ACCA f6 taxation zimbabwe 2015 jun question

Taxation
(Zimbabwe)
Tuesday 2 June 2015

Time allowed
Reading and planning:
Writing:

15 minutes
3 hours

This paper is divided into two sections:
Section A – ALL 15 questions are compulsory and MUST be attempted
Section B – ALL SIX questions are compulsory and MUST be attempted
Tax rates and allowances are on pages 2–4.
Do NOT open this paper until instructed by the supervisor.
During reading and planning time only the question paper may be
annotated. You must NOT write in your answer booklet until instructed
by the supervisor.
Do NOT record any of your answers on the exam paper.
This question paper must not be removed from the examination hall.

The Association of Chartered Certified Accountants

Paper F6 (ZWE)

Fundamentals Level – Skills Module


SUPPLEMENTARY INSTRUCTIONS
1.

2.
3.

Calculations and workings need only be made to the nearest US$1, unless directed otherwise.
All apportionments should be made to the nearest month.
All workings should be shown in Section B.

TAX RATES AND ALLOWANCES
The following tax rates and allowances are to be used when answering the questions.
Tax rates – Individuals employment income
Year ended 31 December 2014
Taxable
income band
US$
Up to 3 000
3 001 to 12 000
12 001 to 24 000
24 001 to 60 000
60 001 to 90 000
90 001 to 120 000
120 001 to 240 00
240 001 and over

Rate
of tax
%
0
20
25
30

35
40
45
50

Amount
within band
US$
3 000
9 000
12 000
36 000
30 000
30 000
120 000

Cumulative income
tax liability
US$
0
1 800
4 800
15 600
26 100
38 100
92 100

NB. The AIDS levy of 3% is chargeable on income tax payable, after deducting credits.
Allowable deductions year ended 31 December 2014
Pension fund contribution ceilings

(a)
(b)
(c)
(d)

US$
5 400
5 400
2 700

In relation to employers: in respect of each member
In relation to employees: by each member of a pension fund
In relation to each contributor to a retirement annuity fund or funds
National Social Security contributions (on a maximum monthly gross
salary of US$700)

Aggregate maximum contributions to all the above per employee per year

3·5% of gross salary
US$5 400

Credits year ended 31 December 2014
US$
900*
900*
50%
50%

Disabled/blind person
Elderly person (55 years and over)

Medical aid society contributions
Medical expenses

* The amount is reduced proportionately if the period of assessment is less than a full tax year.
Deemed benefits year ended 31 December 2014
Motor vehicles
Engine capacity:
Up to 1500cc
1501 to 2000cc
2001 to 3000cc
3001 and above

US$
3 600
4 800
7 200
9 600

2


Loans
The deemed benefit per annum is calculated at a rate of LIBOR +5% of the loan amount
advanced.
Value added tax (VAT)
Standard rate

15%
Capital allowances
%

25
25

Special initial allowance (SIA)
Accelerated wear and tear
Wear and tear:
Industrial buildings
Farm buildings
Commercial buildings

5
5
2·5

Motor vehicles
Movable assets in general

20
10

Tax rates – Other than employment income
Year ended 31 December 2014
%
Companies
Income tax: Basic rate
AIDS levy

25
3

Individuals
Income tax: Income from trade or investment
AIDS levy

25
3

3

[P.T.O.


Capital gains tax
Immovable property and unlisted marketable securities
acquired after 1 February 2009
Immovable property and unlisted marketable securities
acquired prior to 1 February 2009
Disposal of listed marketable securities
On principal private residence where the seller is over 55 years
Inflation allowance

20% of gain
5% of gross proceeds
1% of gross proceeds
0%
2·5%

Capital gains withholding tax on sale proceeds
Immovable property
Marketable securities (listed)

Marketable securities (unlisted)
Note: Other than the withholding tax on listed marketable securities, the
withholding tax is not final on the seller. The actual liability is assessed in
terms of the Capital Gains Tax Act.

