SECTION A: ANSWER ALL QUESTIONS

QUESTION ONE (30 MARKS)

A sixty year old widower received the following amounts in respect of the 2013 tax year

Salary (part time as an electrician) 30 400

Pension from employer 7 000
Interest P.O.S.B 4 700
Interest Barclays (taxed at source $4 500) 18 000
Bonus 3 100
Royalties from Zimbabwean properties 11 700
Seaside Cottage in S.A (tax withheld $4,000) 22 000
Retrenchment package 16 800
Other information
Contribution to medical aid 8 000
Medical shortfalls during the year 6 000
Replacement of spectacles ($1000 recovered) 2 700
Operation cost to replace hip by specialist in S.A were as follows:
Medication 8 400
Operation fees 4 400
Ten days hospitalisation 2 600

Medical aid contribution towards operation was $5,400

Required

a) Calculate the minimum taxable income in respect of the tax year ended 31 December
2013 (15 marks)
b) Compute his tax credits for the year (10 marks)
c) Clearly outline how royalties are taxed (5 marks)

QUESTION TWO (30 MARKS)

Mrs Mayfield (aged 52), a qualified engineer, was employed as a works superintendent at
Unki Mine (Pvt) Ltd until 31 December 2013 when her position was abolished in accordance
with an approved scheme of retrenchment. Her earnings and expenses (which include those
from other sources other than employment) for the period 1 January 2013 to 31 December
2013 were as follows:

Earnings
Salary 60 000
Bonus 6 000
Dividends from Pamodzi Pvt Ltd (note 1) 6 000
Pension income 9 000
Retrenchment package 30 000
Interest POSB Post Office Savings Bank 1 000
Annuity receipt (note 2) 6 000
Income from rental of residential property 12 000
Earnings from poultry project 28 000
Payment to prevent her from joining and disclosing trade secrets to rival
company for the next 3 years 15 000
Entertainment allowance 10 000

Expenses
Subscriptions to Zimbabwe institute of engineers 3 500
Contributions to an approved pension fund 3 600
Contribution to a retirement annuity fund 4 000
Household living expense 18 000
Renewal of an engineer’s set of tools (1 June 2013) 6 000
Independence day donations 4 000
Poultry feeds vaccines and other allowable costs 10 000
Donation to Matthew Rusike Children’s home 3 000

ADDITIONAL INFORMATION

1) Pamodzi Pvt Ltd is a Malawian incorporated company

 2) The annuity receipt commences on 1 December 2013 and derives from an annuity that
she purchased in 2008 for $60 000. The annuity is payable until 30 November 2018.
3) On 1 December 2013, she buys a motor vehicle from her employer for $5,000. At the
time of the sale the vehicle had a market value of $4,500. The employer acquired the
vehicle in February 2004 for $20,000.
4) The retirement pack

SECTION B: ANSWER ONE QUESTION FROM THIS SECTION

OPTION A

You are required to calculate the taxable income in each of the following scenarios. Each
scenario is independent from every other scenario.

a) Mr Manchester has a property in the residential area of Kopje, he wants to lease the
property to Midlands State University for a monthly rental of $ 3,500 per month. Mr
Manchester feels that the location of the house is prestigious and thus Midlands State
University should pay a down payment of $10,000. The lease agreement is for ten
years and started on the 1st of March 2013.
Calculate the taxable income for Mr Manchester for the year 2013 (5 marks)
b) Mr Liverpool is looking for premises to conduct his ball manufacturing business. He
gets an offer from Mr Swansea to use his property. Mr Swansea’s property however
needs to have improvements effected to suit Mr Liverpool’s business. They agree to a
lease period of 15 years starting from the first of January 2013. Mr Liverpool starts
building the improvement on the 1st of February and ends by the end of June. The
agreement had a minimum stated value of $250,000 however due to unforeseen
increases in prices of construction material the actual cost was $450,000.
Calculate the taxable income for Mr Swansea in the year 2013 (5marks)
c) Ms Chelsea is a tenant of Arsenal properties for three years now, she rents a two
bedroomed flat in Nehosho. During the year she is fired from her secretarial job with
China City and she can no longer afford the steep rental of $ 2,500 per month she
decides to sublet her flat to Ms Blackburn who will pay a rental of $2,800 per month
and a down payment of $500 on the 1st September.
Calculate the tax implications of the above scenario and how much taxable
income will arise and in whose hands. (5marks)
 d) Mr Barcelona is a leasor of a property which was effected improvements in 2010 by
the leasee Mr Madrid. The leasee had effected lease improvement to the value of
$240,000 over a lease period of 15 years. The lease improvement were effected by the
1st of January 2010. Mr Barcelona fell ill and passed away on the 28 th of December
2013. Calculate the taxable income of Mr Barcelona in the year ended 2013 give
reasons for your answer.(5marks)

OPTION B

You are required to calculate the taxable income in each of the following scenarios. Each
scenario is independent from every other scenario.

a) Mr Dynamos earns a salary of $67,000 in 2012, performance related award of $2,400,

commissions of $4,800 and is receiving an annuity of $17,000 per year, purchased for
$11,000 with a life expectancy of 8 years. Calculate Mr dynamos’ taxable income
(5marks)
b) Mrs Platinum earns a salary of $60,000 in the year 2013, receives a bonus of $4,000,
commission accrued to her amounted to $17,000. She is retiring at the year end and
will receive $19,000 per annum for the next 19 years. During her contributing years of
pension, the total amount of disallowance towards her pension fund was $14,000,
which exceeded the deductible limit. Calculate income tax for the year of
assessment. (5marks)
c) Malcom retired on 31 December 2013 at the age of 60 years. His receipts and accruals
following retirement are as follows:
A lump sum gratuity of $80,000 from his employer in recognition of his faithful
service to the firm. Cash in lieu of leave $7 392, a motor vehicle valued at $13,000, an
accumulated salary of $69,000, A cheque was paid to him from a collegiate fund,
which was formed by employees and used specifically on occasions such as these.
The cheque amounted to $8,400. $15,000 of the lump sum from pension fund into an
approved retirement annuity fund and a medical aid contribution of $5,000. Calculate
the tax expense for Malcom for the year ended 2013. (10 marks)

SECTION C: ANSWER ONE QUSTION FROM THIS SECTION

OPTION A

a) The commissioner general is mandated to collect and levy taxes on all Zimbabweans
is they are of a Zimbabwean source. Cleary outline why the government of Zimbabwe
collects taxes (10marks)
b) You are required to state in one sentence the rules for determining the source of each
of the following specific types of incomes: (10marks)
1) A lump-sum payment from a retirement annuity fund
2) Royalties from the sale of a book
3) An attendance fee for meetings by a director
4) Dividends
5) Interest received
6) Rental from immovable property
7) Rental of a car
8) Remuneration of employees
9) Share sales
10) Remuneration of foreign employees services

OPTION B

a) Clearly outline the weaknesses of the current tax system, then also highlight the
benefits of the other tax systems over the Zimbabwean tax system (10 marks)
b) With reference to relevant case law to explain the cornerstones of the Zimbabwean
Income Tax legislation (10marks)