowances = 1 620 + 5 000 + 400 000= 406 620
NB: Grant SIA on the additions only and W & T on other assets.
Special Notes
*1 : According to the decision made in Sanders Pvt Ltd v C. of T 1974 (SC) J. A.H.B p39 , “Losses
resulting from thefts by a managing director, a director or a manager in the position of a proprietor are
not losses….arising out of trade. However, thefts by subordinate employees…..” are allowable as
deductions, as in the case at hand.
*2: The general deduction formula allows the cost of valuation of
assets for fire insurance purposes as a deduction.
* 3: Sn 15(2)r1 - Donations made to charitable trusts administered by either the Minister of Social Welfare
or Minister of Health are allowable as deductions.
*4: Para 9 of the 3rd Schedule to the ITA exempts local company dividends.

UNIT 3 PARTNERSHIPS

1) TATENDA AND GOMO
DETERMINATION OF TAXABLE INCOME FOR MESSRS TATENDA AND GOMO’S FOR THE
YEAR ENDED 31 DECEMBER 2007
a) Income from Partnership Operations
$ $
Profit 420 000 000
Add Back
Depreciation 6 400 000
Insurance – Joint life (capital) 11 160 000
Motor Vehicle
- Tatenda (40% x $15m) 6 000 000
- Gomo (40% x $12,2m) 4 880 000
General Expenses (Parking fines) 300 000 28 740 000
448 740 000
Share of Profits
Tatenda ($252m/$420m x $448,74m) 269 244 000
Gomo ($168m/420m x $448,74m) 179 496 000 448 740 000
b) Partners Taxable Income
Tatenda Gomo
$ $
Share of profits 269 244 000 179 496 000
Medical aid contributions *1 900 000 600 000
Life Policies 6 000 000 3 600 000
Interest on Capital 5 200 000 3 800 000
Living Expenses 48 000 000 32 000 000
Salaries from company 120 000 000 120 000 000
Interest for shares *1 - ( 2 800 000)
Motor Vehicle 6 000 000 4 880 000
Medical aid contributions *2 - -
Pension/NSSA *3 ( 600 000) ( 600 000)
Recoupment *4 10 626 000 7 084 000
465 370 000 348 060 000
Special Notes
* 1 . Although used to acquire a capital asset, the interest is allowable as a deduction as upheld in ITC 1504
(1991) 53 SATC 349 (see Students Guide to Tax in Zimbabwe 2006: J Hore and M. Mangoro page 53).
* 2 . The value of medical aid contributions paid by a partnership for partners is taxable in the hands of
partners because the partnership is not a real employer, but those paid for employees by a company or any
other employer are exempt in terms of Para 8 of the 3rd schedule to the ITA.

* 3 . The amounts are allowable as deductions in terms of Sn 15(2) h of the ITA subject to a maximum of
$75 000 per employee per month or $900 000 per employee per annum. In this case however, the $900 000
is limited to 8 months, i.e. 8/12 x $900 000 = $600 000.00.
*4. Recoupment
Asset Sale Price ITV at Potential Recoupment Capital Actual

1.01.07 Allowances Recoupment
Granted
Office Equipment 35m 18.025m 16.975m 12.96m 12.96m
Furniture and Fittings 25m 20.025m 4.975m 4.75m 4.75m
Total 17.71m
Recoupment is $17.71m. This is apportioned as follows:

Tatenda ($252m/$420m x $17.71m) $10 626 000
Gomo ($168m/420m x $17.71m) $ 7 084 000
*5. Where a partnership is dissolved, the assets are taken to have been sold, and thus recoupment should be
calculated and taxed in the hands of the old partners in their old profit and loss sharing ratio. The transferee,
in this case Tago Associates Pvt Ltd, can claim capital allowances on the same assets.
2) CALCULATION OF TAX LIABILITY FOR WADZANAI AND FLORENCE FOR THE YEAR
ENDED 31 DECEMBER 2007
i) Share of profits
$ $
Sales 4 000 000
+ Closing stock – taxable Sn 8(1) h 60 000
4 060 000
Less Allowable Deductions
Wages 230 000
Salaries - Sn1 800 000
Repairs 30 000
Medical Aid 750
Insurance (8 800 – 2500) 6 300
Bonus 10 800
Retirement annuity (19600+7100) 26 700 1 104 550
2 955 450
Less C. R.A.
UBCE brought forward 75 500
Less Recoupment 61 750
Divided by 5 years 13 750 2750
Add CCE
Shaft sinking 360 000
Staff house 50 000
Buildings 800 000
Headgear 40 000 (1250000)
1 702 700
Profit share – Wadzanai 851 350
- Florence 851 350 1 702 700
Tax from Trade

Wadzanai Florence

851 350 851 350
Profit
400 000 400 000
Salary * 1
10 800 -
Bonus *2
1 600 1 700
Insurance
1 500 300
Medical aid
(19 600) (7 100)
Retirement Annuity
1 245 650 1 246 250
373 695 373 875

Tax @ 30%
Less CREDIT (medical) – 75 150

50% 373 620 373 725
11 208, 60 11 211, 75
+ 3% Aids Levy 384 828.60 384 936.75
Special Notes
*1. The question indicates that Wadzanai and Florence earned the salary of $400 000 each. Medical aid
contributions paid by the partnership on behalf of partners are taxable in the hands of partners.
*2. There is no exemption on the bonus because it is not income from employment. The salary and bonus
are taxable at 30% plus 3 % AIDS levy because they are income from trade (not from employment) since
they are paid by the partnership to partners. The definition of remuneration in terms of para 1(1)(b)e of the
13th Sch to the ITA excludes “any amount paid or payable out of moneys of a partnership to a person who
is a member of that partnership”.
3.AUDREY AND MUFARO
W 1. Recoupment
$
ITV 01.09.06 200m
Cost 350m
Capital Allowances granted 150m
Potential Recoupment
($420m-$200m) 220m
Actual Recoupment
(the lesser between $220m & $150m) 150m
W2 . Capital Allowances Election for New Partnership
Cost of assets $420m

SIA (50%) 210m
(a) DETERMINATION OF TAX LIABILITY FOR AUDREY AND MUFARO FOR THE YEAR
ENDED 31.12.07

$ $
Share of profits 400m 400m

Salaries 300m 300m
Recoupment 75m 75m
SIA ($210m / 3) (70m) (70m)
Taxable Income 705m 705m
Tax @ 30% 211.5m 211.5m

3% Aids Levy 6.345m 6.345m
217.845m 217.845m
(b) Election To Minimize Tax
The new partnership can elect to claim SIA on the assets (save for immovables, if any) as shown in
working 2 above. This has the effect of minimizing tax liability as SIA provides the maximum capital
allowances (ie 50% SIA in 1st year and Accelerated W & T at 25% and 25% in the 2nd and 3rd years
respectively). Since the partners share profits equally, the $210m SIA can be split equally among the 3
partners.
UNIT 4 SUSPENSIVE SALES