%
15
1
5

Withholding taxes
On dividends distributed by a Zimbabwean resident company to resident shareholders
other than companies and to non-resident shareholders:
By a company listed on the Zimbabwe Stock Exchange
By any other company
Informal traders
Foreign dividends
Non-executive director’s fees
Contracts (ITF 263)

%

10
15
10
20
20
10

Non-residents’ tax

On interest
On certain fees and remittances
On royalties

%
nil
15
15

Residents’ tax on interest
From building societies
From other financial institutions (including discounted securities)

%
15
15

Elderly taxpayers (55 years and over)
Exemptions from income tax year ended 31 December 2014
Rental income
Interest on deposits with a financial institution
Interest on discounted instruments
Income from the sale or disposal of marketable securities
Pension

US$
3 000
3 000
3 000
1 800

No limit

Income from the sale or disposal of a principal private residence is also exempt.
Benefit derived from the acquisition of a passenger motor vehicle from an employer is exempt.

4


Section A – ALL 15 questions are compulsory and MUST be attempted
Please use the grid provided on page two of the Candidate Answer Booklet to record your answers to each multiple
choice question. Do not write out the answers to the MCQs on the lined pages of the answer booklet.
Each question is worth 2 marks.
1

During the year ended 31 December 2014, Ron contributed a total of US$5 000 to a medical aid society in
Zimbabwe and his employer reimbursed him US$2 000 of this amount. In addition, during the year, he incurred
US$6 000 of costs in respect of his son who was hospitalised. US$4 800 of these costs were paid by the medical
aid society.
Ron is not ordinarily resident in Zimbabwe.
What is the amount of Ron’s total tax credit for 2014 in respect of medical expenses?
A
B
C
D

2

US$5
US$1
US$2

US$4

500
500
100
200

Mary registered for value added tax (VAT) under category A on commencement of business operations on 1 January
2014. Mary’s VAT inclusive sales and purchases for her first quarter are as follows:
Sales:
Month
January
February
March

US$
6 000
10 000
15 000

Purchases:
Month
January
February
March

US$
2 000
4 000
7 000

What is the net amount of value added tax (VAT) payable by Mary for the tax period which includes the results
from March 2014?
A
B
C
D

3

US$2
US$2
US$1
US$2

100
700
826
347

During 2014, Chipo sold the following shares:
(1) Shares in A Limited, a company listed on the Zimbabwe Stock Exchange (ZSE) for total proceeds of US$ 35 000.
The shares had originally cost US$17 500 when purchased on 1 March 2009
(2) Shares acquired in Grey Limited, an unlisted company for total proceeds of US$31 500. The shares had
originally cost US$18 000 when purchased in June 2010.
What is Chipo’s final capital gains tax liability in connection with the disposal of these shares?
A
B
C
D

US$1
US$2
US$5
US$3

925
600
225
050

5

[P.T.O.


4

Nursery (Private) Ltd commenced business operations on 1 July 2014 and employs five full-time employees.
The monthly payroll is as follows:
Employee
Employee
Employee
Employee
Employee

1 (aged 67)
2 (aged 72)
3
4

5

Gross

US$
1 000
850
750
600
500
––––––
3 700
––––––
––––––

What is the total amount of National Social Security Authority (NSSA) contributions payable by Nursery (Private)
Ltd for the year ended 31 December 2014?
A
B
C
D

5

6

US$777
US$1 554
US$672
US$378

Which of the following statements are true in connection with a taxpayer raising an objection to an assessment
by the Zimbabwe Revenue Authority (ZIMRA)?
(1)
(2)
(3)
(4)

The
The
The
The

full disputed tax amount should still be paid as the objection does not suspend payment of tax
objection should give the detailed grounds for the objection in writing
objection should not include supporting documentation, as this will be requested by ZIMRA if necessary
objection must be lodged within 90 days of receipt of the assessment

A
B
C
D

1 and 2 only
1, 2, 3 and 4
1 and 4 only
2 and 3 only

O Limited was incorporated on 20 November 2012 and commenced business operations on 5 January 2014. The
company incurred the following expenses between 20 November 2012 and 4 January 2014:

