CUAC 408 Presentation Questions 2021

Advanced Taxation: BSCAC 4.1

Course Instructor: Dr E Muguti
0775712712, emuguti@cut.ac.zw.Block 12 Office 1.
1.Each group allocated a maximum of 30 mins to present.
2.Presentations are graded as part of the coursework
3.Final presentation after corrections to be uploaded in moodle as pdf
4.No specific order of groups, so all groups expected to be ready by Monday 14:15

QUESTION 1: Raymond Gumbo and Group

Mr Amuli is an ordinary resident of Zimbabwe who is 60 years old. During the year
ended 31 December 2020, he received the following income.

ZWL$
Dividend received from Econet Zimbabwe Ltd; a company listed on the 115,000
Zimbabwe Stock Exchange
Interest on debentures in Zano Ltd, a Zimbabwean public limited company 272,000
Interest earned on fixed deposit a/c with Barclays Bank Zimbabwe 123,000
Rent Received from a Commercial Building in Botswana 450,000
Royalties from a book published in South Africa but written in Zimbabwe 180,000
Dividends from Bakari Incorporated, a Nigerian firm headquartered in 200,000
Lagos (Non-resident Tax amounting to $10,000 was paid in Nigeria, and
$5,000 was paid to an agent who assisted in the repatriation of the
dividend to Zimbabwe)
Interest received from ABSA Bank Tanzania. Non-Resident Tax paid on the 150,000
interest in Tanzania amounted to $15,000. Bank Charges amounting to
$10,000 were incurred in Tanzania.

Required:

Calculate Mr Amuli’s tax liability for the year ended 31 December 2020. Assume that
he was granted all relevant reliefs and elections to minimise tax liability.

[Total:20 marks]

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QUESTION 2: Tinaye Nyamapfeni & Group
(a) Goromonzi Ltd’s factory was destroyed by fire. It obtained compensation from its
Old Mutual Insurance of ZWL$4,000,000, to compensate for the loss of the building.
An additional ZWL$2,500,000 was received for the profits lost during the time the
company was rebuilding its factory.

Required:
Explain with supporting case law and legislation the taxable income of Goromonzi Ltd
relating to the compensations received. (5 marks)

(b) In 2020, Sarah and Tabeth dissolved their partnership when they accepted Raison
into the partnership. In 2021, a debtor, who had been declared insolvent, paid the
partnership ZWL$20,000 in settlement of his debts. Sarah and Tabeth had been
granted a deduction of this amount by the Commissioner-General in 2019.

Required:
Explain how the ZWL$20,000 is to be treated for tax purposes in the hands of Sarah,
Tabeth & Raison in the year 2021. Cite relevant legislation and Case Law. (5 marks)

(c)
Naisoni Ltd bought a factory in 2014 for ZWL$500,000. In 2020, it closed its business
and sold the asset for ZWL$700,000. North Ltd had claimed ZWL$300,000 in capital
allowances on the asset.

Required:
Calculate Naison’s tax liability arising from the disposal of the factory. (5 marks)

(d)
Arimando Ltd received ZWL$400,000 compensation for its destroyed warehouse. The
warehouse had been constructed 3 years earlier for $350,000 and had an ITV of
$220,000 at the date of its destruction. Arimando Ltd decides to construct another
warehouse for $300,000.

Required:
Calculate Arimando Ltd’s income tax liability resulting from the transactions above.
Assume all relevant reliefs and elections to minimise tax liability were granted.
(5 marks)
[Total: 20 marks]

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QUESTION 3: Mitchell Mujeki & Group

(a) On 1 April 2020, Farai and Bikausaru agreed to the leasing of equipment for 12
years. Bikausaru paid a lease premium of ZWL$20,000 at inception.

Required:
(i) Explain with supporting figures, Farai’s gross income for the year 2020.
(2 marks)
(ii) Explain with supporting calculations Bikausaru’s allowable deduction in 2020.
(3 marks)
(b)
On 1 January 2020, Yutiko and Raida entered into an 8-year lease agreement. Raida
paid a $20,000 initial deposit. On 2 June 2020, they varied the lease term to 5 years.

