CHINHOYI UNIVERSITY OF TECHNOLOGY

SCHOOL OF ENTREPRENEURSHIP AND BUSINESS SCIENCES

DEPARTMENT OF ACCOUNTING SCIENCES AND FINANCE

BSc (HONS) IN ACCOUNTANCY

COURSE: TAX LAW & PRACTICE (MAIN)

CODE: CUAC 212

DATE: AUG-DEC 2021

DURATION: 3 HOURS

INSTRUCTIONS TO THE CANDIDATE

Attempt all 5 questions
Use a silent calculator
Start each question on a new page
The following Acts will be provided in the examination: Income Tax Act (Chapter
23:06), VAT Act (Chapter 23:12), Finance Act (Chapter 23:04), Capital Gains Tax
Act (Chapter 23:01)

1
QUESTION 1

Mr. Jairosi Murombo, 57 years old, was working as an Economist in one of the
manufacturing companies based in Harare. During the year ended 31 December 2020,
he was promoted to the position of a working Director and he received the following
income during the year:

ZWL$
Salary 450,000
Bonus 30,000
Entertainment Allowance 50,000
Cash in lieu of leave 70,000
Representative allowance (Note 2) 50,000
Airtime allowance 10,000

During the year Mr. Jairosi Murombo also incurred the following
expenses:
Contributions to the National Bursary Fund 100,000
National Social Security Fund (NSSA) 19,000
Contributions to Old Mutual Pension Fund 40,500
Subscriptions (Note 4) 1,200
PAYE 20,000
Medical Aid Contributions 10,000

Additional information provided is as follows:

1. The employer provided Mr. Jairosi Murombo with a fully furnished company
house in March 2020. The market rentals of similar houses for the period were
ZWL$30,000 per month. He was required to pay rentals of only ZWL$5,000 per
month.

2. Included in the representative allowance, is ZWL$5,000 used by Mr. Jairosi

Murombo for his employer’s business and was approved by the Commissioner
General of ZIMRA.

3. The company provided him with a free use of a motor vehicle with an engine
capacity of 2,600cc on 1st March 2020.

4. Subscriptions of ZWL$1,200 were paid to the Zimbabwe Economic Society to

which Mr. Jairosi Murombo is member.

5. He incurred medical expenses amounting to ZWL$15,000 of which ZWL$5,000

was paid to a traditional medical practitioner not registered for treatment
purposes.

2
 6. In January 2020, the employer provided him with school fees allowance for his
son of ZWL$7,000 and ZWL$8,000 interest free loan to him for his daughter‘s
medical treatment in South Africa. LIBOR is 5%.

Required:

(a) State the due date for the remittance of monthly PAYE for Jairosi Murombo.
(1 mark)

(b) Calculate Mr. Jairosi Murombo’s tax payable or refundable for the year ended 31
December 2020. (19 marks)

[Total: 20 marks]

3
QUESTION 2

Beremauro Ltd submitted the following records in respect of its receipts and
payments for the year ended 31st December 2020. The net profit for the year was
calculated as ZWL$500,000. All the receipts and payments below have been included
in the calculation of the reported profit figure.

Receipts Payments(ZWL$)
(ZWL$)
Income from business operations 2,500,000
Rental Income (Malawi property) 100,000
Profit on sale of motor vehicle 55,000
Interest from Barclays Bank Zimbabwe 15,000
Dividends : Coca-Cola Zimbabwe 80,000
Acquisition of commodity sole selling rights 50,000
Commission 15,000
Depreciation 10,000
Donations (Note 1) 25,000
Electricity 15,000
Entertainment 20,000
Interest payable (Note 2) 10,000
General expenses (Note 3) 80,000
Legal costs (Note 4) 30,000
Marketing and selling 65,000
Medical aid contributions 16,000
Repairs and maintenance (Note 5) 27,500
Stationery 9,500
Salaries and wages (Note 6) 60,000
Pilferage by Managing Director (holds 5% of the 12,000
shares)

The following additional information is provided:

1. Donations:
ZWL$15,000 was donated to Chinyaradzo Children’s Home, a social welfare
organisation registered and administered under the Ministry of Social Welfare. The
balance was a donation to Dynamos Football Club.
2. Interest Payable
Interest payable was from a loan from ZB Bank Zimbabwe to finance the purchase of a
vacant commercial stand.
3. General Expenses:
Included in general expenses are the following;
4
 ZWL$
ZESA electricity connection fee 10,000
Entrance fee to the Exporters Association 30,000
Penalty charged by ZIMRA for late payments 40,000

4. Legal expenses
Legal expenses amounting to ZWL$$20,000 were incurred in an unsuccessful appeal in
the courts against previous income tax payments. The rest was incurred while
attempting to recover debts from customers.
5. Repairs and maintenance:
Included in repairs and maintenace are the following;
ZWL$
Demolishing and modifying existing structure 20,000
Repainting the existing structure 7,500

6. Salaries & Wages:

Included in salaries and wages is an ex-gratia payment of ZWL$7,000 paid to a former
employee.
Required:
Calculate the taxable income or assessed loss for the year ended 31 December 2020
and the tax liability, if any. (20 marks)