Stationery
Repairs and maintenance
Purchase of 10 motor cycles

US$
5 000
40 000
20 000
–––––––
65 000
–––––––
–––––––

What is the maximum amount of tax deduction which O Limited can claim in respect of the above expenses for
the year ended 31 December 2014?
A
B
C
D

US$50
US$45
US$65
US$49

000
000
000
000

6


7

Motsi Land Developers Limited (MLD) entered into an approved build, own, operate and transfer (BOOT) arrangement
with the Ministry of Transport for the construction of a highway and bridge. The BOOT arrangement was signed in
2009.
MLD’s taxable income for the years ended 31 December 2013 and 31 December 2014 is as follows:
US$
420 000
380 000

2013
2014

What is MLD’s total corporate tax liability for 31 December 2013 and 31 December 2014?
A
B
C
D

8

9

US$123 600
Nil
US$58 710
US$57 000

Which of the following are legitimate tax avoidance measures?
(1)
(2)
(3)
(4)
(5)
(6)
(7)

Understating taxable income
Overstating allowable expenses
Claiming the maximum deductions permitted by law
Falsifying records
Taking advantage of all available tax dispensations in any given year
Use of debt within the limits of the thin capitalisation rules
Claiming deductions where the necessary conditions are not fully met

A
B
C
D

1,
3,
2,
1,

3 and 7
5 and 6

4 and 6
4, 5 and 7

XY Limited’s accountant submitted the company’s Pay As You Earn (PAYE) returns to the Zimbabwe Revenue Authority
(ZIMRA) for the quarter ended 30 June 2014 on the following dates:
Date
10 May 2014
25 June 2014
30 July 2014

April
May
June

For how many days in total during the quarter ended 30 June 2014 were XY Limited late in filing their Pay As
You Earn (PAYE) returns ?
A
B
C
D

15
25
65
35

days
days
days
days

7

[P.T.O.


10 Farai received the following dividend income (net) during the year ended 31 December 2014:
Source
A company listed on the Zimbabwe Stock Exchange (ZSE)
An unlisted company

Amount
(US$)
3 000
1 800

How much tax was withheld at source in total from Farai’s dividend income in 2014?
A
B
C
D

US$651
US$570
US$729
US$630

11 Tino is in the process of finalising her value added tax (VAT) return for the month of August 2014. Her VAT payable
for the month is US$6 300 before taking into account the following VAT inclusive adjustments:
Sales value of goods applied to own use

Recovery of impaired debts
Purchases returns

US$
2 200
3 000
1 200

What is the adjusted VAT payable by Tino for the month of August 2014?
A
B
C
D

US$7 135
US$12 700
US$7 260
US$6 534

12 Peter is employed and earns a gross monthly salary of US$6 000 during the year ended 31 December 2014. He
contributed 5% of his monthly salary towards a registered retirement annuity fund. On 1 June 2014, Peter became
a member of a pension fund into which he contributed 7·5% of his monthly salary in addition to his payments to the
registered retirement annuity fund. This pension fund had not yet registered with the Commissioner of Insurance,
Pension and Provident Funds as at 31 December 2014.
What is the amount of Peter’s allowable deductions in respect of his contributions to the pension funds for the
year ended 31 December 2014?
A
B
C
D

US$5
US$3
US$2
US$6

400
600
700
750

13 S Limited’s industrial building was completely destroyed by a fire in March 2014. The industrial building was
constructed at a cost of US$70 000 and brought into use on 25 April 2009.
S Limited’s insurance company paid them compensation of US$60 000 in April 2014 in respect of the destruction
of the building.
What is the amount of capital gains tax payable by S Limited for the year ended 31 December 2014?
A
B
C
D