Required:
Explain with supporting calculations, Raida’s allowable deduction amount in 2020.
(2 marks)
(c)
On 1 April 2020, Takwana signed a 15-year lease agreement with Musakwana. In the
agreement, Musakwana was to effect lease improvements valued at $520,000. On 1
May 2020, the improvements were revised to $600,000. The work was completed on
30 June 2020 and first used by Musakwana on 1 November 2020.

Required:
(i) Calculate Takwana’s gross income for the years 2020 and 2021. (5 marks)
(ii) Calculate Musakwana’s allowable deduction for the years 2020 and 2021.
(5 marks)
(d)
Explain with supporting calculations the gross income for Bukuta Investments Ltd, a
Zimbabwean Company which bought goods on credit for resale from London for
£150,000 on 2 September 2020.

The following foreign exchange rates are applicable:

2 September 2020 $1=£0.60
31 December 2020 $1 =£0.70

Assume that;
(a) The debt is paid on 31 December 2020? (2 marks)
(b) The debt is paid on 4 January 2021? (1 mark)

[Total: 20 marks]

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QUESTION 4: Bridget Garaukama & Group
Taurai Bakeries Ltd entered into a 30-year operating lease agreement with Tomato
Tuxton Ltd for the leasing of an industrial site. This lease agreement stipulated that
Taurai Bakeries Ltd would pay a premium of ZWL$140,000 on 1 July 2020 and would
then erect a factory on the site at a cost of ZWL$2,670,000. From July 2020, it would
pay an annual rental in advance of ZWL$200,000 a year (subject to an annual increase
of ZWL$30,000 each year).

The erection of the factory commenced on 1 August 2020 and was completed on 31
October 2020 at a cost of $3,240,000. It was brought into use on 1 November 2020.

Required:

(a) Calculate the Gross Income for Tomato Tuxton Ltd for the year ended 31
December 2020. (10 marks)

(b) Compute Taurai Bakeries Ltd’s allowable deductions for the year ended 31
December 2020. (10 marks)

[Total: 20 marks]

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QUESTION 5: Johannes Chaambuka & Group

(a) Calculate the QPDs for BataiBaba Ltd which has an estimated taxable income of
$2,500,000 for the 2020 tax year. Also, state the due dates. (10 marks)

(b) Explain the terms BOT and BOOT operators in the context of income tax in
Zimbabwe. (4 marks)

(c) Describe the tax incentives available to the following taxpayers in Zimbabwe.
(i) BOT and BOOT operators. (2 marks)
(ii) Manufacturing entities. (2 marks)
(iii) Industrial park developers and licensed investors. (2 marks)

[Total: 20 marks]

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QUESTION 6: Simbarashe Nyoni & Group

(a) Outline the tax incentives available for mining entities in Zimbabwe. (10 marks)
(b) Explain the purpose of double taxation agreements that are made between
Zimbabwe and other countries. (4 marks)
(c) Draw up a table showing the double taxation agreements that existed between
Zimbabwe and other countries as of 31 December 2020. The table should show the
countries included, the incomes affected and the agreed rates of tax in Zimbabwe.
(6 marks)
[Total: 20 marks]

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QUESTION 7: Lissabel Mavhunga & Group

(a) Describe the income tax incentives and reliefs that are available to farmers in
Zimbabwe. (10 marks)

(b)
Mr Fuzana works for a Mission Hospital in Zvimba, Mashonaland West Province. In
December 2020, the mission hospital authorised a Christmas bonus of ZWL$30,000, a
cash gift of ZWL$50,000 and a transport allowance of ZWL$60,000.00 for each of its
employees.

Required:
Explain, with supporting calculations, Mr Fuzana’s taxable income for the year ended
31 December 2020. (10 marks)

[Total: 20 marks]

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QUESTION 8: Fortunate Shumba & Group

(a) Outline the procedures of dealing with objections and appeals according to the tax
acts in Zimbabwe. (10 marks)

(b)
My name is Sarafina Chimwanda. My aunt felt she was short-changed by ZIMRA. At the
end of last year, she was retired by her company on the grounds of old age (she is
now 62 years old). As a long service gratuity, she was offered a Honda CRV previously
used by her as a company car for ZWL$35,000. Similar vehicles were selling at
ZWL$80,000.

Her employer brought into her gross income a benefit of ZWL$45,000 ($80,000-
$35,000) on the basis that she got a benefit in terms of s8(1)(f) when she purchased
the vehicle at below market price. My argument is on the assessable amount and
whether the company followed the provisions of s8(1)(f)(x) when it brought this
amount into my aunt’s Gross Income.