1) HOUSES FOR ALL PVT LTD
Workings
W1 Schedule of payments
(a) 70 stands
2003 2004 2005

Deposit $525m - -
Amounts Due - $262,5m $262,5m
Amounts Not Yet $525m $262,5m -
Due
Interest (60%) $157,5m $157,5m -
(b) 30 Stands
2004 2005 2006
Deposit $375m - -
Amounts Due - $187,5m $187,5m
Amount not yet due $375m $187,5m -
Interest (75%) $70,3125m $140,625m -
W2 Calculation of Profit
This is given by
E- (F+G) where E-Selling Price
E F-Cost
G-Development Costs
70 Stands $ $
Selling Price ($15m x70) 1 050 000 000
Less-Cost (70/100 x 24m) 16 800 000
Survey Fees (70/100 x $6m) 4 200 000
Roads, water reticulation
(70/100 x $60m) 42 000 000 63 000 000
Profit 987 000 000
b) 30 Stands
Selling Price ($25m x 30) 750 000 000
Less-Cost (30/100 x $24m) 7 200 000
-Survey Fees (30/100 x $6m) 1 800 000
-Roads, Water reticulation
(30/100 x $60m) 18 000 000 27 000 000
Profit 723 000 000

1) DETERMINATION OF TAXABLE INCOME/ASSESSED LOSS FOR HOUSES FOR ALL P/L
FOR THE YEARS ENDED 31/12/03 TO 31/12/06
2003 $
Profit (w2) 987 000 000
Less Suspensive Sale Allowance
Dx E-(F+G)
E
$525m x $987m (w2a)
$1,050bn 493 500 000
493 500 000
Add Interest 157 500 000
Less Administration Expenses (800 000)
Taxable Income 650 200 000
2004
70 stands
Profit/Income $
(Suspensive Sale Allowance- 2003) 493 500 000
Less Suspensive Sale
Allowance
Dx (E- (F+G)
E
$262,5m x $987m
$1,050bn 246 750 000
246 750 000
30 Stands $
Profit (w2b) 723 000 000
Dx (E- (F+G)
E
$375m x 723m (w2b) 361 500 000
$750m 361 500 000

Total Taxable Income

-70 stands 404 250 000
-30 Stands 431 812 500
836 062 500
Less Administration Expenses 950 000
Total Taxable Income 835 112 500
2005
70 Stands
Income (Suspensive Allowance 2004) 246 750 000
Less Suspensive sale Allowance
D x (E- (F+G)
E
$0 x $987m
$1,050bn 246 750 000
Add Interest ____-______

30 Stands $
Income (Suspensive Allowance –2004) 361 500 000
D x (E- (F+G)
E
$ 187,5m x $723m/$750m 180 750 000
180 750 000
Total taxable income

- 70 Stands 246 750 000
-30 Stands 321 375 000
568 125 000
Less Administration Expenses 2 500 000

Total taxable Income 565 625 000
2006
70 Stands
No Further Income
30 stands
Income (Suspensive Sale Allowance-2005) 180750 000
Less Suspensive Sale allowance
D x (E-(F+G)
E
0x $723m
$750m ___-_____
180 750 000
Less Administration Expenses 6 500 000
2. EBENEZZER PVT LTD
Workings
W1 Capital Allowances and Recoupment
(a) Factory Building $
Cost ($35m + $5m) 40m
SIA (50%) 20m
ITV 31/12/06 20m
Selling Price 300m
Potential Recoupment 280m
Actual Recoupment
(Capital Allowances
Previously granted) 20m
W2 Inflation Allowance
(a)Building

$
Cost 40m
Inflation
$40m x (11 666 826.7-665 774.1)
/665 774.1 660 948 066.32
Calculation of Capital Gain (B-C) $ $

Selling Price 10 000 000 000
Less Recoupment 20 000 000
9 980 000 000
Cost 40 000 000
Less SIA w1(a) 20 000 000
20 000 000
Inflation Allowance (w2) 660 948 066.32 680 948 066.32
Capital Gain (Total) 9 299 052 933.68
W4 Schedule of Payments
2007 2008
Deposit 6bn -
Amounts Due - 4bn
Amounts Not Due 4bn -
DETERMINATION OF TAX PAYABLE OR REFUNDABLE FOR EBENEZZER PVT LTD FOR

THE YEAR ENDED 31/12/07 & 31/12/08
2007 $
Capital Gain (w3) 9 299 052 933.68
Less Suspensive Sale
Allowance
AX (B-C)
D
$4bn x $9.299bn
$10bn 3 719 620 773.44
Capital Gain (07) 5 579 431 160.24
Tax at 20% 1 115 886 432.05
Less (CGWT)

15% of $10bn 1 500 000 000
Tax Refundable (384 113 567.95)
2008
Capital Gain (Allowance for 2007) 3 719 620 773.44
A x (B-C)
D
$0 x$9.299bn /$10bn -
Tax at 20% 3 719 620 773.44
(b) Defaults
Where a purchaser defaults in paying, say the last installment as is in the question, the taxation of the
capital gain arising therefrom is governed by Sn 18(2) of the CGTA. The capital gains tax refundable in
2007 remains the same but the capital gains tax payable or refundable for 2008 is calculated thus:-
$
Amounts received to date 6 000 000 000
Less Amounts taxed to date *3 5 579 431 160.24
Capital Gain 420 568 839.76
Tax at 20% 84 113 767.95
Special Notes
* 1. Where A - Amounts Not Yet Due
B- Capital Amount deemed to have accrued under this agreement.
C- Allowable Deductions in terms of the CGTA
D- Amount deemed to have accrued under this agreement.
*2 . A capital gains withholding tax of 15% of the selling price of immovable property is required to be
withheld and paid over to ZIMRA by a conveyancer (lawyer, estate agent etc) or any other person acting on
behalf of the seller. The amount so withheld is to be remitted to ZIMRA not later than the last day of the
month following that in which the tax is withheld.
*3 . Amount taxed in previous year or years.
3) MATKO TV SALES
W1. Schedule of Payments

2007 2008
Deposit 158.4bn --
Amounts Due -- 105.6bn
Amounts Not Yet Due 105.6bn --
Interest 73.92bn --
DETERMINATION OF TAX LIABILITY FOR MATKO TV SALES MANIA FOR THE

YEAR ENDED 31.012.07
$bn
Gross Profit (80% x $264bn) 211.2
[(Gross Profit/Sales x 100%)x Amounts Not Yet Due
$211.2bn/$264bn x 100% x $105.6bn 84.48
126.72
Interest 73.92
Taxable Income 200.64
Tax @ 30% 60.192
Add 3% AIDS Levy 1.80576
Tax liability 61.99776
The credit sales basis should be adopted as it yields a taxable income of $200.64 bn for 2007 as compared
to $125 bn anticipated from cash sales. The amount so granted as a suspensive allowance ie $84.48 bn is
brought to tax in full in 2008. The suspensive sale allowance in that year will be zero.

