THE STATE

UNIVERSITY OF ZANZIBAR

LECTURER: CPA MASOUD RASHID

COURSE: TAXATION
GROUP NO: 3

S/N Reg no
1 BAF/1/20/021/TZ
2 BAF/1/20/022/TZ
3 BAF/1/20/023/TZ
4 BAF/1/20/024/TZ
5 BAF/1/20/025/TZ
6 BAF/1/20/026/TZ
7 BAF/1/20/027/TZ
8 BAF/1/20/028/TZ
9 BAF/1/20/029/TZ
10 BAF/1/20/030/TZ
EMPLOYEMENT INCOME
QUESTION 2

Mr. Hamnazo is a resident employee of Tatua Company Ltd from 1st January
2004. The following information relates to his affairs:
(i) His monthly receipts include basic salary, transport, lunch and medical
allowances to the tune of TAS 500,000, TAS 425,000, TAS 175,000 and TAS
50,000 respectively.
(ii) Transport allowance of TAS 425,000 for nine people totaled TAS 3,825,000 has
been given to Mr. Hamnazo including each child and his spouse because he
lives more than 45 km from the place of employment.
(iii) Sel driven car of above 3000 cc was given to him for private use.Expenditure on
the car is claimed against taxable income of Tatua Company Ltd.
(iv) Mr. Hamnazo was given an interest free loan of TAS 4,000,000 payable in
two calendar years on monthly installments (assume statutory interest rate of
15% p.a).
(v) Other per month benefits enjoyed by Mr. Hamnazo includes electricity and water
amounted to TAS 300,000 and TAS 240,000 respectively.
REQUIRED:
Calculate the monthly taxable employment income for Mr. Hamnazo.
SOLUTION
CALCULATION OF MONTHLY TAXABLE INCOME
Name of the payee: Mr. Hamnazo
Residential status: Residential individual
Source of income: employment Income
Year of income : 2004
TAS
Monthly Salary 500,000
1,275,00
Transport allowance for 3 people(9-6(425,000))
0
Lunch allowance 175,000
Medical allowance 50,000
Car benefit 125,000
Loan Interest Benefit (15% * 4,000,000)/12 50,000
Water & Electricity 540,000
2,715,00
Taxable Employment Income
0
QUESTION 3
Ms Glory was employed for the first time by Fruto International Ltd, a private
resident company since 1st January, 2005. As a company’s Marketing Manager, Ms
Glory was given a range of responsibilities. She has been resident of the United
Republic of Tanzania solely in the years 2004 and 2005. Her duties are well balanced
by a good package of remuneration which is made up of the following:
(i) Basic salary of Tshs. 800,000 per month and medical service insurance of Tshs. 30,000
per month as per the company’s policy to its employees.
(ii) Mobility allowances for use when on duty trips within her duty
station of Tshs. 100,000 per month coupled with life insurance of Tshs. 50,000 each
month paid directly by the company to the Insurance Company. It is estimated that Ms
Glory is spending only 50% of the mobility allowance for the performance of her
official duties.
(iii) It is the policy of the company to pay all of its employees lunch allowances of Tshs.
2,000 each per day for 22 days each month.
(iv) Travelling allowances for home-office-home trips of Tshs. 100,000 per month.
(v) The company pays school fees and uniforms for its employees as its contribution as per
the National Education Policy. Ms Glory received Tshs. 500,000 which the employer
ensured that the sum is spent according to agreed terms.
(vi) A fully furnished residential quarter where the value of furniture itself amount to Tshs.
2,000,000. The company normally recognizes Tshs. 120,000 per month as expense for the
provision of the house while the market rent of a house of the same status is Tshs. 150,000
per month. The cost of the house to the company was Tshs. 10 million.
(vii) During 2005, Ms Glory travelled to her home country, Uganda, for an annual leave where
she provided consultancy for one month for the following remuneration: Consultancy fees
amounting to Tshs. 40,000 per day for 20 days; Upkeep allowance of Tshs. 200,000 for the
period of consultancy and free accommodation with market value of Tshs. 150,000.
(viii) During her trip to Uganda, the company paid Tshs. 450,000 for her return air ticket, since
the location of the company is Dar es Salaam.
(ix) Ms Glory acquired a car at a cost of Tshs. 6,000,000 which was fully used in the
employment duties.
(x) Ms Glory also received interest from her Banker on fixed deposit account, Tshs.
200,000.
(xi) Retirement contributions are made to the Social Security Fund where the employer
contributes 10% and the employee 10% of the gross monthly salary.
REQUIRED
On the basis of the above information, compute Ms Glory’s taxable income for the year of
income 2005 (assume today is 31st December 2005).
SOLUTION
Computation of employment income
Name of taxpayer: Ms. Glory
Residential Status: Resident Individual
Source of income: Employment Income
Years of income: 2005

