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    MPL Answer

    Uploaded by

    Coty Mothebe

    Copyright:

    © All Rights Reserved
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    MPL Answer

    Uploaded by

    Coty Mothebe
    7 views2 pages

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    © All Rights Reserved
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    7 views2 pages

    MPL Answer

    Uploaded by

    Coty Mothebe

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    Marks

    6 Corporation tax – MPL

    (a) Corporation tax payable by MPL for the year ended 31 March 2020
    Manufacturing Other
    M M
    Revenue
    Business manufacturing income 500,300 ½
    Non-resident dividends (50,200 + 21,514) 71,714 1
    –––––––– –––––––
    Gross income 500,300 71,714
    Less: Operating expenses (W1) (482,240) 0
    –––––––– –––––––
    Chargeable income 18,060 71,714
    –––––––– –––––––
    Corporation tax payable
    Manufacturing income at 10% 1,806 ½
    Non-manufacturing income at 25% 17,929 ½
    –––––––
    19,735
    Less: Foreign tax credit (W2) (15,777)
    –––––––
    Net tax payable 3,958
    –––––––
    Workings
    1. Operating expenses
    M
    Operating expenses 663,300
    Less: Disallowed expenses
    Start-up costs (140,000) ½
    Market research (36,600) ½
    Capital expenditure (38,700) ½
    ––––––––
    448,000
    Add: Additional deductions available
    25% uplift for approved training ((75,200 – 68,300) x 25%) 1,725 1
    Amortised start-up costs (140,000 x 20%) 28,000 1
    Depreciation allowance (38,700 x 20% x 7/12) 4,515 1
    ––––––––
    482,240
    ––––––––
    Note: Alternatively, a mark will also be awarded for a four-year write off on amortisation of start-up costs.
    2. Foreign tax credit
    M
    Foreign tax suffered 21,514
    –––––––
    Average Lesotho rate 19,731/(18,020 + 71,714) 22% 1
    Foreign tax credit restricted to (71,714 x 22%) 15,777 1
    ––––––– –––
    9
    –––

    (b) Withholding tax


    M
    (i) Royalty payments for:
    – Use of technology (40,000 x 10%) 4,000 1
    – Trade name (20,000 x 25%) 5,000 1
    –––––––
    9,000
    (ii) Operating lease payments (35,000 x 10%) 3,500 1
    –––––––
    12,500
    ––––––– –––
    3
    –––

    8
    Marks
    (c) Income instalments
    M
    Tax liability for previous year (as in (a) above) 19,735
    Less: Foreign tax credit (15,777)
    –––––––
    3,958 ½
    –––––––
    Each instalment (3,958 x 30%) 1,187 ½
    Total instalments (1,187 x 3) 3,561 ½
    Due dates for each instalment:
    First instalment 30 September 2021 ½
    Second instalment 31 December 2021 ½
    Third instalment 31 March 2022 ½
    –––
    3
    –––
    15
    –––

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