Required:
Advise Sarafina’s Aunt of her correct status regarding the purchase of the Honda CRV.
(10 marks).
[Total: 20 marks]

8
QUESTION 9: Zayne T Muronza & Group

Mrs Gariroma, who was employed as an executive manager by Bola Hardware, was
retrenched on 31 August 2020. She was paid ZWL$220,000 in severance pay and
ZWL$50,000 gratuity.

Mrs Gariroma also signed an undertaking with Bola Hardware, which would restraint
her from competing with Bola Hardware within Harare for the next 3 years. She
accepted a payment of ZWL$350,000 for accepting the restraint to trade.

Bola Hardware allowed Mrs Gariroma to take for free a Land Cruiser V6 she had been
using before her retrenchment. The vehicle was valued at ZWL$240,000 as of 31
August 2020.

Meanwhile, she received ZWL$900,000 after commutation of 2/5 of her total pension
entitlement from Old Mutual Pension Fund. The pension commuted amounted to
ZWL$450,000. With effect from 1 September 2020, Mrs Gariroma became entitled to a
monthly pension of ZWL$16,000, guaranteed for ten years.

Required:

Compute with supporting explanations, Mrs Gariroma’s minimum taxable income for
the year 2020. (20 marks)

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Question 10: Mutsawashe Jauki & Group

Agatha is an Architect employed with Aristos Engineering Ltd in Zimbabwe. She

incurred the following expenses during the year 2020. She has a daughter, Ropafadzo
who is mentally disabled. On the recommendation of a doctor, Ropafadzo attends a
school for disabled children where Agather pays ZWL$100,000 for tuition and the cost
of meals and lodging. Agatha has a heart condition, and a physician advised her to
install a swimming pool at her home and it was completed for ZWL$120,000. Agatha
treats it as an invalid appliance. In addition, Agatha pays ZWL$90,000 to install
wheelchair ramps, support bars, and railings for her son, Moses’ bedroom. Moses is
physically disabled.

She also paid the following additional expenses.

ZWL$
Medical Aid contributions for her husband Themba who is blind 12,000
Medical Aid Contributions for Ropafadzo, Moses and Agatha 70,000
Doctor bills for Amos and Jane (Themba’s parents) 73,000
Prescription medicines for Ropafadzo 7,500
Non-prescription drugs for Moses 9,500

Agatha received a 50% reimbursement for all medical expenses incurred from Bonvie
Medical Aid Society.

Assume that Agather’s taxable income from employment-related income was

ZWL$700,000 for the 2020 tax year. PAYE paid during the year amounted to
ZWL$50,000.

Required:

Calculate Agatha’s tax liability from employment-related income for the year 31
December 2020. [20 marks]

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QUESTION 11: Yolanda Tinotenda Msariri & Group

Mr Tomana was employed by Titus (Pvt) Ltd (Titus) for the past 30 years and held the
position of Finance Director for the past three years. Mr Tomana became seriously ill
and on 30 March 2020, he was diagnosed with a terminal illness. He retired with
effect from 31 March 2020 on the ground of ill health. He died on 30 April 2020 and
his estate was wound up on 31 October 2020.

Mr Tomana, who was 56 years old, was ordinarily resident in Zimbabwe. He was
married to Nancy whose leg was amputated in 2017. Nancy now uses an artificial limb
and is unemployed.

They have two children, Samson who is 22 years of age, and Kathy who is 17 years of
age.

1. Mr Tomana received the following remuneration from Titus for the period 1
January 2020 to 31 March 2020:
ZWL$
Gross Salary (PAYE paid during the year, amounting to ZWL$5,000) 300,000
Bonus, voted 10 March 2020, paid on 15 May 2020 20,000
Director’s fees, voted 10 March 2020 10,000
Entertainment Allowance (of which ZWL$2,000 had been used in 5,000
entertaining business guests)
Contribution to Old Mutual Pension Fund 50,000

2. Mr Tomana had the use of a company vehicle with an engine capacity of 1,400cc up
to the time of his retirement.

3. On 1 January 2020 Titus granted Mr Tomana an interest-free loan of ZWL$50,000 to

finance his medical expenses. Titus also paid medical expenses amounting to
ZWL$30,000 in March 2020 on behalf of Mr Tomana.

