Paper F6 (ZWE)

Fundamentals Level – Skills Module

Taxation
(Zimbabwe)
Specimen questions for June 2015

Time allowed
This is and
Reading notplanning:
a full specimen
15 minutes paper, it is a selection of
specimen
Writing: questions to3 hours
give an indication of the style of the
questions. It includes three multiple choice questions and
This paper is divided into two sections:
one long question.
Section A – ALL 15 questions are compulsory and MUST be
attempted
The full exam will consist of the following:
Section B – ALL SIX questions are compulsory and MUST be
Section A – 15 multiple choice questions for 2 marks each
attempted
Section B – Four 10 mark questions and two 15 mark
Rates of tax and tables are printed on pages 2–4.
questions
Do NOT
All open this
questions arepaper until instructed by the supervisor.
compulsory.
During reading and planning time only the question paper may
be see
To annotated. You must
an example of NOT writespecimen
the full in your answer
exam,booklet
pleaseuntil
refer to
instructed by the supervisor.
the F6 (UK) Specimen Paper.
This question paper must not be removed from the examination hall.

The Association of Chartered Certified Accountants

SUPPLEMENTARY INSTRUCTIONS

1. Calculations and workings need only be made to the nearest US$1, unless directed otherwise.
2. All apportionments should be made to the nearest month.
3. All workings should be shown in Section B.

TAX RATES AND ALLOWANCES

The following tax rates and allowances are to be used when answering the questions.

Tax rates – Individuals employment income

Year ended 31 December 2014
Taxable Rate Amount Cumulative income
income band of tax within band tax liability
US$ % US$ US$
Up to 3 000 0 3 000 0
3 001 to 12 000 20 9 000 1 800
12 001 to 24 000 25 12 000 4 800
24 001 to 60 000 30 36 000 15 600
60 001 to 90 000 35 30 000 26 100
90 001 to 120 000 40 30 000 38 100
120 001 to 240 000 45 120 000 92 100
240 001 and over 50

NB. The AIDS levy of 3% is chargeable on income tax payable, after deducting credits.

Allowable deductions year ended 31 December 2014

Pension fund contribution ceilings
US$
(a) In relation to employers: in respect of each member 5 400
(b) In relation to employees: by each member of a pension fund 5 400
(c) In relation to each contributor to a retirement annuity fund or funds 2 700
(d) National Social Security contributions (on a maximum monthly gross
salary of US$700) 3·5% of gross salary
Aggregate maximum contributions to all the above per employee per year US$5 400

Credits year ended 31 December 2014

US$
Disabled/blind person 900*
Elderly person (55 years and over) 900*
Medical aid society contributions 50%
Medical expenses 50%
* The amount is reduced proportionately if the period of assessment is less than a full tax year.

Deemed benefits year ended 31 December 2014

Motor vehicles
Engine capacity: US$
Up to 1500cc 3 600
1501 to 2000cc 4 800
2001 to 3000cc 7 200
3001 and above 9 600

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 Loans
The deemed benefit per annum is calculated at a rate of LIBOR +5% of the loan amount
advanced.

Value added tax (VAT)

Standard rate 15%

Capital allowances
%
Special initial allowance (SIA) 25
Accelerated wear and tear 25

Wear and tear:

Industrial buildings 5
Farm buildings 5
Commercial buildings 2·5

Motor vehicles 20
Movable assets in general 10

Tax rates – Other than employment income

Year ended 31 December 2014
%
Companies
Income tax: Basic rate 25
AIDS levy 3

Individuals
Income tax: Income from trade or investment 25
AIDS levy 3

3 [P.T.O.
 Capital gains tax
Immovable property and unlisted marketable securities acquired
after 1 February 2009 20% of gain
Immovable property and unlisted securities acquired
prior to 1 February 2009 5% of gross proceeds
Disposal of listed marketable securities 1% of gross proceeds
On principal private residence where the seller is over 55 years 0%
Inflation allowance 2·5%

Capital gains withholding tax on sale proceeds %

Immovable property 15
Marketable securities (listed) 1
Marketable securities (unlisted) 5
Note: Other than the withholding tax on listed marketable securities, the
withholding tax is not final on the seller. The actual liability is assessed in terms
of the Capital Gains Tax Act.