Tshs
Annual Basic Salary (800,000 x 12) 9,600,000
Medical service insurance Nil
Mobility allowance (100,000 x 50% x 12) 600,000
Life insurance (50,000 x 12) 600,000
Lunch allowance (2,000 x 22 days x 12) 528,000
Travelling allowance (100,000 x 12) 1,200,000
School fees & Uniforms 500,000
13,028,00
Total gross salary
0
Consultancy fee (Uganda ) Nil
Upkeep allowance (Uganda) Nil
Free accommodation (Uganda) Nil
Trip to Uganda (more than 20 miles) Nil
Interest from NBC (non-final) 200,000
Retirement Contributions by employer’s 1,302,800
(2,400,00
Retirement Contributions
0)
12,130,80
Taxable income before house benefit
0
Housing Benefit (Note 1) 1,800,000
13,930,80
Taxable income
0

Note 1
Computation of house benefit:
The lesser of:
(a) Annual market rental value 1,800,000 (i.e. 150,000 x 12); and
(b) the greater of:
(i) 15% x 12,130,800 = 1,819,620
 (ii) Claims (120,000 x 12) = 1,440,000 ̍
Housing Benefit = 1,800,000.
Note 1:
(as per S.61 (2) of income tax act 2004)
The lesser of the total contribution made or statutory contribution (i.e. 2,400,000 p.a.)
So we first include employer’s contribution, then we less the lesser of total contribution and
statutory contribution.

Total gross cash emoluments 13,028,000

Employer’s contribution (10%) 1,302,800
Employee’s contribution (10%) 1,302,800
Total contribution 2,605,600
QUESTION 4.

(a) Mr. Juakali is a resident employee who is employed by the ABC Co.
Ltd. effective from 1st January, 2004. The facts relating to his employment are
as follows:
(i) Monthly receipts:
Tshs
Basic Salary 1,000,00
Transport Allowance 850,000
Lunch Allowance 350,000
Medical Allowance 100,000
(ii) Mr. Juakali was given residential house free of charge but the Company claimed
expenditure of Tshs. 150,000/=. The rental market value of the house was Tshs.
700,000/= of which Mr. Juakali contributed Tshs. 100,000/= as rent.
(iii) Mr. Juakali was given a new self driven car of above 3000cc that was used for private
use. This car claims expenditure on the maintenance and ownership against taxable
income.
(iv) Mr. Juakali was given an interest free loan of Tshs. 4,000,000/= payable in 24 monthly
installments (assume the statutory interest rate in relation to the calendar year was 12%
p.a.)
(v) Other benefits which were enjoyed by Mr. Juakali included:
Electricity Tshs.
Water Tshs.

Additional information was given as follows:

(i) Transport allowance of Tshs. 850,000/= @ 7 = Tshs. 5,950,000 has been given to Mr.
Juakali including each child and his spouse because he is domiciled more than 45 km
from the place of employment.
(ii) Mr. Juakali was given Tshs. 400,000 cash to be paid as tuition fee to Makerere
University by the IFDA Scholarship where he is enrolled for a Master’s degree course.

REQUIRED:
(i) Calculate the Housing Benefit and Car Benefit enjoyed by Mr. Juakali per month.