4.When Mr Tomana retired at the end of March he was given the company vehicle
which had purchased by Titus in November 2019 at a cost of ZWL$50,000 and which at
31 March 2020 had a market value of ZWL$ 40,000.

5. Mr Tomana owned a block of flats in Zimbabwe which was let at a monthly rental
of ZWL$4,000 from 1 January 2020 to 31 December 2020. In January 2020 he had
erected a fence along one boundary at a cost of ZWL$ 25,000. At 31 December 2019
Mr Tomana had an assessed loss of ZWL$2,000.

6. On 15 January 2020, Gemsen (Pvt) Ltd, a Zimbabwean subsidiary of Titus, voted a

director’s fees of $20,000 to Mr Tomana, who had also been a non-executive director
of this company.
11
7. Mr Tomana made the following bequests in terms of his will:
(i)To his wife, Nancy, a sum of ZWL$40,000 to cover living expenses. In addition, the
block of flats was bequeathed to Samson, with a life usufruct on Mrs Tomana (Nancy).
(ii) Mr Tomana owned shares in a South African company, Vuligate Electronics. The
shares were bought in 2013 for ZWL$100,000. The shares had a market value of
ZWL$85,000 at the date of his death. On 15 October 2020, Mr Tomana’s estate
received a gross foreign dividend from Vuligate Electronics amounting to ZWL$30,000
(10% Non-Resident Tax on dividends was paid in South Africa). In terms, of the will,
these shares were bequeathed to the Tomana Trust which was formed in terms of the
will. The shares were to be transferred to Kathy, Tomana’s daughter, on her 21st
birthday.

8. The estate also received the following income and paid the following expenses
between 31 March 2020 and 31 October 2020:
ZWL$
Cash in lieu of leave 24,000
Gratuity in the form of a salary for the month of April 32,000
2020
Executor’s fees (5,000)
Funeral Expenses (15,000)
Medical Shortfalls (500)

Required:
Calculate the 2020 tax liability of Mr Tomana for the period 1 January to his date of
death. Assume Mr Tomana was granted all relevant tax reliefs and exemptions to
enable him to minimise tax liability. (20 marks)

QUESTION 12: Precious Karimbika & Group

Refer to question 11
Calculate the taxable income of each of the following beneficiaries at 31 October
2020, when the estate was wound up. Provide explanations for your answers.
(i) Nancy (6 mark)
(ii) Samson (2 mark)
(iii) Kathy (2 mark)
(iv) Deceased Estate (4 mark)
(v) Tomana Trust (6 mark)
[Total: 20 marks]

12
QUESTION 13: Simbarashe Mupazviribwo & Group

Emmanuel Properties Ltd

Emmanuel Properties Ltd ('Emmanuel') is a listed property company. It has one million
equity shares in issue which are widely held. Emmanuel is an ordinary resident of
Zimbabwe.

Emmanuel is a registered value-added tax (VAT) vendor and its financial year and tax
year of assessment ending on 31 December 2020. Emmanuel's portfolio of investment
properties consists of;
✓ Commercial properties (shopping centres and office buildings); and
✓ Residential properties.

Query 1

Information on the 2020 year of assessment

The following was captured when completing the tax return (ITF 12(C)) for the 2020
year of assessment. All amounts include VAT where relevant:

Income ZWL$
Commercial properties gross rentals 3,600,000
Residential properties gross rentals 400,000
Interest from financial institutions 25,000
Accounting profit on Isuzu Twin Cab 1,200

The Isuzu Twin Cab was used by the Managing Director since 2018 when it was
acquired up to 31 August 2020 when it was eventually sold for ZWL$24,000. The Isuzu
Twin Cab had been bought for $36,000 (including VAT) and had an engine capacity of
3,500cc.

Required:
Outline the VAT implications of the transactions above with supporting calculations
where relevant. (10 marks)

Query 2

In January 2020 Emmanuel decided to enter the low-cost housing market. The
directors identified a tract of land on which to build 100 low-cost residential units.
The land identified for the development is owned by the Municipality of Bulawayo but
is not for sale. However, the Municipality of Bulawayo was prepared to enter into a
30-year lease of the land on the following terms:
✓ A monthly rental of ZWL$3,000 is payable in advance.
✓ Emmanuel must erect low-cost housing on the land at a cost of at least ZWL$2
million.

