THE INSTITUTE OF ADMINISTRATION AND COMMERCE

TAXATION MAY 2025 COURSEWORK

DUE: 19 APRIL 2025 TOTAL MARKS 100

INSTRUCTIONS TO CANDIDATES
1. Answer ALL questions
2. Answers should be submitted in typed softcopy
3. Use times new roman fond 12, line spacing 1.15
4. Observe Proper citing and acknowledgement of sources used
5. The cover Page should have: Name of Institute, National ID, Student Number,
Subject, a box indicating answered questions
6. ALL WORK TO BE SUBMITTED STRICTLY VIA STUDENT PORTAL ONLY

INFORMATION SHEET
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TAX RATES usd

Details Income brackets Rates %

0 to 1 200 0

1 201 to 3 600 20

3 601 to 12 000 25

12 001 to 24 000 30

24 001 to 36 000 35

36 001 and above 40

Add 3% levy

Income from trade and investments 24

[Individuals]

Company and trust income 24

Income from trade and investments 15

[Pension funds]

Licensed investor- first five years 0

Licensed investor-after five years 24

Holder of special mining lease 15

Income from mining company or trust 24

BOOT or BOT first five years 0

After five years 15

Dividends 20

Question 1.

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Liam Danga is the Financial Director of Teachers Pvt Ltd. He is also a director of Students Pvt
Ltd, which is a holding company of Teachers Pvt Ltd.

Liam is now 60 years of age. He had contracted poliomyelitis during his youth and is confined to
a wheelchair.

For the tax year ended 31 December 2023 he received the following paid in USD.

-Salary 160 000

-Director's fees, voted for on 30/09/2023 6 000

-Medical aid contribution paid by the company 5 600

-Medical expenses paid by the company 4 000

-Entertainment allowance see note 1. 8 400

184 000

-Liam Danga's pension fund contribution. 6 575

-PAYE paid 82 700

Notes:

1. During the year Liam Danga entertained clients at a cost of USD1 950.

Additional information

2. For the period 1/1/23 to 30/9/23 Liam used a company car of engine capacity of 1500cc. In
October 2023 the company sold the vehicle to Liam for US $2 000. The market value of the
vehicle was US $3 500 and had cost the company US $5 450.

3. In September 2023 Liam exercised an option to acquire 200 shares in Teachers Pvt Ltd at US
$2 per share. At that date the market value of these shares was US $3 per share. The option had
been offered in February 2020 when the market value of the shares was equivalent of US $3.5
per share.

4. Liam owns two flats, one of which is his principal private residence and another was rented
out throughout the year for US $24 600. The monthly levy of US$ 500 per month was paid by
Liam. He closed the balcony of the rented flat in September 2023 at a cost of UD$7 800.

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5. Liam received a pension of US $200 per month from an approved pension fund from his
previous employer.

5. On 30 September 2023 Student Pvt Ltd paid Liam director's fees of US$5 000 less US $1 000
withholding tax.

6. On the same date he invested funds in bankers' acceptances. Interest on these bankers'
acceptances amounted to US $4 000 for the year.

Required:

Calculate Liam Danga's tax liability for the year ended 31 December 2023. Provide detailed
explanation in support of your calculations whenever necessary. (33 marks)

Question 2.

Glenn Foods Ltd operates under a license of its parent company - Glenn Foods International. It
manufactures baby foods and have its place of business along Highglen road in Harare.

For the tax year ended 31/12/23 it reported a net operating loss of US$35,5 million something
that raised a red flag with the ZIMRA. The tax authority promptly conducted a tax audit which
resulted in ZIMRA disallowing certain expenses thereby slapping the company with a tax bill of
US$15,9 million inclusive of a 40% penalty for tax evasion.

Details of the disallowed expenses was as follows:

1) Glenn Foods Ltd's Global License Agreement (GLA) - US $3.8 million

The GLA grants the local subsidiary exclusive rights to continue to manufacture and distribute
Glenn Foods International products in Zimbabwe and the local entity pays royalties at 5% on of
it's net sales and this reduced by 2% by RBZ on remittance.

2) Shared Services -US$2,5 million

This was in respect of payments made to a local personal and it's affiliates abroad. Glenn Foods
Ltd explained that there wasn't any duplication of services by affiliates and that the services were
unique.

3) Research Services -US $1.5 million

This was paid to an affiliate for analytical quality test.

4) Canteen Meals- US $1.6million

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This was for meals provided to staff and factory workers.

Required:

1) Outline the basic requirements for lodging an objection with ZIMRA. (5 marks)

2) With reasons (case law where applicable) draft an objection letter for Glenn Foods Ltd to
ZIMRA defending the disallowed expenses in terms of section 15(2) of the Income Tax Act
(chp.) 23:06. (15marks)

3) Explain the difference between tax evasion and tax avoidance. In your opinion was ZIMRA
justified to impose a 40% penalty for tax evasion on Glenn Foods Ltd. (5 marks)

Question 3

Administrative easy is one of the characteristics of an effective tax system.

a) Briefly explain what you understand by this characteristic. (5 marks)

b) Tax and Revenue Management System (TaRMS) is an online system recently implemented
by ZIMRA. Outline what the system entails. (10 marks)

C) With regards administrative easy, evaluate TaRMS and suggest any improvements to
ZIMRA. (10 marks).

Question 4.

A potential investor has approached you for clarification on obligations placed on business by
ZIMRA.

Outline to them:

1) Conditions governing the existence of Value Added Tax. (5 marks)

2) Types of VAT registrations. (4 marks)

3) Conditions that must be satisfied before one can claim input tax. (3 marks)

4) Formula for calculating VAT. (1 mark)

5) Exempt supplies and give two examples. (4 marks)

The end