(ii) Calculate the monthly taxable income for Mr. Juakali

(iii) Briefly explain the meaning of “employment” in line with the Income Tax Act 2004.
SOLUTION
ii) CALCULATION OF MONTHLY TAXABLE INCOME
Name of the payee: Mr. Juakali
Residential status: Residential individual
Source of income: employment Income
Year of income: 2004
Tshs
Basic salary 1,000,000
Transport allowance for 1 person 850,000
Lunch allowances 350,000
Medical allowances 100,000
Car benefit(Note 2) 125,000
Scholarship fee Nill
Intrest free loan(4,000,000 * 12%)/12 40,000
Electricity and water 270,000
Taxable income before house benefit 2,735,000
House benefit (Note 1) 410,250
TOTAL TAXABLE INCOME 3,145,250

i) Calculation of house benefit:

Note 1
The lesser of:
(c) Monthly market rental value 700,000
(d) the greater of:
(iii) 15% x 2,735,000 = 410,250
(iv) Amount Claims = 150,000
Housing Benefit = 410,250
Note 2
Calculation of car benefit
Above 3000cc = 1,500,000 , Monthly = 1,500,000/12 = 125,000
iii) By virtue of section 3 of the Income Tax Act 2004, employment means:
(a) A position of an individual in an employment of another person,
(b) A position of an individual as a manager of an entity other than as a partner in a
partnership,
(c) A position of an individual entitling the individual to a periodic remuneration in respect
of services performed.
QUESTION 5
From the given information calculate the total taxable income of Mr. Mambo for the
year of Income 200X as stipulated in the Income Tax Act, 2004
(i) Mr. Mambo, resident employee was employed by ZMK Ltd. since 1st
January, 200X as an accountant. He is provided with a house along Mbezi Beach area
whose rental market value was Tshs. 200,000 per month. The Company was claiming
rental expenditure to the Commissioner of Income Tax to the tune of Tshs. 150,000 per
month.
(ii) During the year Mr. Mambo was provided with a brand new private car (3000cc). The
Company was claiming expenditure for the maintenance of the car. The car use was 1/3
official use, and 2/3 private use.
(iii) During the year, the Company advanced Mr. Mambo Tshs. 3,000,000 as a loan payable in
24 equal installments and free of interest (Assume statutory rate of interest is 12% p.a.
charged on total loan).
(iv) The company contributed 15% of Mr. Mambo’s basic salary every month to NSSF
(Approved) at the same time the employee was contributing 5% of his basic salary to
NSSF.
(v) The employer also paid for Mr. Mambo scholarship fees of Tshs.
1,000,000 which was for full time course ending August 200X.
(vi) Mr. Mambo is also holding a part-time marketing consultancy to a private firm
belonging to his mother in law, where he is being paid a monthly salary of Tshs 100,000.
(vii) The term of his service agreement with the Company provided for payment to him, so as
not to work for any competitor after his retirement. In return for this covenant, the
company paid Mr. Mambo Tshs. 1,000,000 in December 200X.
(viii) Mr. Mambo is holding Saving Account with CRDB Bank. On 15th July, 200X, Mr.
Mambo received Tshs 685,000 as interest from his savings account.
(ix) His monthly salary was fixed at Tshs 600,000.
(x) The employer also met the following bills during the year. All these bills were paid
directly to the utility Companies.
 Electricity Tshs 350,000
 Gas Tshs 210,000
 Water Tshs 121,950
SOLUTION
Calculation of employment income
Name of taxpayer: Mr. Mambo
Residential Status: Resident Individual
Source of income: Employment Income
Years of income: 200X
Tshs
Basic salary (600,000 x 12) 7,200,000
Electricity 350,000
Gas 210,000
Water 121,950
Salary from consultancy work (100,000 x 12) 1,200,000
Amount received for accepting restriction 1,000,000
Scholarship fees Nil
Interest from CRDB (Final) Nil
Loan Interest Benefit (Note 1) 360,000
Car Benefit (Note 2) 1,000,000
NSSF (Employer) Nill
NSSF contribution 360,000
Taxable income before house benefit 11,801,950
Housing Benefit (Note 5) 1,800,000
TOTAL TAXABLE INCOME 13,601,950
WORKING
Note 1. Loan Interest Benefit = (12% - 0%) x 3,000,000 = 360,000
Note 2. With 3,000cc, car benefit = 1,500,000 *2/3 private = 1,000,000 taxable
Note 3. NSSF Contribution:
Employer (15%) 1,080,000
Employee (5%) 360,000
Total 1,440,000
Since it is less than the statutory amount of 240,000 all employees contribution of 360,000 is
deductible.
Note 5.House benefit
(i) Market rental = 2,400,000
(ii) 15% of 11,801,950 = 1,770,292.5
(iii) Deduction claimed = 1,800,000
(iv) Higher of (ii) and (iii) = 1,800,000
(v) Lesser of (i) and (iv) = 1,800,000 HB = 1,800,000
DEPRECIATION ALLOWANCES
QUESTION 1
Ms. Hawa commerce a guest house business in January year 2018 with the following assets
i. A guest house building which cost TZS 40,000,000 by year 2017
ii. 25 bed which cost TZS 2,000,000
iii. One ton Toyota pickup that was imported from Dubai in December year 2017 for TZS
9,000,0000
iv. One desktop computer which was purchased for TZS 4,000,000
v. 15 split units air conditioners, costing TZS 6,000,000
vi. 20 year leasehold of land as from January 2018 where the guest house building was
constructed
REQUIRE
Compute the depreciable allowance to be granted to Ms. Hawa for the year 2018
SOLUTION
Tax payer: Ms.hawa
Calculation of depriciable allowance for deepriciable for the year 2018
class 1 3 6 TOTAL
rate 37.50% 12.50% 5% TZS
Guest house     40,000,00 40,000,000
0
25 beds   2,000,000   2,000,000
Toyota pick up 9,000,000     9,000,000
Desktop computer 4,000,000     4,000,000
15 air conditioners   6,000,000   6,000,000
Total cost 13,000,000 8,000,000 40,000,00 61,000,000
0
Depreciation 4,875,000 1,000,000 2,000,000 7,875,000
allowance
TWDV 8,125,000 7,000,000 38,000,00 53,125,000
0
QUESTION 2

