B4 & C4

Q&A: SELECTED QUESTIONS

PREPARED BY NICHOLAUS MASAWE (0784676646)

QUESTION ONE: MS. GLORY -EMPLOYMENT INCOME

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 in the years 2004 and 2005. Her
duties are well balanced by a good package of remuneration which is made up of the following.

 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.
 Mobility allowances for use when on duty trips within her duty stations 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 50% of
the mobility allowance for the performance of her official duties.
 It is the policy of the company to pay all of its employees lunch allowance of Tshs 2000
each day for 22 days each month.
 Travelling allowances for home office home trips of 100,000 per month.
 The company pays school fees and uniforms for its employees as its contribution as per
National Education Policy. Ms. Glory received Tshs 500,000 which the employer
ensured that the sum is spent according to agreed terms.
 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 rent of a house of the same status is Tshs 150,000 per
month. The cost of the house to the company was Tshs 10,000,000,
 During 2005, Mrs. Glory travelled to her home country Uganda for an annual leave
where she provided consultancy for one month for the following remuneration .
 Consultation fee amounting to Tshs 40,000 per day for 20 days.
 Upkeep allowance of Tshs 200,000 for the period of consultancy.
 Free accommodation with the market value of Tshs. 150,000.
 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.
 Ms. Glory acquired a car at a cost of Tshs. 6,000,000 which was fully used in the
employment duties.
 Retirement contributions are made to the social security fund where the employer
contributes 10% and the employee 10% of the basic monthly salary.

REQUIRED

a) On the basis of the above information, compute Ms. Glory’s taxable income for the year
of income 2005. You are also required to justify in brief why each of the item above has
been included or excluded from your computations. (15 Marks)
b) Compute tax payable (5 marks)
 SUGGESTED SOLUTION

a)

Taxable income=Total income

Details Amount Descriptions

Employment income 15,788,000 See the

computations below

Business income Nil There was no

business income

Investment income Nil There was no

investment income

LESS: Contribution to approved (1,920,000) See W3

retirement fund as per S.11

TOTAL INCOME (which is taxable 13,868,000

income)
 Ms Glory’s Employment Income

Details Amount Narration

Basic salary 9,600,000 Earned from her employment

Medical service insurance Nil Since the benefit is available on a non-

discriminatory basis (available to all employees, it
is excluded benefits. Excluding this payment
assumed that the amount/benefit covers for not
more than herself, her spouse and maximum of
their four children (S.7(3)(c)

Mobility allowance (50%) 600,000 It is assumed that she was NOT required to
account for unspent amount.

Life insurance 600,000 Earned from her employment

Lunch allowance 528,000 Earned from her employment and the amount is
not in the list of what to exclude. Note that, a
service is not the same as allowance

Travelling allowance 1,200,000 Travelling allowance is EXCLUDED from E.I if

received by a government employee. Since Ms.
Glory’s employer was not the government, the
benefit is taxable

Scholarship 500,000 According to the second schedule of ITA, 2004,

scholarship is exempted from tax if it is paid for a
full time programme. It is appropriate to assume
that Ms. Glory was not enrolled on a full-time
basis because while she was undertaking her
studies, she was also in her employment, this is
supported by the facts that she was being paid
other allowances which are connected to
discharge of her employment duties. Therefore,
the amount is taxable despite the fact that the
amount was spent according to the agreed terms

Consultation fee from Nil It would be appropriate to include this in the

Uganda computation of her Business income. But in
either way, the amount is not taxable because
ms. Glory has to be taxed on the income derived
in URT. This is despite the fact that Ms. Glory is a
resident individual in 2015. But S.6(2) restrict the
application of a worldwide concept for resident
individual who has been a resident for not more
 than 2 years

Up keep allowance Nil Refer the above explanation (narration related to

consultation fee from Uganda)

Free accommodation Nil Refer the above explanation (narration related to

consultation fee from Uganda)

Air ticket Nil The amount is excluded in the computation of E.I

since Uganda is more than 20 miles from DSM.

In addition, it is assumed that the amount was not

intended to cover for more than herself, her
husband and maximum of their four children and
that the amount corresponds to actual travelling
cost

Motor vehicle Benefit Nil Not taxable since the motor vehicle was not
provided by her employer

Retirement 960,000 Although some retirement benefits (those

benefits(10%*9.6m) exempted as per public retirement Act, 1999) are
not taxable, the one related to Ms. Glory is
taxable since her employer is not the government

Employment income before 13,988,000

Housing benefits

Housing benefits 1,800,000 (W1)

Employment income 15,788,000

W1: Housing benefits

According to S. 27 of ITA, 2004, housing benefits is the lower of A and B (reduced by rent paid,
if any)

A Rental market value after taking into account period of occupation and 1,800,000
part area occupied (150k*12 months)
B The higher of 1,810,200
i) 15% of total income before HB (w2) 1,810,200
(15%*12,068,000)
ii) Amount claimed 1,440,000
THEREFORE, HB 1,800,000
LESS: Rent paid by ms. Glory Nil
NET HOUSING BENEFITS TO BE INCLUDED IN HER E.I 1,800,000
W2: Total income before Housing benefit
Employment income before housing 13,988,000
benefits
Business income Nil
Investment income Nil
Less: Contribution to approved retirement 1,920,000
fund as per S. 61(w3)
Total income before Housing benefit 12,068,000