13
The lease was signed on 1 March 2020 and the first month's rental was paid on that
date. Construction of the 100 low-cost residential units commenced on 1 April 2020
and they were completed for $23,400 each on 31 October 2020. Emmanuel
commenced letting the units on 1 November 2020 for a monthly rental of $230.

Two second-hand ten-tonne trucks were acquired on 1 November 2020 from a non-
registered operator for a total cash payment of $450,000. The trucks were
immediately brought into use wholly for business purposes. Depreciation was
calculated as follows:
$450 000 x 20% x 2/12=15 000

Required:
Outline the income tax deductions available to Emmanuel for the above with
supporting calculations where relevant. Assume that Emmanuel made all relevant
elections to minimise tax liability. (10 marks)

[Total: 20 marks]

14
QUESTION 14: Tapiwa Hanyani & Group

Emmanuel Properties Ltd

Emmanuel Properties Ltd ('Emmanuel') is a listed property company. It has one million
equity shares in issue which are widely held. Emmanuel is an ordinary resident of
Zimbabwe.

Emmanuel is a registered value-added tax (VAT) vendor and its financial year and tax
year of assessment ending on 31 December 2019. Emmanuel's portfolio of investment
properties consists of;
✓ Commercial properties (shopping centres and office buildings); and
✓ Residential properties.

Query 3:
Acquisition of office block
Emmanuel acquired an office block from Diamond (Pvt) Ltd ('Diamond'), which is not a
connected person in relation to Emmanuel, for $7,5 million on 1 December 2020.
Diamond is a registered VAT vendor which only makes taxable supplies. It held the
office block as a capital asset. The sale qualified as the sale of a going concern.
Emmanuel uses the office block wholly to make taxable supplies.

No tax allowances were allowed on the building because the company acquired the
new office block before 1 February 2009 (dollarisation date).

Required:
Discuss, with supporting calculations, all tax implications (income tax, capital gains
tax and VAT) for both Emmanuel and Diamond in respect of the acquisition of the
office block.
Communication skills - logical argument. (10 marks).

Query 4

Emmanuel also paid the following expenses during the year:

ZWL$
Medical aid for employees 600,000
Employees’ bonuses for the year, voted on 15 November 2020 but 120,000
paid on 31 January 2021
Provision for leave pay 50,000
Penalties to ZIMRA for late payment of PAYE 25,000
Travel allowances to three supervisors 30,000

Required:

15
Describe the income tax and VAT implications of the above expenses in Emmanuel's
financial statements as well as the tax implications (if any) for the individuals in
receipt of these benefits. Assume that the taxpayers made all the relevant elections
to minimise tax liability. (10 marks)
[Total: 20 marks]

16
QUESTION 15: Rachael E. Makanda & Group

(a) Arumando Electronics (Pvt) Ltd is a retail shop, selling televisions on credit to
approved customers. A television set was bought for ZWL$40,000 in January 2020. It
was sold on 15 April 2020 for ZWL$80,000 under the following terms. The customer is
required to pay a deposit of 25% on the date of sale and the remainder payable over
20 months in equal instalments commencing the month following that of sale.
Ownership will only pass to the buyer on the payment of the last instalment.

Required:
Explain with supporting calculations, the income tax implications of the above
transactions for the year 2020 and 2021. Assume that Arumando was granted all the
relevant reliefs and allowances to minimise tax liability. (6 marks)

(b) During the 2020 year of assessment Prema Ltd sold goods to Sesta Ltd for a sale
consideration of ZWL$144,000. Prema Ltd holds 80% of the shares in Sesta Ltd. Prema
Ltd had originally bought these goods from an independent entity for a purchase
consideration of ZWL$129,600. Ordinarily, for similar uncontrolled transactions,
Pamusha Ltd charges a mark-up of 50% on such sales of these goods.

Required:

Explain and determine the transfer price to be used for the sale transaction in
determining Prema Ltd’s taxable income for the year 2020. (8 marks)

(c) State the registration and returns submission requirements once one becomes an
employer. (6 marks)
[Total: 20 marks]

17
QUESTION 16: Allen Nyamutenha & Group

Most tax authorities are interested in transactions between related entities,

especially where they deem prices charged for the transfer of goods or services not to
be consistent with prices charged to unrelated entities. In this regard, they normally
use the arms’ length principle to test the consistency of the prices for transactions
between related entities.

