QUESTION 1 [25Marks]

Matiki (Private) Limited is a company which manufactures adhesives at Ruwa Growth

Point near Harare. The company has a 31 December year-end.The income statement of
the company in respect of the year ended 31 December 2020 reflected a net profit of
$2 850 000. The profit was arrived at after deducting expenses and crediting income
which included the following items:

EXPENSES $ $
*Depreciation of assets 25 000
*Donations:
-Methodist Church 5 000
-National Bursary Fund 120 000
-Ministry of Health and Child Welfare for the
purchase of 150 000
drugs at Harare Government Hospital
-Ministry of Education and Culture for the building of
a library 150 000
at Mzilikazi Government School
-Standards Association of Zimbabwe 20 000 425 000
*Entertainment:
-Prospective clients 10 000
-Staff Xmas party 2 500 12 500

INCOME
*Profit on sale of printing machine 7 200

The printing machine was acquired in the 2019 tax year for $16 thousand and was sold for
$30 thousand in the 2020 tax year

ASSETS ON HAND AS AT 1 JANUARY 2007 INCOME TAX VALUE

1
JAN 2020
Industrial building: Cost $29 thousand in 2016 tax year Nil
Plant and machinery: Cost $150 thousand in the 2015 tax year Nil
Printing machine: Cost $16 thousand in the 2019 tax year $8 000
 Furniture and fittings: Cost $5 thousand in the 2017 tax year Nil
Factory canteen: Cost $25 thousand in the 2018 tax year $6 250
Commercial vehicles: Cost 120 thousand in the 2019 tax year $60 000

CURRENT ADDITIONS $
Delivery truck – Mazda B1800 70 000
Nissan Almera Sedan for use by the Finance Manager 25 000
Second hand printing machine 80 000
New computer 5 000
1 unit of staff housing 46 000
1 unit of staff housing 10 000

REQUIRED
1. Compute the company’s taxable income/assessed loss in
respect of the tax year ended 31 December 2020 assuming the
company claims the maximum tax allowances available. (15
marks)
2. When is the provisional tax due? (10 marks)

QUESTION 2 [25 Marks]

Kombo (Private) Limited, a company controlled by three individuals,

commenced regular production of platinum on 1 January 2020 on a mine which
it owns.
You are given the following information for the year of assessment ended 31 December 2020.
1. Profit before tax but after debiting the following was $55 000
a) Depreciation 7 850
b) Mining Claims written off 15 000
c) Unrealized exchange loss 10 000
d) Interest on money borrowed to finance working

capital 18 000
e) First installment of company formation expenses 250
2. Capital expenditure incurred during the year was:
a) Dwelling for Mr. Chioniso the majority shareholder
And Managing Director of the company 5 500
 b) Plant 15 000
c) Dump Truck 25 000
d) Peugeot 406 (Sedan) 18 000
e) Railway line 5 000
f) Shaft Sinking 10 000
3. Proceeds from the sale of a Peugeot 306 Sedan were $10 thousand. (Original cost
in 2017 was
$14 500 and assume that the deemed cost for passenger motor
vehicles was then $10 thousand
4. The balance of unredeemed capital expenditure as at 31 December 2019 was $108
000
5. The estimated life of the mine as at 31 December 2020 is 19 years
REQUIRED:
Calculate taxable income or assessed loss of the company for the year ended 31 December 2020
using each of the three methods of determining capital redemption allowances. (25 marks)

QUESTION 3 [25 Marks]

Janet and Johnson Moyo are an elderly couple in their late forties and in January
2021 they moved into a town house in Gunhill in respect of which they had
signed a purchase agreement at a price $9 250 000 in December 2020. Although
they had not yet paid the purchase price, they were planning to settle the purchase
price once proceeds from the sale of their previous principal private residence in
Mount Pleasant, Harare, which they had sold in December 2019 for $19 950 000
was released after the determination of their capital gains tax status. The couple
had originally purchased the house in July 2016 for $12 000. The couple had
incurred the following expenses on the Mount Pleasant house:
a) Between January and March 2018, they had erected a stone wall
around the property at a cost of $20 000
b) Between July and November 2019, they had added a
swimming pool, and constructed permanent paving around
the house at a total cost of $50 000
c) In November 2019, they had painted the house to make it
attractive for sale before appointing an estate agent to market the
property. The cost of painting was $30 000
d) The agent’s commission amounted to $68 000
 e) The couple also agreed to pay 50% of the sale legal fees and this
portion amounted to $50 000

The couple has approached you for advice on their capital gains status and
how they can minimize capital gains tax liability, given the above
transactions.

REQUIRED
a) Write a brief report on the tax advice you would give the couple. (10 marks)

b) Compute the minimum tax payable by the couple in relation to the transaction
outlined above for 31 December 2020 (15 marks)