UNIT 5 FARMING
1.MR FARMER
Workings
W 1 Opening Stock $
Bulls 2 at $45m 90 000 000

Cows 60 at $70m 4 200 000 000
Oxen 20 at $60m 1 200 000 000
Heifers 40 at $30m 1 200 000 000
Tollies 10 at $30m 300 000 000
Calves 50 at $10m 500 000 000
7 490 000 000
W2 Closing Stock $
Bulls 3 at $45m 135 000 000

Cows 45 at $70m 3 150 000 000
Heifers 75 at $30m 2 250 000 000
Tollies 40 at $30m 1 200 000 000
Calves 30 at $10m 300 000 000
7 035 000 000
LIVESTOCK TRADING ACCOUNT FOR MR A.FARMER FOR THE YEAR ENDED 31/12/07
$ $
Sales 2 100 000 000
Opening Stock 7 490 000 000
Inheritance 675 000 000
Purchase *1 445 000 000
8 610 000 000
Closing Stock 7 035 000 000 1 575 000 000
Livestock Profit 525 000 000
DETERMINATION OF TAX LIABILITY FOR MR A .FARMER FOR THE YEAR ENDED

31/12/07
$ $
Excess of Income over expenditure 216 800 000
Add Livestock Profit 525 000 000
Staff House 263 000 000
Interest (75% x $300m) *2 225 000 000
Zimra interest *3 2 200 000
Legal expenses
- Land Designation 60 000 000
-Water Rights 6 000 000
Medical Aid 140 000 000
Motor vehicle
Expenses (80%x $226m) *4 45 200 000
Sundry Expenses

-Aerial Services -
-Loan Raising Fee
($24m x 75%) 18 000 000
-Spectacles 120 000 000
-Life Insurance 35 000 000
Telephone
($48m x 10%) 4 800 000
Wages-Gardener 120 000 000
Directors fees 97 000 000 1 661 200 00
Less: Wear and Tear 1 878 000 000
-Staff house (5% x [$263m
+ 25% of $24m –Raising fee] -
-Isuzu (20% x 80%) x $10m) 1 600 000
Temporary Farm Road 133 000 000
Interest-tax reserve
certificates * 5 4 500 000
Dividends *6 1 500 000
Assessed loss b/f 1 100 000 000 1 240 600 000
Tax at 30% 191 220 000
3% Aids Levy 5 736 600
Tax Liability 196 956 600
Tax on Pension
$
Pension- UK -
-Zimbabwe 90 000 000
90 000 000
Tax on the 1st $48m -
Excess ($90m-$48m) at 35% 8 800 000
Add 3% AIDS Levy 14 700 000
Tax as determined 23 500 000
Add Tax from farming 196 956 600
Total tax liability 220 456 600
Special Notes
*1 The value of inherited livestock is an allowable deduction in terms of 15 (2) v of the ITA and the value
to be used is the value for estate duty
*2 The portion of the loan (75%) is not for the purposes of trade. The other 25% for the staff house is
capitalised to the cost before capital allowances are granted, in this case Wear & Tear since SIA was not
elected. However, because the cost of the ‘staff house’ is above the deemed cost of $16m, the buiding is not
regarded as a staff house for tax purposes.
*3 Interests, penalities, fines etc as are paid for failure to comply with applicable laws are not allowable as
deductions
*4 80% relates to business and is allowable. The other 20% is added back to profit. SIA cannot be granted
on movables used less than 90% for business.
*5 Interest from reserve certificates is exempt from income tax in terms of para 10 (1) c of the 3rd Sch to the
ITA.
*6 Dividends from locally registered companies are exempt from income tax in terms of para 9 of the 3rd
Sch to the ITA.

2. MR MURIMI
Workings
W1. Capital Allowances-Farm Improvements

$
Cost 200 000
ITV 120 000
W&T (5%) 10 000 *1
ITV 31/12/07 110 000
W2 Capital Allowances
Schedule of Capital Allowances-Additions
Asset Maize Store Peugeot 306 Staff House Mazda 323 Total
Rate of W&T 5% 20% 5% 20%
(%)
Cost 1 500 000 2 500 000 450 000 400 000
ITV 31/12/06 - - - -
SIA (50%) 750 000 - 225 000 - 975 000
W &T - 400 000 *2 - - 400 000
Selling Price - - - 380 000
Recoupment - - - 380 000 380 000
ITV 31/12/07 750 000 2 100 000 225 000 -
DETERMINATION OF MINIMUM TAX PAYABLE FOR MR MURUMI FOR THE YEAR ENDED
31/12/07
$ $
Net profit before tax 4 410 000
Ass: Depreciation 75 000

Interest 1 000
Legal Expenses -License 25 000
-Service
station 20 000
-Store hours -
-Debt
Collection -
General Expenses-Water Supply 9 000
-Livestock
Entertainment 6 000
-Insurances -
Motor Vehicle (Private) 80 000
Recoupment (see w 2) 380 000
Livestock -Own Consumption 3 000
- Donation 4 000 603 000
5 013 000

Less: Dumping Rights (Capital) 125 000
Directors Fees
(South African source) 55 000
OK dividends 25 000
Inherited Livestock 750 000
Timber Sales *8 50 000
Retirement Annuity
Policy 50 000
Dam *9 2 400 000
Fencing *10 100 000
Capital Allowances
(w1 & w2)
- SIA 975 000
-W& T-Peugeot 400 000
-Improvements 10 000 4 940 000
Taxable Income 73 000
Tax at 30% 21 900

3% Aids Levy 657
Tax Liability 22 557
Special Notes
*1 . 5% x $200 000 (Cost) i.e grant W& T and not SIA.

*2 . Grant W &T because for movables to qualify for SIA, they shoould be used to the extent of at least
90% for business. TheW & T is calculated thus : 20% x (100%-20%) x $2 500 000 =$400 000.
*3 . The interest is not for the purposes of trade.
*4 . A new license and service station are capital in nature because they give the farmer an enduring
benefit, hence legal expenses towards such are also capital.With regards to the trading hours, the decision is
C.I.R V Carron Company.House Of Lords (29.05.68) A.H.B p41 is important.In the mentioned case, the
taxpayer had incurred expenditure to remove trade restrictions which resulted in an increase in profits.It
was held that “ the money was spent to remove antiquated restrictions which prevented profits from being
earned” but “ created no new asset” . In like manner, the expense on the extension of trading hours results
in an increase in the profits but should not be capital because it creates no new asset.
*5 . This gives the farmer an enduring beenfit, thus it is capital in nature .
* 6 . The value of 1 tolly taken for own consumption and the 1 heifer donated should be taxed in terms of
Sn 8 (1)f of the ITA.
*7 . An allowance based on the estate value should be granted in terms of Sn 15(2)v of the ITA.
*8 . The value of timber sold together with a farm is taxable in terms of Sn 8(1) g of the ITA. However, if
the farm on which timber is growing was acquired by way of inheritance or donation and is not
incorporated as part of the business of the recipient , the amount so received is not brought to tax. In this
case, there is no mention of the farm and timber having been incorporated as part of the farmer’s trade.
*9 & 10. These expenses are allowable in full in terms of para 2 of the 7th Sch to the ITA.
3) RELIEF FOR FARMERS

The types of relief available to farmers and the relevant provisions of the Act are as follows:
Para 5 of the 7th Schedule arw Sn 15(2)z to the ITA – Enforced Sales/Destocking allowance.