US$0
US$3 000
US$9 000
US$2 000

8


14 James was provided with accommodation in a newly constructed company house by his employer on 1 June 2014.

The house is in the northern suburbs of Harare. The construction of the house cost James’s employer US$240 000.
The market rental for the house is US$2 000 per month.
James paid his employer rent of US$50 per month for occupation of the house.
What is the amount of the fringe benefit to be included in James’s gross income for the year ended 31 December
2014?
A
B
C
D

US$14
US$16
US$13
US$16

000
800
650
450

15 R Limited accurately remitted provisional tax of US$15 000 to the Zimbabwe Revenue Authority (ZIMRA) on 20 June
2014 in respect of its second Quarter Payment Date (QPD) for the year ended 31 December 2014.
There have been no subsequent revisions to R Limited’s estimate of revenue for the year.
What is the amount of provisional tax which should have been remitted to ZIMRA in respect of R Limited’s third
QPD for the year ended 31 December 2014?
A
B
C
D

US$15 000
US$6 000
US$21 000
US$18 000
(30 marks)

9

[P.T.O.


Section B – ALL SIX questions are compulsory and MUST be attempted
Please write your answers to all parts of these questions on the lined pages within the Candidate Answer Booklet.
1

You should assume that today’s date is 1 August 2014.
Mark and Mary are married and jointly own the principal private residence (PPR) which they reside in. Mark was born
on 15 July 1960 and Mary was born on 24 December 1959. The couple are contemplating disposing of their PPR.
An estate agent has provided the following market values for their property as at 31 August 2014:
Date acquired/constructed
Main residence
Outbuilding
Temporary car shelter
Concrete wall
Lock up garage

15
10
20
18

13

February 2009
April 2009
November 2009
February 2010
March 2011

Cost
(US$)
80 000
20 000
5 000
30 000
25 000

Market value
(US$)
150 000
35 000
6 000
40 000
30 000

The estate agent has advised Mark and Mary that whilst there are many buyers interested in their property just now,
they should consider selling as soon as possible in case the property market falls. The estate agent’s commission will
be 10% of the sales price.
Required:
(a) Explain why, notwithstanding the estate agent’s advice, Mark and Mary should consider delaying the disposal
of their property. Advise on any tax planning which could be undertaken to allow them to sell at the earliest

date possible whilst availing of the maximum tax reliefs available.
(4 marks)
(b) Calculate the capital gains tax payable by Mark and Mary assuming that they dispose of their property on
31 August 2014.
(6 marks)
(10 marks)

10


2

Carpets Galore Limited (CGL) is a category C valued added tax (VAT) registered operator. The VAT returns and
remittances of CGL for the month of July 2014 are as follows:
VAT return
submitted
30 August 2014

July

VAT payable
US$
10 000

Amount remitted
US$
10 000

Remittance
date

25 October 2014

The trading activities of CGL for the month of August 2014 are detailed below. All sales are stated exclusive of VAT,
where appropriate, and all purchases/expenses are stated inclusive of VAT, where appropriate. None of the
purchases/expenses relate to the provision of exempt supplies.

Sales of carpets and accessories
Exempt supplies
Sales returns (defective carpets)

Purchases
Purchases
Stationery
Depreciation
Repairs and maintenance
Other expenses
Purchases returns

Sales
US$
40 000
8 000
(5 000)
–––––––
43 000
–––––––
–––––––
Purchases/other expenses
US$
15 000

10 000
4 000
7 500
6 000
9 000
(3 000)
–––––––
48 500
–––––––
–––––––

Supplier VAT
registration number
WA45000
N/A
ZA33000
N/A
N/A
MZ64000
N/A

Required:
(a) State the due date for Carpets Galore Limited’s value added tax (VAT) return for August 2014.

(1 mark)

(b) Calculate Carpets Galore Limited’s maximum interest and penalties in respect of its VAT return for the month
of July 2014.
(3 marks)
(c) Calculate the VAT payable by Carpets Galore Limited for the month of August 2014.

Note: You should indicate by the use of zero (0) any items referred to in the question where there is no VAT
impact.
(6 marks)
(10 marks)

11

[P.T.O.