1. IFA manufacturing company Ltd. (IMC) is a firm manufacturing 3M trucks, bases and
spare parts. It has been in Tanzania as a branch of the Tuko saw Ltd. of Kenya, for the
past 20 years. IMC has the following classes of depreciable assets pools with their
respective tax written down values as at 1st January 2014:

Class I:TZS 2,550,000 Class II:TZS. 6,000,000 Class III: TZS 2,583,700

2. In July 2013, the company had attended the International trade fair organized by the BET,
which was held at Zanzibar.IMC won the 2nd prize – a Valmet tractor, worth by then TZS.
3,600,000 This tractor was ordered by the government from the Valmet plant in
ZANZIBAR. However, the delivery of the tractor was delayed, pending a price review.

3. Prices were reviewed to TZS. 10 mill per tractor during August 2014. The IMC received
the tractor on 16/8/2014 and used it from the same date. Part of the plant and machinery
was sold for TZS. 3 mill on 3/2/2014. IMC decided to purchase a new aircraft on
3/3/2014 for TZS 50 mill to enable it coordinate with the head office at Mombasa where
its Board of Directors met since 2000 to-date. It also purchased a new ship of 500 tons
for 60 mill/=. Both were used from the same date.

4. A new boiler was purchased for TZS. 600,000 for the glass manufacturing section. A
concrete foundation was constructed for TZS. 300,000 to install the boiler. This was
used from mid-December 2014. On the 15/8/2014, the ship, the market value of which
was estimated at TZS. 20 mill was stolen at ZANZIBAR harbor

5. The company was using tyres manufactured by the General Tyre (EA) Ltd. of Arusha
Tanzania and radiators manufactured by the Afro Cooling Company Ltd. (ACCL) of
ZANZIBAR. Since these major sources of raw materials had financial problems, the IMC
advanced a TZS 6mill loan to the ACCL for purchase of plant and machinery; and TZS.
10mill loan to General Tyre (EA) Ltd. for the purpose of purchasing a lorry to transport
rubber from Iringa rubber farms. Part of the office furniture was soldduring December
2014 for TZS. 1.2 mill While the purchaser took the furniture during the same month,
payment was to be made during March 2015

Required:

Calculate the depreciation allowance that IMC is eligible to claim from TRA according to the
ITA, 2013 as at 31st December 2014
SOLUTION
Tax Payer IFA Manufacture Company Ltd (IMC)
Year of Income: 2014
Computation: Depreciation Allowances
DEPRECIABLE ASSETS DEPRECIABLE ASSETS POOLS
CLASS I (Tshs.) II (Tshs.) III (Tshs.)
RATE – A 37.50% 25% 12.50%
TWDV 1st Jan 2014 2,550,000 6,000,000 2,583,700
Air craft 50,000,000
Ship 60,000,000
Plant and machinery (3,000,000)
Boiler Ship (stolen) (20,000,000)
Office furniture (1,200,000)
DEPRECI. ALLOWANCES
Boiler initial allowance 450,000
(600 + 300)* 50%
TOTAL AMOUNT 2,550,000 23,250,000 172,963
Annual allowance: 956,250 23,352 172,963
,000
TWDV 31st Dec 2014 1,593,750 70,200,000 1,210,738
QUESTION 4.