- A farmer who is forced to sell his livestock due to drought or epidemic(s) may elect to be taxed on the
taxable income arising from the enforced sales over 3 years. With effect from 01.01.01, this paragraph
also covers sales made when a farm has been acquired due to the Land Acquisition and Resettlement
Programme. This means that if a farmer derives $9bn taxable income from the sale of livestock due to
any of the said reasons, the income will be taxed in installments of $3 bn per year.
- As has been pointed out above, the farmer should make an election for the relief brought about by this
paragraph to be availed to him.
Para 6 of the 7th Schedule arw Sn 15(2)z to the ITA - Restocking Allowance
- A restocking allowance shall be granted to a farmer who has restocked his herd which was depleted by
drought or epidemic diseases. The allowance shall be 50% of the cost to the farmer of restocking the
herd. If the number of livestock so purchased exceeds the difference between the assessed carrying
capacity of the land (ACCL) determined by AREX and the number of stock on hand immediately
before the date of such purchase, then the allowance shall be restricted by the formula
A x B
2 C
Where A= Cost of livestock purchased

B= Difference between assessed carrying capacity of the land and the number of stock on
hand immediately prior to purchase.
C= Number of livestock purchased.
Example
Mr Munda restocked his herd by 200 beasts a few months after the end of a drought. The cost of
restocking was $300 million. The ACCL as determined by AREX was 300. The number of
livestock on hand immediately before restocking was 101. The allowance is determined thus:
(Note that the number of purchases (200) exceeds 300 minus 101 = 199, so use the formula A/2 x B/C,
as follows:
$300m/2 x 199/200= $ 149 250 000. If the number of purchases was say 140, the allowance would have
been an outright 50% ie A/2 = $300m/2 giving $150m.

UNIT 6 MINING
1) SENDEKERA PVT LTD

DETERMINATION OF TAXABLE INCOME/ASSESSED LOSS FOR SENDEKERA PVT LTD
FOR THE YEAR ENDED 31/12/07
(1) Using Para 2 of 5th Sch to ITA (Life of Mine Basis)

$
Add: Depreciation 7 850 000
Mining claims
Written off 15 000 000
Unrealised exchange
loss *1 -
Interest -
Company formation -
expenses *2 250 000 23 100 000
78 100 000
Less CRA
UBCE b/f 108 000 000
Minus Recoupment *3 6 896 552
101 103 448
+ CCE
Dwelling 5 500 000
Plant 15 000 000
DumpTruck 25 000 000
Peugeot 406 *4 10 000 000
Railway line 5 000 000
Shaft sinking 10 000 000
171 603 448
CRA is $171 603 448/20 yrs 8 580 172.40
Taxable Income 69 519 827.60
Special Notes
*1 . An unrealised exchange loss is not allowable as a deduction. Only realised exchange losses are
allowable.
*2 . Such expenses are capital in nature.
*3 . Where an asset with a deemed cost is sold, its selling price is also deemed as follows:
Deemed Cost/ Actual Cost x Selling Price. In this case it is $10m / $14.5m x $10m = $6 896 552
*4 . The deemed cost for PMVs is currently $10m.
*5 . The estimate of the life of mine is 19 years from the end of the year of assessment. The figure to be
used for calculaitng CRA is thus 19 years + 1 year = 20 years i.e to include the current year of assessment.
Using Para 4(2) of 5th Sch (Mixed Basis)

$ $

Mining claims
Written off 15 000 000
Unrealised exchange
loss -
Interest -
Company formation
Expenses 250 000 23 100 000
78 100 000
Less CRA
UBCE b/f 108 000 000
- Recoupment 6 896 552
101 103 448
Portion of CRA ($101 103 448
Divided by 20yrs 5 055 172,40
+ CCE
Dwelling 5 500 000
Plant 15 000 000
Peugeot 406 10 000 000
CRA *1 75 555 172.40
Assessed Loss 2 544 827.60
Special Notes
*1. Under the Mixed Basis, a portion of the CRA is added to the CCE. The CRA is determined by
dividing the net of UBCE minus Recooupment by the life of mine.
Using Para 4(4) of the 5th Sch (New Mine Basis)

$
Mining claims Written off 15 000 000
Unrealised exchange
loss -
Interest -
Company formation
Expenses 250 000 23 100 000
78 100 000
Less CRA
UBCE b/f 108 000 000
- Recoupment *3 6 896 552
101 103 448
+ CCE
Dwelling 5 500 000
Plant 15 000 000
Peugeot 406 10 000 000

CRA 171 603 448
Assessed Loss (93 503 448)
2) QUARRY PVT LTD
COMPUTATION OF TAXABLE INCOME FOR QUARRY INVESTMENT FOR THE YEAR

ENDED 31.12.07
Life of Mine Basis: Paragraph 2 of 5th Sch To ITA

$ $
Profit as per accounts (ignore sales) 157 000
Add: Depreciation (capital redemption
allowance granted instead) 25 000
Mining claims (capital nature) 125 000 150 000
307 000
Less: Capital Redemption Allowance

UBCE b/f 216 000
Recoupment of Capital
expenditure *1 40 000
176 000
Less: Current Capital Expenditure
Fencing (Capital-no limit) 22 000
Railway lines (capital-no limit) 150 000
Plant (W1), *2 355 000
Equipment (Capital-no limit) 250 000
House 200 000
1 153 000
Capital Redemption Allowance (W2) 76 867
230 133
Less Replacement *3-(maximum) 40
230 093
Training investment allowance (repealed with
effect from 01/01/01) -__
Taxable Income 230 093
e) Mixed Basis: Paragraph 4(2) of the 5th Sch to the ITA
COMPUTATION OF TAXABLE INCOME FOR QUARY INVESTMENTS FOR THE YEAR

ENDED 31/12/07
$ $
Profit per accounts (Ignore sales) 157 000
Add: Depreciation (CRA) 25 000
Mining claims (capital nature) 125 000 150 000
307 000
Less: Capital Redemption Allowance
Portion given by formula (W3) 11 733
Add: Current Capital Expenditure
Fencing (capital -no limit) 22 000
Railway line (capital-no limit) 150 000
Plant (no replacement election- in full) 415 000
Equipment (capital-no limit) 250 000

