INCLASS TEST 2 -45 MINUTES
(a) Murimi Wanhasi (Pvt) Ltd is a Zimbabwe registered company that is in the business of
selling a wide range of agricultural equipment in Zimbabwe. It also exports some equipment
to Botswana and Namibia. The company is registered for VAT under category C. It only
makes taxable supplies of goods. The company is seeking your advice on the income tax and
VAT implications of the following transactions.
(i) The company imported a Ford Ranger (single cab) 2,700cc from Singapore on 1 June
2022 for use by its Finance Manager. The vehicle is used for business and private purposes.
The vehicle's landing cost in Zimbabwe was $40,000,000. During the month of December,
the company incurred the following expenses in respect of the vehicle:
ZWL$
Insurance and licensing
2,520,000
Fuel
970,000
New bull bar and anti-roll bars
1,500,000
(ii) During the tax period, the following entertainment, subsistence and related expenses
were incurred:
Staff teas and lunches
500,000
Golf Club subscriptions for the managing director
1,300,000
Hotel costs incurred by the managing director while out of town on business
1,000,000
Subsistence allowance to 2 sales men who went out of town on business
900,000
Required:
Write a memo to advise Eve on how each of the above transactions must be treated for VAT
and Income Tax purposes. All amounts (where appropriate) include VAT. Show relevant
calculations where necessary.
(18 marks)
(b)
In February 2022 Ngorima Ltd made a decision to acquire new office premises in the
Newlands suburb of Harare. In order to fund the acquisition Ngorima decided to sell the
office building in Southerton which they had been using. The Southerton office building was
acquired in May 2020 for a purchase price of ZWL$1,300,000 and had been brought into use
during the same year. The building was sold for ZWL$2,100,000 to an unconnected person
and part of the proceeds were used to acquire the new building in Newlands for an amount of
ZWL$1,500,000. Max claimed maximum possible capital allowances on the Southerton
Office premises.
Required:
Outline, with supporting calculations, the capital gains tax implications for Ngorima Ltd.
(7 marks)
[Total: 25 marks]