AYSHA Co .Ltd. commenced a business of assembling computer hardware on 1stMay2017.

The company acquired the following assets from JAMILA CO which was winding

upitsbusinessintheURTon30thApril2017

a) A house, which was used by the JAMILA CO.’s director, for TZS. 15,000,000.This was
converted by AYSHA Co. Ltd. Into a factory building after incurring additional
alterations cost of TZS. 4,500,000

b) Factory building was acquired for TZS. 24 million. One fifth of this building houses the
head office. The office was air-conditioned with air conditioners worth TZS. 2 million.

c) Factory plant and machinery worth TZS. 180 million. The tax written down value
(TWDV) of the machinery was TZS. 60 million in the vendor’s books.

d) Two five-ton Lorries worth TZS. 40 million in total. Their total TWDV was TZS. 32
million and their total book value (BV) was TZS. 28 million.

e) A saloon car costing TZS. 23 million. This car had a nil BV and TWDV in the books of
the vending company. AYSHA Co. Ltd. used the car purely for business purposes.

f) Processors, Data key boards, Printers, which were semi – assembled, were also acquired
for TZS. 20 mill.

g) Office furniture was purchased for TZS. 4.2 million. This asset had a TWDV of TZS.
1,800,000 and accumulated depreciation of TZS. 400,000.

h) Office stationery and some operational guides were also purchased for TZS. 1,900,000

After the commencement of the business, the following transactions took place:

i. OneoftheLorrieswasguttedbyfire.TZS.8millionasinsurance compensation was received from

National Insurance Corporation for the loss.

ii. On1stNovember2017aneight-tontrailerwaspurchaseforTZS.38 million.

 iii. BBAsoldtoAYSHACo.Ltd.agodownbuildingconstructedforTZS.15
millionatTZS.175million. It was used for storage of AYSHA Co .Ltd. finished
productsfrom1stJanuary2018

iv. Theremaininglorrywasexchangedforanewoneon1stMarch2018.

v. AYSHALtd.hadtopayanadditionalTZS.10millionforthenewlorry, the total cost of which

wasTZS.24million.
SOLUTION

Tax Payer: Aysha.Co.Ltd

Year Of Income: 30 Aprl 2017

Computation Depreciation Allowances For Depreciation Asset

CLASSES CLASS 1 CLASS 2 CLASS CLASS 4

3
RATE 37.5% 25% 12.5% 5%
Factory building 15,000,000
Factory alterations 4,500,000
Factory building 24,000,000
Factory P&M 90,000,000
2 lorries P&M 40,000,000
One lorry fire (8,000,000)
Exchange lorry (14,000,000)
Office furniture 4,200,000
Taller 38,000,000
Saloon of factory 15,000,000
Exchange lorry go 175,000,000
down
Board printer 2,000,000
Exchanger 24,000,000
Annual amount 57,000,000 128,000,000 6,200,000 218,500,000
Desperation allowable (21,375,000) (32,000,000 (775,000) (10,925,000)
)
TWDV 35,625,000 96,000,000 5,425,000 207,575,000
Question 5

ZAA lodge limited is a newly formed company, for carrying out hotel and tour business. During
the year zero the company incurred the following capital expense. Year zero projected capital
costs
Description Quantity Total cost TZS.
A. MACHINERY, EQUIPMENT AND FURNITURE
1. General
 Generator 1 6,400,000
 Telephone exchange 1 7,200,000
 Computer 1 3,000,000
2. Hotel and Room
 Office furniture 1 8,000,000
 Bed 72 14,400,000
 Mattresses 72 3,456,000
 TV set 35 16,800,000
 Carpel 36 3,600,000
3. Kitchen
 Fridges and freezers 6 2,880,000
 Equipment* 6 15,008,291
4. Laundry
 Washing machine 1 7,572,667
 Irons 5 100,000
5. Swimming Pool
 Pump 1 800,000
6. Workshop
 Implements - 4,000,000
 Tour Radio 11 10,000,000
B. MOTOR VEHICLE
 Staff bus (capacity 30 seat) 1 28,000,000
 Shopping van 1 16,000,000
 Tour land rovers 10 24,000,000
C. BUILDING
 Brick huts (Purchased Old & used) 10 60,000,000
 Brick Huts (new) 4 48,000,000
 New Restaurant/Kitchen 1 64,000,000
 New swimming Pool-basic construction 1 20,000,000
 New laundry Building 1 10,600,000
 Road construction to Hotel 1 11,000,000