House 200 000 1 048 733
ASSESSED LOSS (741 733)
Workings
W1 : (Cost) 415 000
- (replacement) 60 000
355 000
W2 : Capital Redemption Allowance

= 1 153 000
15
= 76 867
W3 : Portion of Capital Redemption Allowance
Unredeemed balance of capital expenditure - Recoupment

Life of mine
Shortened as
= U-R
L
= 216 000 - 40 000

15
= 11 733
Special Notes
*1 :The sale price of the Mazda Pick up truck is the recoupment and is taxable in terms of Sn 8(1)i of the
ITA.
*2 :Original cost of the asset is considered where a replacement has occurred, hence the replacement cost is
subtracted from the original cost.
*3 :Para 6 of the 5th Schedule to the ITA election allows a deduction of a maximum of $40 as replacement
allowance.
3A .RIMNE PVT LTD
DETERMINATION OF TAX LIABILITY FOR RIMNE PVT LTD FOR THE YEAR ENDED
31/12/07
$ $
Net Profit 10 000 000 000
Add
Mining claims written off 6 000 000 000
Depreciation 3 000 000 000
Prospecting Expenses -
Goodwill Written off 2 000 000 000
Ore on hand *1 500 000 000 11 500 000 000
21 500 000 000
Less CRA

UBCE (Non Production)
-On-shaft sinking 900 000 000
-Adminstration 500 000 000
-Buildings *2 600 000 000
2 000 000 000
Minus Recoupment *3 300 000 000
1 700 000 000
Add CCE
Nissan Hardbody (PMV) 10 000 000
Dwelling 16 000 000
School 8 000 000 000
Mules 100 000 000
Staff House 16 000 000
Equipment *4
($1m-$0.2m) 800 000
9 842 800 000
CRA: $9 842 800 000/5yrs *5 1 968 560 000
19 531 440 000
Less Replacement Allowance (Para 6-5th Sch) *4 40
Taxable Income 19 531 431 960
Special Notes
*1 . Ore on hand at the end of the year is taxable in terms of Section 8 (1)h of the ITA.
*2 . The UBCE is the total of the expenditure incurred during the period of non-produciton. Both revenue
and capital expenditure is regarded as the UBCE in such cases.
*3 . Recoupment for mining purposes is the price at which the asset is sold or whatever is recouped.
*4 . Para 6 at the 5th Sch allows a taxpayer to elect for replacement election on the replacement of
buildings, works or equipment up to a maximum of $40. As can be seen this figure is now too insignificant.
*5 . The mine mines iron, which has a deemed estimate of life of 5 years
(B) Sand and stone
(i) The extraction of sand and quarrying are not regarded as mining operations in terms of the Income
Tax Act
(ii) Extraction of gold
The extraction of minerals from dumps is regarded for the purposes of Income Tax , as mining operations.
(iii) Mining Claims
Section 9 of the Income Tax Act allows a taxpayer to elect that any profit arising from the sale of mining
claims be taxable over 4 years, commencing with the year in which the mining claims are sold. In this
case , Mr.M.Nzira will be taxable on:-
Offer $10 000 000
Less Purchase Price $200 000 x3 600 000
9 400 000
The $9,4m will be taxable over 4 years as follows
2007 2008 2009 2010

$2 350 000 $2 350 000 $2 350 000 $2 350 000
Mr Nzira bought the mining claims, not with the intention to mine or hold on to them as an asset, but rather
with a speculative motive. This is so because as soon as he got an offer, he started enquiring about the tax
implications. This clearly suggests that there was a motive to make profit from the claims.

UNIT 7 CAPITAL GAINS TAX
1. JANET AND JULIEN GUMPO
Workings

(a) House $
Cost 2 000 000
Inflation
$12m X (24 384.1-470.2)/470.2 610 307 954.06
b) Stone Wall
$
Cost 20 000 000
Inflation
$20m X (24 384.1-1386.9)/1386.9 331 634 580.72
c) Swimming Pool
$
Cost 50 000 000
Inflation
$50m X (24 384.1-21 919.3)/ 21919.3 5 622 442.32
[A] Brief Report
To: Janet and Julien Gumpo
RE: Capital Gains Tax Implications of the Disposal of the Mount Pleasant House
-The Capital Gains Tax Act requires capital gains tax to be charged on capital gain arising from the
disposal of specified assets, houses included.
-The capital gain is arrived at after deducting the cost of the house and improvements from the gross capital
amount (selling price). An inflationary allowance is also calculated on the cost of the house and the
improvements using the All Items CPI rates supplied by the C.S.O. Direct selling expenses such as adverts
and sale fees are also deducted.
-The Capital Gains Tax is chargable at 20% on the said capital gain. If the house is sold through an agent,
such as an estate agent or lawyer, such person is requireed to withhold 15% of the selling price before the
proceeds are given to the seller. The said withholding tax should be paid to ZIMRA by the ageny, who is
referred to as a conveyancer. Upon assessment of the actual amount of capital gains tax that you are
required to pay, it will then be decided whether you will be due for a refund or you will need to pay more
tax to ZIMRA.
-The said act also provides for an election called rollover election, whereby, if a person disposes of his
principal private residence (in your case , the Mount Pleasant house) and goes on to construct or purchase
another one before the end of the year following that of disposal, the capital gain arising from the disposal
is rolled over.The effect of the rollover is that the capital gain will not be taxed and thus deferred to a
subsequent year in full or in part, the latter which is applicable to your case.
- The amount of capital gains tax that arose from the disposal of your house is as indicated below,
$486 635 417.66
CALCULATION OF MINIMUM CAPITAL GAINS TAX FOR JANET & JULIEN GUMPO FOR
THE YEAR ENDED 31.12.04
$ $
Gross Capital Amount 11 950 000 000

Cost 12 000 000
Inflation 610 307 954.06
Stone Wall 20 000 000
Inflation (w 1(b)) 331 634 580.72

Swimming Pool 50 000 000
Infation (w1(c)) 5 622 442.32
Paint 30 000 000
Inflation (w 1(d)) 3 373 465.39
Agents Commission 68 000 000
Sale legal fees 50 000 000 1 180 938 442.46
Capital Gain *1 10 769 061 557.51
Taxable amount (A X C)/B
($11.95bn-9.25bn) x $10.769bn/ $11.95bn 2 433 177 088.31