Required:
(a) Define a ‘controlled transaction’ in the context of the arm’s length principle and
explain its tax implications in transfer pricing. (3 marks)

(ii) Explain any two common methods that may be used to determine the arms’ length
(4 marks)

(b)

During the 2020 year of assessment, Murombo Ltd sold goods to Samaita Ltd for a sale
consideration of Z$72,000. Murombo Ltd holds 80% of the shares in Samaita Ltd.
Pamusha Ltd had originally bought these goods from an independent entity for a
purchase consideration of Z$64,800. Ordinarily, for similar uncontrolled transactions,
Pamusha Ltd charges a mark-up of 25% on such sales of these goods.

Required:
Determine the transfer price to be used for the sale transaction in determining
Murombo Ltd.’s taxable income for the year. (3 marks)

(c)

You are the Senior Consultant in Mugomaster Consultants Ltd, a company that
specialises in tax-related matters. Ruvimbo, a second-year trainee in your firm has
come to you with withholding tax queries from other clients in the firm’s portfolio
and you are asked to give guidance on the matters raised. Below is the list of the
transactions:

1. Luckmore Chemists Ltd is a leading pharmacy in Zimbabwe. During the 2020

financial year, they entered into a contract with a supplier in which they will pay the
supplier Z$320,000 per annum as payment for the supply of various beauty products.

2. Gregory Solutions Ltd, a Zambian listed company engaged Bistos (Pvt) Ltd, another
Zambian company, to train the finance department of Erikana Ltd (a Zimbabwean
company) on the use of new finance software. In October 2020, after the training was
done, Gregory had to pay Bistos Z$200,000 for the services rendered to Erikana Ltd
from their Zimbabwean bank account. Gregory has an 80% shareholding in Erikana.

Required:

18
Write a memo to Ruvimbo, the trainee in which you discuss the withholding tax
treatment of the transactions above as per the requirements of the Income Tax Act.
Indicate the following in your discussion citing relevant sections, schedules and
paragraphs of the relevant Tax Acts;

(i) Type of withholding tax, if any.

(ii) Due date for the submission of the tax, where applicable.
(iii) Rate and amount of tax. (10 marks)

[Total: 20 marks]

19
QUESTION 17: Badza Catherine & Group

Mr Gurumoto is 60 years old. He inherited a farm from his late uncle in 2010. The
valuation of the farm then in the estate was Z$500,000. Ever since 2010 he has been
operating livestock farm, until 15 January 2020. Due to the demand for land for
residential purposes, he decided to give up farming and sold his farm to Gweru City
Council for Z$1,300,000.

Gweru City Council had the farm subdivided into 50 stands of equal size, which were
ready for sale to the public on 1 March 2020 for Z$35,000 each. It incurred
development expenditure prior to sale amounting to Z$150,000.

The sale took place as follows;

• 20 stands on 15 October 2020,

• 15 stands on 12 December 2020,

• 15 stands on 18 March 2021,

The terms of the agreement were as follows;

25% deposit on signing of the contract on the date of sale. The balance was payable
over 10 months in equal instalments, commencing the month following that of sale.

Required:

Calculate Gweru City Council’s taxable income from the above transactions for the
years ended 31 December; 2020, 2021 and 2022. [20 marks]

20
QUESTION 18: Trymore Longwe & Group

You are a Senior Partner in the Tax and Advisory Department of Mugova Chartered
Accountants. A trainee in the department, Edith has presented to you some tax
enquiries from clients. She is not sure of the income tax and VAT implications. The
following queries have been presented to you;