5
QUESTION 3
(a) State the dates and respective percentages of tax that should be paid on on
QPDs (Quarterly Payment Dates) by farmers and partners. (4 marks)
(b) Discuss any three (3) special allowable deductions granted to farmers only in
Zimbabwe in terms of the Income Tax Act. (6 marks)
(c) Explain the income tax implications of the death of a partner in a partnership
business. (4 marks)
(d)
Tinashe bought a farm in Shurugwi on 30 September 2019 on which he commenced
mixed crop farming on 1 January 2020. The following are the fixed assets
acquired/constructed and used on the farm for the year ended 31 December 2020.
ZWL$
Farm implements 800,000
Tractor 440,000
Combine Harvester 300,000
Borehole and water tank 190,000
Farm workers’ compounds (10 self-contained houses) 1,500,000
Farm manager’s house 750,000
Fencing 280,000
Stumping and clearing of the land 78,000
Tobacco barns 350,000
Irrigation equipment 690,000
Two (2) passenger motor vehicles 650,000

Required

Compute the total allowable deductions for Tinashe for the tax year ended 31
December 2020. Maximise the deductions. (6 marks)

[Total: 20 marks]

6
QUESTION 4

(a)
Mr. Chakama Rumano (Rumano) a resident of Zimbabwe got a job in South Africa in
December 2020. He decided to sell his shareholding of 20,000 shares in Bakasa
(Private) Limited (Bakasa), an unlisted Zimbabwean company. The shares were valued
at ZWL$25 a share on the date of sale and the shares had been purchased on 1 March
2020 for ZWL$5 a share. He paid brokerage commission of 2% on the amount in
connection with the sale. On 20 November 2020, he again donated his 1,000 shares in
Econet Wireless (Econet), a company listed on the Zimbabwe Stock Exchange.
Withholding tax was deducted from the listed shares. The market value of these
shares was ZWL$50 each on date of donation. The 1,000 shares had been acquired in
April 2014 for $5,000.

Required:
(i) Calculate the capital gains payable by Rumano on the shares from Bakasa.
(5 marks)
(ii) Calculate Capital Gains Tax,if any, on the Econet shares. (3 marks)
(b)

Mrs. Bolomali bought a flat in Harare on 11 April 2019 at a cost of ZWL$1,000,000. She
repainted the flat in May 2019 at a cost of ZWL$70,000 and in September 2019 she
constructed a brick wall surrounding the flat for ZWL$120,000. She put burglar bars
and a driveway in January 2020 at a cost of ZWL$18,000 and ZWL$16,000 respectively.
In February 2020 her employer transferred her to Bulawayo. She advertised the
Harare flat on 1 March 2020 and thus incurred ZWL$1,500 advertising costs. She
managed to get a buyer on 11 March 2020 and sold the property for ZWL$1,800,000.
Mudehwe Real Estate, the estate agents who facilitated the sale, charged her 5% as
agent‘s commission. The estate agent also withheld withholding tax at the prescribed
rate.
Required:

(i) Calculate Mrs Bolomali apital gains tax payable or refundable, if any. (10 marks)

(ii) State the due date for the Capital gains withholding tax and the capital gains tax
for Mrs Bolomani on the transactions above. (2 marks)

[Total: 20 marks]

7
QUESTION 5

Tsanzaguru (Pvt) Ltd (Tsanzaguru) is a registered operator in Category C. The

company owns a 15 storey building in Rusape which provides for both commercial
letting and residential letting.

Rentals for the month of August 2021 were ZWL$2,300,000 including VAT for
commercial letting and ZWL$1,000,000 residential letting. The company incurred the
following expenditure inclusive of VAT.

ZWL$
Harare Sports club subscription fees 70,000
Repairs for the building 25,000
Plumbing services 50,000
Municipal owners rates 15,000
Insurance subscriptions 90,000
Electrical repairs 12,000
Accounting services 50,000
ISUZU Double cab 230,000

Required:
(a) State the due date for the submission of Tsanzaguru’s VAT return for the month
of August 2021. (1 mark)
(b) Tabulate, with examples, any three (3) differences between exempt supplies
and zero-rated supplies. (6 marks)
(c) Discuss any four (4) circumstances under which the Commissioner can decline
an application for voluntary VAT registration. (4 marks)
(d) Calculate the VAT payable/refundable for the month of August 2021 return for
Tsanzaguru. (9 marks)
[Total: 20 marks]

8
1. Employment Income: 1 January to 31 December 2020
Segment of Income Amount(ZWL$) Rate within Tax(ZWL$) Cumulative
per annum(ZWL$) segment (%) Tax(ZWL$)
Up to 24 000 24 000 0% 0 0
24 001 to 90 000 66 000 20% 13 200 13 200
90 001 to 180 000 90 000 25% 22 500 35 700
180 001 to 360 000 180 000 30% 54 000 89 700
360 001 to 600 000 240 000 35% 84 000 173 700
600 001 and above 40%

2. Deemed motoring benefit per annum

Engine capacity Benefit (ZWL$)
Up to 1 500cc 54 000
1 501 to 2 000cc 72 000
2 001 to 3 000 cc 108 000
3 001 and above 154 000

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%

END OF EXAMINATION