Tx at 20% 486 635 417.66
Special Notes
*1. The capital gain should, in terms of Section 21 of the CGTA, be subjected to tax in part.The
amount taxable is determined using the formula (A X C )/B.
Capital Gain
AX C
B
The Rollover amount is Total Capital Gain minus Taxed Capital Gain i.e $10.769bn- $2.433bn = $8.336bn.
2. GRANGE PVT LTD
Workings
W1 Capital Allowances Previously Granted
(a) Building
$
Cost 3 300 000
Wall 2 000 000
5 300 000
Less ITV 2 970 000
Capital Allowances 2 330 000
W2 Recoupment
ITV 2 970 000
Selling Price 900 000 000
Potential Recoupment 897 030 000
Capital Allowance 2 330 000 (Actual Recoupment)
Building
$
Cost 3 300 000
Inflation
$3,3m x ( 56 098 958.3-13 099.4)
/13 099.4 14 129 145 943.33

(b) Wall
Cost 2 000 000
Inflation
$2m x (( 56 098 958.3-665 774.1)
/665 774.1) 166 522 501.25
DETERMINATION OF CAPITAL GAINS TAX FOR GRANGE PVT LTD FOR THE YEAR
ENDED 31.12.07
$ $
Gross CapitalAmount 900 000 000
Less Recoupment (w2) 2 330 000
897 670 000
Allowable Deductions
Cost
- Building 3 300 000
-Wall 2 000 000
5 300 000
Less Capital Allowance 2 330 000
(w 1) 2 970 000
Inflation Allowance
- Building (W3 a) 14 129 145 943.33
-Wall (W3 (b)) 166 522 501.25 14 298 638 444.58
Capital Loss (13 400 968 444.58)
Tax at 20% -

UNIT 8 VALUE ADDED TAX
1.MODERN PLASTICS
DETERMINATION OF VAT PAYABLE OR REFUNDABLE FOR MODERN PLASTICS FOR

THE JULY 2007 TAX PERIOD
OUTPUT TAX $ $
Standard Rated Sales 30 000 000
Motoring Benefits
-Mercedes Benz (3200cc) 6 700 000
-Mazda B 2500 twincab 5 000 000
-Nissan Hardbody twincab(2400cc) 5 000 000
Mazda 323 (1600cc) 4 000 000
20 700 000
Vat Thereon (15/115 x $20.7m x 1/12) *1 225 000

30 225 000
Less INPUT TAX

Furniture 1 500 000
Mazda 323 -
Mazda B 1800 *2 9 000 000
Zesa *3 150 000
Lunch at Meikles -
Purchases 12 000 000 22 650 000
Vat payable 7 575 000.00
Special Notes
* 1. An employer who provides his employees with motor vehicles for private use is deemed to have made
“a supply of … services by the registered operator in the course of a trade” by Sn 17(3) of the VAT Act.
The employer/registered operator is thus supposed to make an adjustment to his ouput tax by including the
VAT on the benefit enjoyed by the employees using the deemed benefit outlined in 8(1) f of the ITA. The
motoring benefit for 2007 currently stand as follows:
Engine Capacity Annual Benefit

0- 1500cc $2.4m
1501-2000cc $4m
2001-3000cc $5m
3001cc and above $6.7m
It becomes necessary therefore, to divide the benefit by the number of months in question and then
multiplying the result by the tax fraction.
* 2 .Input tax cannot be claimed on the purchase of passenger motor vehicles (Madza 323 in this case) but
can be claimed for commercial vehicles such as Mazda B 1800).(see Sn 18 of SI 273 of 2003 and Sn 16(2)d
of the VAT Act)
*3 .VAT is chargeable on electricity for commercial purposes but not on electricty for domestic purposes.
*4 .The provision of food to clients is entertainment as in this case. Input tax cannot be claimed on such
expenditure (see definition of entertainment in Sn 2 and 16(2)a of the VAT Act) except, among other cases,
where the registered operator’s business is in the entertainment.

2. GENERAL QUESTIONS
(i) Input Tax
Input tax may not be claimed in the following circumstances

a) the provision of entertainment such as meals provided to clients except in cases where the registered
operator’s business is the provision of entertainment. See Sn 16(2)a of the VAT Act.
b) the purchase of passenger motor vehicles (see Sn 16(2)d of the VAT Act and Sn 18 of SI 273 of 03)
c) any fees or subscriptions paid by the registered operator in respect of membership of any club,
association or society of a sporting, social or recreational nature (see Sn 16(2)b of the VAT Act).
(ii) Zero-Rating
Goods and services would be zero-rated for VAT in the following circumstances.
(a) If exported outside Zimbabwe
(b) The supply of goods used by the disabled e.g braille books
(c) If the goods consist of medicines as defined in the Medicines and Allied Substances Control Act
(Chapter 15.03). See Sn 10(1)j of the VAT Act.
(d) Sale of gold to the RBZ or any bank registered under the Banking Act . See Sn 10(1)f of the VAT Act.
( iii) Exempt Supplies
The following supples of goods or services are exempt from VAT

(a) the supply of electricity for domestic purposes
(b) educational services such as tuition at a university
(c) medical services such as doctors’ consultation
(d) The provision of transport services comprising the transport by that person in a vehicle of fare-paying
passengers eg the transport of commuters in a commuter-omnibus
(iv) Valid Tax Invoice
A valid tax invoice shoould contain the following :
-the words Tax Invoice in a prominent place

-the name , address and VAT number of the supplier
-the name , address and if the recipient is a registered operator, the VAT number of the receipient
-an individual serialised number and the date on which the tax invoice was issued
-the description of the goods or services supplied
-the quantity or volume of the goods or services supplied
-the value of supply, VAT charged and consideration for the supply or where the amount of tax charged is
calculated by applying the tax fraction, the consideration of the supply and either the amount of VAT
charged or a statement that the total invoice amount is inclusive of VAT at the applicable rate (see Sn 20 of
VAT Act)
3 .DETERMINATION OF TAX PAYABLE/REFUNDABLE FOR RACHIE PVT LTD FOR THE

NOVEMBER-DECEMBER 2007 TAX PERIOD
($) VAT Rate VAT ($)

OUTPUT TAX *1
Cellphones *1 6 000 000 000 15% 782 608 695
Television ($2bn - $200m) *2 1 800 000 000 15% 234 782 608
Fuel 800 000 000 Exempt -
Exports 600 000 000 0% -
Airtime *3 850 000 000 22,5% 156 122 449
Chairs ($500m+$100m) 600 000 000 15% 78 260 869
Milk (Meals) *4 100 000 000 15% 13 043 478
Bread 60 000 000 0% -
Bad Debts Recovered *5 600 000 000 15% 78 260 869
Computers *6 80 000 000 15% 10 434 783
1 353 513 749
INPUT TAX
Cellphones 39 000 000 000 15% (5 068 956 498)
Televisions
($1bn-$200m) *7 800 000 000 15% (104 347 783)
Chilled Mushrooms 20 000 000 0% -

Maize Flour 80 000 000 0% -
Cattle Tongues 60 000 000 0% -
Pork *8 10 000 000 15% (13 043 48)
Bad Debts *9 200 000 000 15% (26 086 956)