3

Z Limited owns a plot of undeveloped commercial land in Harare on which it intends to construct an industrial
building. Due to cash flow constraints, Z Limited entered into a 20-year lease agreement with Evergreen Panel Beaters
(Private) Limited (EPB) for the development of the commercial land. The terms of the lease agreement are as follows:
(1) EPB to construct an industrial building and a security wall on the commercial land at a cost of not less than
US$150 000 for the building and US$50 000 for the wall.
(2) EPB to make use of the property for the duration of the lease agreement subject to payment of a monthly rent of
US$8 000 and a one-off premium of US$60 000.
(3) The lease agreement was signed on 1 January 2014, on which date the rent and premium were also duly paid.
The construction of the building and the security wall commenced soon after the signing of the lease agreement.
The agreed construction period was three months.
(4) The industrial building and the security wall were constructed within the agreed cost and timeframe and brought
into use by EPB on 1 May 2014.
EPB obtained a loan of US$100 000 on 1 February 2014 from a bank in order to be able to complete the
construction of the industrial building and the security wall. The interest rate on the loan is 20% per annum.
EPB paid a total of US$28 000 in provisional tax for the year ended 31 December 2014. The accountant had
calculated the taxable income for the year ended 31 December 2014 at US$280 000 without taking into account
the lease agreement provisions and the bank loan.
Required:

(a) Calculate the adjusted taxable income and tax payable by Evergreen Panel Beaters (Private) Limited for the
year ended 31 December 2014.
Note: You should indicate by the use of zero (0) any amounts for which no adjustment is required.
(8 marks)
(b) Calculate the amounts to be included in the gross income of Z Limited in connection with the lease
agreement for the year ended 31 December 2014.
(2 marks)
(10 marks)

12


4

Maria is in the business of interior designs and is still working on the tax computation for her income tax
self-assessment return for the year ended 31 December 2013. Her net profit before tax for the year is US$15 800
after taking into account the following:
US$
(7 000)
(8 000)
5 500
14 300
12 000
1 800
1 000

Proceeds on disposal of non-current assets – Note 1
Company dividends received
Depreciation for the year
Salaries and wages

Office rent
Restraint of trade payment – Note 2
Traffic fine
Note 1

An extract from Maria’s non-current asset register as at 31 December 2013 is as follows:

Furniture and fittings
Computer equipment
Office equipment

Cost
(US$)
15 000
9 000
20 000

Tax value
(US$)
7 500
2 250
nil

Included in the office equipment is the cost of the equipment which was disposed of during the year. The equipment’s
original cost is US$10 000 and it was disposed of for US$7 000.
Note 2
The restraint of trade payment was made to an ex-employee of Maria’s in return for which the employee agreed not
to work for any competitor of Maria for a period of two years.
Maria paid a total of US$13 000 in provisional tax for the year ended 31 December 2013. A total of US$5 000 in
withholding tax on contracts (ITF 263) was also deducted from invoices raised by Maria for the year ended

31 December 2013, although the income has been included gross of the withholding tax deducted in her profits for
the year.
Required:
(a) (i)

State by when Maria’s income tax self-assessment return should have been submitted to the Zimbabwe
Revenue Authority (ZIMRA).
(1 mark)

(ii) Advise Maria on ZIMRA’s remedies for late submission of an income tax return.

(2 marks)

(b) Calculate the income tax shortfall or the income tax overpaid by Maria in respect of the year ended
31 December 2013.
Note: Your calculation should start with the net profit for the year of US$15 800 and should indicate by the
use of zero (0) any amounts referred to in the question for which no adjustment is required.
(7 marks)
(10 marks)

13

[P.T.O.


5

Josh Oak is a veterinary surgeon in the government department of animal husbandry and veterinary services. For the
past five years he was based at the head office in Harare but was transferred to the Mash East office on 15 June
2014. The following are the details of his earnings during the year ended 31 December 2014:

Employment income
Salary and benefits
(i)

Salary of US$28 000. In addition, Josh received a bonus of 10% of his salary on 30 November 2014.