Withholding taxes %
On dividends distributed by a Zimbabwean resident company to resident shareholders
other than companies and to non-resident shareholders:
By a company listed on the Zimbabwe Stock Exchange 10
By any other company 15
Informal traders 10
Foreign dividends 20
Non-executive director’s fees 20
Contracts (ITF 263) 10

Non-residents’ tax %
On interest nil
On certain fees and remittances 15
On royalties 15

Residents’ tax on interest %

From building societies 15
From other financial institutions (including discounted securities) 15

Elderly taxpayers (55 years and over)

Exemptions from income tax year ended 31 December 2014
US$
Rental income 3 000
Interest on deposits with a financial institution 3 000
Interest on discounted instruments 3 000
Income from the sale or disposal of marketable securities 1 800
Pension No limit

Income from the sale or disposal of a principal private residence is exempt.

Benefit derived from the acquisition of a passenger motor vehicle from an employer is exempt.

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Section A – ALL 15 questions are compulsory and MUST be attempted
Note: Only three specimen questions provided. For full specimen exam, see F6 (UK) Specimen paper

Please use the grid provided on page two of the Candidate Answer Booklet to record your answers to each multiple
choice question. Do not write out the answers to the MCQs on the lined pages of the answer booklet.
Each question is worth 2 marks.

1 Elite Software Developers (Private) Limited employs three permanent employees earning US$500, US$700 and
US$900 each per month.

What is the total amount of National Social Security Authority (NSSA) contributions payable by Elite Software
Developers (Private) Limited for the year ended 31 December 2014?
A US$5 400
B US$67
C US$798
D US$882

2 Matt, who is 30 years old, received the following items of income during the year ended 31 December 2014.
(1) Net rental income from a garden flat in Durban, South Africa
(2) Proceeds from the sale of household effects
(3) Net rental income from a holiday resort lodge in Nyanga, Zimbabwe
(4) Gain on the disposal of unlisted marketable securities (acquired on 2 May 2009)

Which of the items of income may result in a charge to tax on Matt?

A 1, 2, 3 and 4
B 3 and 4 only
C 1 and 4 only
D 1 and 3 only

3 Ray is a registered operator for value added tax (VAT) purposes under category C.
The following are Ray’s VAT-inclusive sales and purchases for the month of August 2014:
US$
Sales for month 350 000
Sales returns (14 500)
––––––––
335 500
––––––––
Purchases (120 000)
––––––––
215 500
––––––––

What is the amount of VAT payable by Ray for the month of August 2014?
A US$34 500
B US$32 325
C US$30 000
D US$28 109

5 [P.T.O.
Section B – ALL SIX questions are compulsory and MUST be attempted
Note: Only one specimen question provided. For full specimen exam, see F6 (UK) Specimen paper

Please write your answers to all parts of these questions on the lined pages within the Candidate Answer Booklet.

1 Just Toys (Private) Limited (JT) commenced business operations in the retail of an assortment of toys in Zimbabwe
in 2013. The following is JT’s statement of profit or loss for the year ended 31 December 2014:
Note US$ US$
Turnover 1 960 000
Less: Cost of sales (980 000)
––––––––––
Gross profit 980 000
Other operating income 1 45 000
Administrative expenses:
Staff costs 2 (220 000)
Repairs and maintenance 3 (135 000)
Motor vehicle expenses 4 (104 000)
Office expenses 5 (182 000)
Donations 6 (23 000)
Finance costs (165 000) (829 000)
–––––––– ––––––––––
Net profit for the year 196 000
––––––––––
––––––––––
Notes
1 Other operating income included:
US$
Bank interest received 6 000
VAT refund 10 000
2 Staff costs:
Included in the staff costs is US$32 200 representing the payment by JT of US$10 733 towards the pension
contributions of each of the three senior managers.
3 Repairs and maintenance comprised:
US$
Replacement of faulty electrical installations at shop 76 500
Paving around the shop 53 200
Computer repairs 5 300
––––––––
135 000
––––––––
––––––––
4 Motor vehicles expenses comprised:
US$
Fuel and maintenance costs 28 000
Two passenger vehicles procured under a hire purchase agreement 62 500
Traffic fine 1 200
Insurance and licensing costs 12 300
––––––––
104 000
––––––––
––––––––