VAT Refundable (3 865 181 836)
Special Notes
* 1 .Where prices are given VAT indusive , use the tax fraction to determine the VAT component i.e. for
15% , it is 15%/115% or 22,5%/122,5% for 22,5% (the latter being for cellular telecommunications
services)
* 2. VAT is calculated on the price exclusive of the trade discount.
* 3 . The supply of cellular telecommunications services attracts VAT at 22,5%
* 4 . Milk is zero rated but becomes taxable if supplied as part of a meal
* 5. Output tax should be accounted for where bad debts previosuly claimed for VAT purposes are
recovered.
* 6.Output tax on the market value should be accounted for where taxable goods previously purchased for
use in an operator’s business are to be used excusively for purposes other than for his business (change of
use).
* 7. Where over-invoicing occurs in error, the excess amount should be adjusted for tax purposes.
* 8. Only meat and meat offals of cattle are zero rated (see VAT General Amendment Regulations
Number14). Pork is taxable.
*9 . Bad debts incurred which can be proved to the satisafction of the Commisioner General to be bad rank
for input tax claims.

UNIT 9 ADMINISTRATION
1) DEDUCTIONS (Sn 15 and 16 –ITA)

(a) (i) architects fees- Allowable as a capital allowance in terms of Sn 15(2)c as read with (a.r.w) the 4 th
Sch to the ITA. The cost is first capitalized to the cost of the building before capital allowances are granted.
(ii) Supply of water- of Not Allowable. Acquisitions of rights are generally capital in nature because they
give the taxpayer an enduring benefit.
(iii) Temporary farm road- Allowable. This is not a permanent road and thus there is no enduring benefit
that accrues to the taxpayer.
(iv) Tax returns- Allowable .The expense is for the purposes of trade
(v) Entrance fees- Not Allowable. Subscriptions for continued membership are however allowable.
Students’ subscriptions are also not allowable nor can the entrance fee be claimed as a deduction because it
is of a capital nature.
(vi) Sole selling rights- Not Allowable – Expenditure on the acquisition of sole selling rights is prohibited
by capital Sn 16 (1)j of the ITA
(vii) Entertainment- Prohibited by Sn 16 (1) m of the ITA.
(viii) Technical education- Allowable in terms of Sn 15 (2)p of the ITA
(ix) Research- Allowable in terms of Sn 15(2) m of the ITA.
(x) Preliminary expenses- Allowable in terms of Sn 15 (2) t of the ITA.
(b) Assessed Losses (Sn 15 (3) of the ITA)

No assessed loss shall be carried over under these instances.
(i)Where a taxpayer has been declared insolvent or has assigned his property for the benefit of his creditors
(ii) Where there is a change in the shareholding of companies solely to take advantage of the assessed
losses. Taking over a company with an assessed loss brings with itself tax advantages to the taxpayers
involved in the transaction, mainly the one who acquires the company with the assessed loss. This is so
because assessed losses are allowable deductions and effectively reduce the amount of taxable income,
especially in cases where the amount involved would be large. In that regard, the taxpayers involved in the
transaction should convince the Commissioner General or the courts, whichever is applicable, that the
transaction was not entered into merely to take advantage of the assessed loss. As held in ITC 1514, ‘ the
onus is on the appellant [in that case the taxpayer] to satisfy the court that the change in its shareholding
was not effected solely or mainly in pursuance of or in connection with a scheme for taking advantage of
the assessed loss ……’. In the case, a Mr. G had acquired all the shareholding in Hart Ranch, which had an
assessed loss at 30 June 1986 of $76 692. The appellant succeeded in proving that ‘ the change in the
shareholding of the company was not effected to take advantage of the said assessed loss…' . In another
case of Hodgson & Myburgh Pvt Ltd v C. of T. J.311 A.H.B , the appellant lost the case because he ‘had not
discharged the onus of showing that the change in shareholding was not mainly in connection with a
scheme for taking advantage of the loss’.
(iii) Where an assessed loss has been carried over for more than 6 years (excluding the year in which it is
incurred) except for mining businesses.
2) C.I.S 4 of 11.03
a)
(i) Trading Stock- removal expenses for trading stock are allowable because they are revenue in nature.
ii) Plant and machinery- removal expenses for plant and machinery from the light industrial sites to the
heavy industrial sites are capital in nature. However , minor plant removal costs within the same building
are allowable as they are revenue in nature.
b) Doubtful Debts- Doubtful Debts are allowable under the following conditions

(i) the debts should have been included in the taxpayer’s income either in the current or previous year of
assessment
(ii) such an allowance so granted in one year shall be included in the income of the taxpayer in the
following year of assessment.
(iii) the debts shoould be due and payable to the taxpayer (see Sn 15(2) gii)
( c ) Insurance Premiums- the amount is allowable as a deduction despite the fact that it relates to
expenditure for another year of assessment. It remains deductible as long as it is revenue expenditue
incurred for the purposes of trade or in the production of income.
(d) Embezzlement-the loss of $2 million incurred through embezzlement is allowable as a deduction.

Generally, embezzlement by lower-ranking employees tends to stand a better chance of being allowed as a
deduction than that by partners or proprietors. In this case, the Finance Director tends to be more of an
employee than an owner of the business (see page52 of Students Guide to Tax In Zimbabwe 2006 J. Hore
and M.Mangoro).
(e) Legal Advice-the amount is allowable as a deduction because it is revenue in nature. It does not give the
taxpayer an enduring benefit.
(f) Fines –the costs incurred towards fines in general are not allowable as deductions. In Pyramid Agencies
Pvt Ltd v C. of T J 342 A.H.B. p 48, an “employee was fined for failing to exhibit correct registration plates
whilst towing a caravan for the taxpayer”. It was held in that case that “Section 15(2)a permits only a
commercial loss and one which results from an infraction of the law is not such a loss” The expense was
thus not allowable.
3) TAXABLE INCOME
$
a) Amount 150 000
Less: Purchase of annuity 50 000
100 000
Less: Contribution not allowed (within the last
2 years) 15 000
Tax portion 85 000
b) The taxable recoupment from capital expenditure is $400 000. Sn 8(1)i of ITA refers. The sale price of
the asset or whatever is recovered is the recoupment. The whole amount shall be deemed to have
accrued from a source within Zimbabwe in terms of Sn 12(5) of the ITA.
c) Nil. There is no taxable benefit since the loan was used for education.
d) The benefit is exempt in terms of Para 4(q) of the 3rd Schedule to the ITA to the extent that such benefit
does not exceed 50% of the taxable income excluding the benefit. This is with effect from 01 January 2001.
e) $3m is taxable in terms of Sn 8(1)b of the ITA since there is a relationship between the services rendered
and the tip.
f) The amount is not taxable since Mr. Benson was not in Zambia solely to offer services to the
Zimbabwean government -Sn 12(1)d and 12(1)e of the ITA refer.