(ii)

Fringe benefits of US$10 000 being accommodation allowance of US$4 000, representation allowance of
US$3 000, fuel allowance of US$1 000 and school fees allowance of US$2 000 for his minor children.

(iii) The standard relocation allowance of US$5 000 when he transferred to the Mash East office. The actual
expenses incurred by Josh in the transfer amounted to US$3 500.
(iv) An interest free loan of US$15 000 received from his employer on 1 August 2014. Josh applied US$10 000
towards his post graduate studies and US$5 000 towards the purchase of a vehicle for his wife. The LIBOR for
the year ended 31 December 2014 averaged 1·5% per annum.
(v)

Use of an employer allocated vehicle with an engine capacity of 3 200cc

(vi) A total of US$12 000 from a matured retirement annuity fund (RAF). His contributions to the fund over the years
were allowed as a deduction.
Payments by Josh
(vii) Pension contributions amounting to 7·5% of his salary. Josh also contributed US$4,000 towards his RAF.
(viii) Professional subscription fees of US$1 500.
(ix) Medical aid contributions of US$6 000.
The PAYE deducted by Josh’s employer for the year amounted to US$9 400.
Other income
(x)

Net rental income of US$23 000 from a holiday cottage in Botswana.

(xi) Net non-executive director’s fees (after deduction of withholding tax at source) of US$8 000.
(xii) A share of rental income from the estate of his late father. The commercial property was transferred in equal
shares to Josh and his three siblings at a value of US$200 000 on 1 March 2013 from which date the property
was let out to tenants. The following are the details of the income and expenditure of the commercial property
for the year:
Gross rent
Management fees
General repairs and maintenance
Permanent repairs to the security wall

US$
120 000
(18 000)
(15 000)
(10 000)
–––––––
77 000
–––––––
–––––––

Required:
Calculate the taxable income and income tax payable by Josh Oak for the year ended 31 December 2014.
Note: You should indicate by the use of zero (0) any amounts for which no adjustment is required.
(15 marks)

14

6

AB Limited (AB) is engaged in the retail business of computer consumables and accessories. The year ended
31 December 2014 is AB’s third year of trading. AB recorded assessed trading losses of US$35 000 and
US$22 000 respectively in its first and second years of trading.
AB’s statement of profit or loss for the year ended 31 December 2014 is as follows:
Note
Gross profit
Bank interest received
Company dividends received
Prior year suspense sales allowance
Motor vehicle expenses
Insurance and licensing
Marketing expenses
Depreciation
Salaries and wages
Staff pension contributions (five employees)
Staff medical aid contributions
Entertainment
Repairs and maintenance
Legal fees
Donations to a local church
Renewal of operating licences
Other administration expenses
Interest paid

1
2

3

Net profit before tax

US$
450 000
2 000
20 000
35 000
(14 000)
(7 000)
(25 000)
(37 000)
(115 000)
(35 000)
(40 000)
(10 000)
(30 000)
(3 000)
(8 000)
(9 000)
(45 000)
(12 000)
––––––––
117 000
––––––––
––––––––

Notes
(1) The repair and maintenance cost all relates to the purchase of permanent fixtures and fittings.
(2) The legal fees were in respect of employee contracts.

(3) The interest paid was in respect of a loan to purchase shares in another company.
Additional information
AB’s non-current asset registers shows the following assets which had been in use since the commencement of trade:
Cost
(US$)
40 000
100 000
30 000
50 000
––––––––
220 000
––––––––
––––––––

Furniture and fittings
Commercial vehicles
Office equipment
Three passenger vehicles

Required:
(a) Briefly set out the general rule regarding how a company, like AB Limited, with brought-forward assessed
trading losses may use these against its future taxable profits.
(1 mark)
(b) Calculate the taxable income of and corporate tax payable by AB Limited for the year ended 31 December
2014, making use of any available reliefs.
Note: You should indicate by the use of a zero (0) any amounts referred to in the question for which no
adjustment is required.
(14 marks)
(15 marks)
End of Question Paper

15