Case 1
Mr Mupfumi, a Zimbabwean resident at all times, aged 50, was promoted to the
position of Marketing Director of Fine Gadgets Electronics Ltd (“Fine Gadgets”) on 15
January 2020. The company offered him the following benefits as part of his
employment package. Mr Mupfumi is interested to know the tax implications of these
packages to both himself and the company. The benefits included the following;
(i) Continued membership of the company’s pension fund which is a defined
contribution scheme. Mr Mupfumi is obliged to make monthly contributions being 5%
of his cash salary. Fine Gadgets will contribute 10% of his cash salary. Mr Mupfumi will
only be entitled to the results from Fine Gadgets’ contributions by way of pension
annuities when he retires at the age of 59.
(ii) The exclusive right to use a company car, a Toyota Hilux double cab. The vehicle
has a 2,500cc engine capacity and was acquired for Z$240,000 and brought into use by
Mr Mupfumi on 1 February 2020. Fine gadgets will pay for all the fuel, licence,
maintenance, and insurance costs.
Required:
Write a memorandum to Edith, outlining the income tax and VAT implications of Mr
Mapfumo’s package to both Mr Mapfumo and Fine Gadgets. Cite any relevant
legislation and case law. [Total:20 marks]

21
QUESTION 19: Tatenda Muchavhaira & Group

Case 2:
sMurimi Wanhasi (Pvt) Ltd is a Zimbabwe registered company that is in the business of
selling a wide range of agricultural equipment in Zimbabwe. It also exports some
equipment to Botswana and Namibia. The company is registered for VAT under
category C. It only makes taxable supplies of goods. The company is seeking your
advice on the income tax and VAT implications of the following transactions.
(i) The company imported a Ford Ranger (single cab) 2,700cc from Singapore on 1
June 2020 for use by its Finance Manager. The vehicle is used for business and private
purposes. The vehicle’s landing cost in Zimbabwe was Z$320,000. During December,
the company incurred the following expenses in respect of the vehicle:
Z$
Insurance and licensing 20,160
Fuel 7,760
New Double Cab Canopy 12,000
(ii) During the tax period, the following entertainment, subsistence and related
expenses were incurred:
Staff teas and lunches 4,000
Golf Club subscriptions for the managing director 10,400
Hotel costs incurred by the managing director while out of town on 8,000
business
Subsistence allowance to 2 salesmen who went out of town on business 7,200
Required:
Write a memo to advise Edith on how each of the above transactions must be treated
for VAT and Income Tax purposes. All amounts (where appropriate) include VAT. Show
relevant calculations where necessary.
[Total: 20 marks]

22
QUESTION 20: Bothwell Nigel Berejena & Group

Kurima Ltd acquired the warehouse in 2017 for an amount of ZWL$800,000 from a
registered VAT operator. In 2018 the warehouse was gutted by fire and was
completely destroyed. Kurima Ltd received an amount of ZWL$1,200,000 in June 2018
from their insurers in respect of the destroyed warehouse. In that same year, Kurima
Ltd constructed a replacement warehouse on the same premises as the destroyed
warehouse for a total cost of ZWL$1,100,000 and the new warehouse was brought into
use during the same year.

In October 2020 Kurima Ltd decided to dispose of the above-bonded warehouse that
they had been using to store their stock of motor vehicles. The decision was made to
unlock liquidity by selling the warehouse and leasing it back from the new owners. In
November 2020 a buyer was found and the warehouse was sold for an amount of
ZWL$1,400,000 which was paid to Kurima Ltd during the same month.

Required:
With reference to the information above, discuss with supporting calculations the
capital gains tax implications of the insurance proceeds received in 2018 and the
subsequent disposal in 2020 of the bonded warehouse. [Total: 20 marks]

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1. Employment Income: 1 January to 31 December 2020
Segment of Income Amount Rate within Tax (ZWL$) Cumulative
per annum (ZWL$) (ZWL$) segment (%) Tax (ZWL$)
Up to 3 500 3 500 0% 0 0
3 501 to 15 000 11 500 20% 2 300 2 300
15 001 to 50 000 35 000 25% 8 750 11 050
50 001 to 100 000 50 000 30% 15 000 26 050
100 001 to 150 000 50 000 35% 17 500 43 550
150 001 and above 40%

2. Deemed motoring benefit per annum

Engine capacity Benefit
(ZWL$)
Up to 1 500cc 28 800
1 501 to 2 000cc 34 400
2 001 to 3 000 cc 57 600
3 001 and above 76 400

3. Rates of capital allowances

Special Initial Allowance (SIA) 25%
Accelerated Wear and Tear 25%
Wear and Tear on:
Immovable Assets (general rate) 5%
Commercial buildings 2.5%
Motor Vehicles 20%
Movable assets (general rate) 10%

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