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5 Office expenses included:
US$
Outsourcing of payroll function 15 000
Fit and supply contract for the shop kitchen 29 000
Utility payments 27 700
Depreciation 37 000
Rental expenses 58 000
Interim audit fees 12 000
6 Donations comprised:
US$
Mayor’s Christmas fund 5 000
Ministry of Health for Harare Hospital Pediatrics’ unit 13 000
Local church 5 000
–––––––
23 000
–––––––
–––––––
Additional information
JT does not have a formal tax policy on non-current assets and has made no elections in respect of special initial
allowances (SIA). The following were the assets acquired and brought into use on commencement of business
operations during the year ended 31 December 2013:
Cost
US$
Commercial vehicles 53 000
Furniture and fittings 80 000
––––––––
133 000
––––––––
––––––––
In addition, JT acquired a business building for US$70 000 and converted it into a shop during the year ended
31 December 2013.

Required:
Calculate the taxable income and respective tax payable by JT for the year ended 31 December 2014.
Note: Your computation should also list all of the items referred to in the notes 1 to 6, indicating with the use of
a zero (0) any items which do not require adjustment.

(15 marks)

7 [P.T.O.
Answers
Fundamentals Level – Skills Module, Paper F6 (ZWE) Specimen Answers
Taxation (Zimbabwe) and Marking Scheme

Section A

1 C
The NSSA contributions payable by an employer are restricted to 3·5% of the gross monthly salary up to a
maximum amount of US$700 per employee per month.
(US$500 + US$700 + US$700) x 12 x 3·5% = US$798

2 B

3 D
US$
Output VAT
Sales (15/115 x 350 000) 45 652
Sales returns (15/115 x 14 500) (1 891)
Input VAT
Purchases (15/115 x 120 000) (15 652)
–––––––
28 109
–––––––

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Section B Marks

1 Taxable income and tax payable for the year ended 31 December 2014
US$
Net profit for the year 196 000 ½
Add:
Pension contributions – three employees (32 200 – (5 400 x 3)) 16 000 ½
Replacement of faulty electrics 0 ½
Paving around a shop 53 200 ½
Computer repairs 0 ½
Fuel and maintenance costs 0 ½
Passenger vehicle procurement 62 500 ½
Traffic fine 1 200 ½
Insurance and licensing costs 0 ½
Outsourcing of payroll function 0 ½
Fit and supply contract 29 000 ½
Utility payments 0 ½
Depreciation 37 000 ½
Rental expenses 0 ½
Interim audit fees 0 ½
Donations: Mayor’s Christmas fund 0 ½
Ministry of Health 0 ½
Local church 5 000 ½
Less:
Bank interest received (6 000) ½
VAT refund (10 000) ½
Capital allowances:
Shop paving (2·5% x 53 200) (1 330) ½
Passenger motor vehicle (20% x 10 000 x 2) (4 000) ½
Shop kitchen fittings (10% x 29 000) (2 900) ½
Commercial vehicles (20% x 42 400) (working) (8 480) 1
Furniture and fittings (10% x 72 000) (working) (7 200) 1
Shop building (2·5% x 70 000) (1 750) ½
––––––––
Taxable income 358 240
––––––––
––––––––
Corporate tax at 25% 89 560 ½
3% AIDs levy 2 687 ½
––––––––
Tax payable 92 247
––––––––
–––––––– –––
15
–––
Working:
Capital allowances – reducing balance
Year ended 31 December 2013 Wear and tear Income tax value
US$ US$
Commercial vehicles (20% x 53 000) 10 600 42 400
Furniture and fittings (10% x 80 000) 8 000 72 000

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