UNIT 10 DECEASED ESTATES, LEASE IMPROVEMENTS AND
DOUBLE TAXATION
1. MR DUBE
(a) Mr Dube’s Son

The son will be taxable on income (profits) arising from the farm with effect from 01 April 2007 at 30% +
3% Aids levy. The son is an ascertaiined beneficiary and acquires an immediate certain right to the present
and future enjoyment of income arising from the farm.
However, the value of the farm and the $30m cash are not taxable because they are receipts of a capital
nature. If the cash is invested or otherwise dealt with, the fruit arising therefrom becomes taxable in the
son’s hands.
b) Mr Dube’s Daughter
The daughter will likewise be taxable, with effect from 01 April 2007 on rents arising from the letting of
the property but will not be taxable on the value of the property as well as on the $20m cash , for the same
reason that they are capital in nature.
c) Mr Dube’s Brother
The brother will also be taxable, with effect from 01 April 2007, on any revenue that may accrue to him.
d) Mr Dube’s Estate
Mr Dube’s estate , which came into being on 01 April 2007 and elapsed on 30 November 2007, will
likewise be taxable on any revenue accruals that may be realised in the said period.
2. LEASE IMPROVEMENTS
a(i) Section 15(2) e of the ITA allows for the deduction of costs incurred on lease improvements by the
lessee, only in cases where there is an obligatory lease agreement
(ii) Section 8(1) e of the ITA brings to tax improvements made under a lease agreement in the hands of the
lessor.
b) Advanced Company Pvt Ltd
Allowance:
Lease Period 7 years
Minus Construction 2 years
Unexpired Period 5 years
Unexpired Period (in months) 5yrs x 12 months
= 60 months
Therefore:- Cost $630 000 000/ 60 months
= $10 500 000 / month
Allowance for Year 4
12 months x $10,5m = $126m
c) J.D Pvt Ltd
JD Pvt Ltd is taxable , with effect from the third year on $10,5m x 12months
= $126m per annum

The same amount should annually be brought to tax till year 7
3. D MUNRO
Workings
W1 Relief on Dividends
(a) Determination of E
E- Zimbabwe tax on foreign dividends subject to relief (taxed in foreign country)
Bulgaria Dividends $
($12m +$2m +$1m) * 1 15 000 000
South African Dividends
($13m + $3m) 16 000 000
31 000 000
Tax at 20% *2 6 200 000
Actual Relief
Country Zimbabwe Tax Foreign Tax Relief

Bulgaria ExF $2m $2m
F+G
($6,2m x $15m)/
($15m +$16m)
=$3m
South Africa ($6,2m x $16m)/ $3,m $3m
($16m + $15m)
= $3.2m
Total $5m
Where E- Zimbabwe Tax on foreign company dividends taxed in foreign country (subject to relief)
E- Foreign company dividends from one country subject to relief (taxed outside)
G-Foreign company dividends from other countries subject to relief
DETERMINATION OF TAX DUE ON DIVIDENDS

$
Econet (Exempt-Para 9-3rd Sch) -
Bulgaria 15 000 000
South Africa 16 000 000
Australia 20 000 000
51 000 000
Tax at 20% 10 200 000
Less Relief (w1) 5 000 000
Payable 5 200 000
Special Notes
*1 & *2 . The dividends are supposed to be taxed gross and the deduction of the deduction of telephone
charges and tax are not permissible.

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TAXATION

QUESTIONS AND ANSWERS 2008

Taxation Questions and Answers 2008 Jonathan Hore i

Taxation Questions and Answers 2008 Jonathan Hore ii

Author- 1 March 2008

Taxation Questions and Answers 2008 Jonathan Hore iii

COPYRIGHT AND SECURITY WARNING

Taxation Questions and Answers 2008 Jonathan Hore iv

Taxation Questions and Answers 2008 Jonathan Hore v

1 September to December 2007

Gross Salary $120 000 000

Taxation Questions and Answers 2008 Jonathan Hore 1

Taxation Questions and Answers 2008 Jonathan Hore 2

He incurred the following expenses

Taxation Questions and Answers 2008 Jonathan Hore 3

Taxation Questions and Answers 2008 Jonathan Hore 4

ASSETS ON HAND AS AT 1 JANUARY 2007 INCOME TAX VALUE 1

Industrial building: Cost $29 million in 2003 tax year Nil

Taxation Questions and Answers 2008 Jonathan Hore 5

2) Mr Tima commenced a manufacturing business on the 1 st of January of the current year of

Taxation Questions and Answers 2008 Jonathan Hore 6

Taxation Questions and Answers 2008 Jonathan Hore 7

Taxation Questions and Answers 2008 Jonathan Hore 8

Taxation Questions and Answers 2008 Jonathan Hore 9

1 Depreciation 6 400 000

Taxation Questions and Answers 2008 Jonathan Hore 10

Taxation Questions and Answers 2008 Jonathan Hore 11

5. Ore valued at $60 000 is on hand at 31 December 2007.

8. Wadzanai and Florence earned the salary of $400 000 each.

Taxation Questions and Answers 2008 Jonathan Hore 12

Cost of land in February 2002 $24 000 000

The following administration expenses (all tax deductible) were incurred:

Year ended 31st December 2003 $ 800 000

Taxation Questions and Answers 2008 Jonathan Hore 13

Taxation Questions and Answers 2008 Jonathan Hore 14

He sold 70 head of cattle for a total of $2 100 000 000

He inherited the following livestock from his late brother

40 10 250 000 675 000 000

The fixed standard values of Mr A. Farmer’s livestock are as follows:

Bulls* $10 million each

Taxation Questions and Answers 2008 Jonathan Hore 15

Excess of income over expenditure 216 800

Taxation Questions and Answers 2008 Jonathan Hore 16

You are given the following additional information

Taxation Questions and Answers 2008 Jonathan Hore 17

PROFIT AND LOSS ACCOUNT

Accountancy 185 000 Livestock Profit 3 035 000

Taxation Questions and Answers 2008 Jonathan Hore 18

Taxation Questions and Answers 2008 Jonathan Hore 19

Taxation Questions and Answers 2008 Jonathan Hore 20

(a) Sales of a Mazda pick –up truck

Taxation Questions and Answers 2008 Jonathan Hore 21

Taxation Questions and Answers 2008 Jonathan Hore 22

UNIT 7: CAPITAL GAINS TAX

Taxation Questions and Answers 2008 Jonathan Hore 23

UNIT 8: VALUE ADDED TAX

The following transactions were carried out in July 2007

Taxation Questions and Answers 2008 Jonathan Hore 24

Cell-phones 39 000 000

Taxation Questions and Answers 2008 Jonathan Hore 25

A. The company recovered $600m previously claimed as bad debts in preceding

Taxation Questions and Answers 2008 Jonathan Hore 26

Taxation Questions and Answers 2008 Jonathan Hore 27