*Cost of equipment include TZS 7,000,000 for cutlery

REQUIRED

Compute the depreciable allowance due to the company for year of income 2018
SOLUTION
BUSINESS INCOME
QUESTION 2
Amina & Khamis Co. ltd registered their business using Tanzania laws and commenced its business on 1 st
February 2002 as a retailer of mixed products in Morogoro Tanzania. The firm has prepared the
following draft accounts for the year ended 31st December 2017

Note TZS TZS “000”

s “000”
Sales 1 770,000
Dividend 2 5,000
Interest income 3 12,000
Bad debts Recovery 4 5,000 792,000
Expenses
Salaries 320,000
Interest Expenses 5 70,000
Rent for the Business office 120,000
Legal and Professional fees 6 20,000
Contribution to the retirement fund 7 15,000
Insurance 8 18,000
Depreciation 9 25,125
Mixed Expense 10 10,000 598,125
Profit for the Year 193,875

Addition notes:

1. All sales are on credit

2. Dividends are the result of the shares held by the partners bought from the Dar es Salaam Stock
Exchange. These were shares of TWCA Cement Company which distributed dividends during the
period.
3. Amina earned TZS. 8,000,000 as interest from its bank deposits and Khamis earned TZS.
4,000,000 from the amount deposited in ABC bank.
4. The amount received as a result of a business effort to collect debts from its receivables.

5. Interest paid to NSSF Pension Fund for late submission TZS. 20,000,000
Finance charge on loan facility not yet obtained TZS. 50,000,000

TZS. 70.000,000

6. Audit fees TZS. 10,000,000

Fee for filling an appeal at Tax Revenue Appeals Tribunal TZS. 10,000,000
TZS. 20,000,000
7. Employers’ contributions TZS. 15,000,000
8. Insurance costs are in respect of cars owned by Amina and Khamis equally for the year.
9. The depreciation amount was calculated from the two saloon cars used in business where at
December 2016 the written down value was TZS. 12,000,000 and also include a brand-new Prado
VX which has been imported in January 2017 for TZS. 30,000,000.
10. Mixed expenses included payment of TZS.2,500,000 and TZS.3,000,000 which have been used
by Amina and Khamis for their medical expenses, respectively, for the year. The balance was for
general consumables used by the business
REQUIRED:

Based on the information available, determine the taxable income for each partner for the year
2017.
 SOLUTION

Amina & Hamisi total taxable income adjustment as at 2017

  TZS “000” TZS “000”

Unadjusted Profit for the year   193,875

less: non business income included    

Dividend (5,000)  
interest from deposit (12,000) (17,000)

Sub total   176,875

add: disallowed expenses    

Depreciation 25,125  
partners salaries 320,000  

interest to NSSF 20,000  

Appeal fee 10,000  

insurance for private car 18,000  

partners medical expenses 5,500 398,625

Sub total   575,500

less: allowable expenses    

Depreciation (12,000,000 + 30,000,000)37.5%   (15,750)

Adjusted taxable income   559,750

Amina & Hamisi income appropriation

  TZS “000” TZS “000”

Taxable income   559,750

Less: Partners income    

salaries 320,000  

insurance 18,000  
medical expense 5,500 (343,500)

Distributable Income   216,250

DETERMINATION OF THE TAXABLE INCOME FOR EACH PARTNER

  AMINA HAMISI

TZS
  TZS "000" "000"
Distributable income 108,125 108,125

salaries 160,000 160,000

medical expenses 2,500 3,000

interest income 8,000 4,000

insurance 9,000 9,000

Taxable income 287,625 284,125