W3: Contribution to approved retirement fund as per S.61

S61 addresses two questions
1. When to deduct (Deduct only if the contribution was included in the computation of E.I)
2. How much to deduct (Lower of actual contribution and statutory contribution).
According to Income tax regulations, 2005, statutory contribution = TZS. 2,400,000
Actual contribution (employee and employer contributions (960k*2) =1,920,000
Therefore, the amount to be deducted=1,920,000

b) Tax payable
Since Ms. Glory is a resident individual who has total income from Tanzania Mainland,
the following schedule will be used to determine her tax liability (This schedule is
normally provided in the examination). The table has been amended to take into account
tax changes made in July 2020 by the government

S/N TOTAL INCOME (PER ANNUM) RATE PAYABLE

Where total income does not exceed
1 Tshs.3,240,000 Nil
Where total income exceeds Tshs.
3,240,000 but does not exceed 9% of the amount in excess of
2 Tshs.6,240,000 Tsh. 3,240000
 Where total income exceeds Tshs.270,000 Plus 20% of the
Tshs.6,240,000 but does not exceed amount in excess of
3 Tshs.9,120,000 Tshs.6,240,000
Where total income exceeds Tshs.846,000 Plus 25% of the
Tshs.9,120,000 but does not exceed amount in excess of Tshs.
4 Tshs.12,000,000 9,120,000
Tshs.1,566,000 plus 30% of
Where total income exceeds the amount in excess of
5 Tshs.12,000,000 12,000,000

Since her income exceeds TZS. 12,000,000, she is obliged to pay Tshs.1,566,000 plus
30% of the amount in excess of 12,000,000
1,566,000+ 30% (13,868,000-12,000,000) = 2,126,400

QUESTION THIRTEEN: NBAA MAY 2016 (C4)

Professor SRINIVAS MADISHETI is a Professor of Accounting and Marketing and head of the
Research and Publication Committee of the School of Business of ABCD University. The
University has a housing scheme, under which it provides accommodation to its staffs who then
suffer an 8% deduction on their salaries as rent. The following information is also available:
a) Professor Srinivas was employed under expatriate terms which provided for among
other things a salary of TZS.8,000,000 per month, but was increased at the rate of 5%
after every four months. He is given a free house, the market rental for this house is
estimated at TZS.T400,000 per month. The total bills of this house for the year 2014
(electricity, telephone and water) was TZS. 1,500,000.
b) He was appointed by the Centre for the promotion of exports from developing countries
to carry out a market survey in Tanzania on the market for developed countries and
products for exports to Europe. He was being paid the full costs of the study and an
additional fee of TZS. 15,000,000. This study was carried out during the months of
March and April, 2014.
c) On a part time basis, he was offering consultancy services to Morogoro Business and
Management Consultants firm. For this, he was being paid TZS.300.000 per hour.
During. 2014 he spent 60 hours with the firm.
d) His birthday coincided with Easter festivals, 2014. During the 2014 Easter celebrations,
the University awarded him a birthday present worth TZS.920,000. In addition, another
present was given to him by his fellow workers. This was valued at TZS.840.000.
e) He was required to appear in the quarterly meetings of the University Senate. The
University paid him 10% of his salary for attendance of each of such meetings. During
2014. he attended all such meetings held while he was still in employment.
f) A distribution of surplus made from short courses of a consultancy carried out at the
University during 2014 was made in May 2014 to all the workers. Professor Srinivas
received TZS.6.000.000 from this distribution during 2014.
g) He was provided with a car (2500cc) which was wholly used for domestic purposes by
his wife. This car was purchased by the University for TZS.20.000.000 in year 2010
h) As part of the contract of employment, the employer was required to contribute an
amount equivalent to 15% of his salary per month to a private pension scheme
established in INDIA. The scheme was not approved by the Commissioner. This was
paid by the university for the months from June to
December. 2014 only.
i) He received interest from the CBN Bank of TZS.5,000.000 and a dividend from
a local company of TZS.3.500.000. No withholding tax was deducted at source.
j) Upon completion of his contract, the University met the expenses of TZS.4 million for
transporting him and his belongings back home to India.

REQUIRED:
Calculate the employment income, business income, investment income and total taxable
income of Professor Srinivas for the year of income 2014. (20 marks)
QUESTION THREE
Joshua Masunga has been working for Arusha Co. Ltd since 2010. The following information
are available for the year ended 31 December 2015: Employment income and benefits:
i) Salary of TZS 28.000.000 per annum. In addition, Joshua received a bonus of 10%
of his annual salary on 30lh November 2015.
ii) Fringe benefits of TZS. 10,000,000 being accommodation allowance of
TZS.4.000.000, representation allowance of TZS.
3,000,000. fuel allowance of TZS.l.000,000 and school fees allowance of
TZS.2,000.000 for his minor children.
iii) The standard relocation allowance of TZS.50,000 when he was transferred to Dar es
Salaam in October 2015.
iv) A loan of TZS. 15.000,000 received from his employer on P August 2015 who
charged him 12%, and the loan is payable
after 3 years. The statutory rate for the year ended 31st December 2015 was 8%
per annum.
v) Use of an employer allocated vehicle with an engine capacity of 3,200cc for official
purpose.

Deduction from Joshua's salary

 Pension contributions amounting to 10% of his salary.
 National Health Insurance contributions of 3% of his salary.

Other Income
 Business Income was TZS 30,000,000
RQUIRED:
Calculate taxable employment income and tax payable by Joshua for the year ending 31st
December 2015