QUESTION 1

(a) You work in the tax department in a firm of accountants. You have received a few queries from clients of the firm as follows-

(i) Dan Company Limited rents its premises from Mr Jones. The manager of the company, Mr Paul wants to know whether the company must deduct any tax at source. He also wants to know when the tax, if any must be paid to the Mauritius Revenue. Authority and the fines and penalties for late payments

(ii) Mr Subash lives in the UK. He does not receive any emoluments in Mauritius. He spends around one month vacation in Mauritius annually and during a recent visit in Mauritius, he bought a house in February 2009 in Rose Hill. He plans to rent the house in the future. He wants to know the rules as to whether he shall be considered as resident in Mauritius and if he will be liable to any tax in Mauritius

Required

Provide a clear explanation to each of the queries raised at (i) and (ii) above

(b) Bin Ltd's Profit & Loss account for the year ended 31 December 2007 is as follows

Required-

Prepare the company's income tax computation for the year of assessment 2008/2009 given that the company is entitled to an annual allowance of Rs300,000

QUESTION 3

A company has employed Mr Sinha for many years. He receives a basic monthly salary of Rs70,000. He is also entitled to an end of year bonus of one-month salary. Mr Sinha is provided with a company car, which he uses to attend duty. It was established that his private mileage is 15% of the total mileage. The car of a cylinder capacity of 1,500 Cc, cost Rs600,000 inclusive of registration duties

Under the term of his contract, Mr Sinha is also provided with a fully furnished house which is owned by his company. On 1st December 2008, Mr Sinha took a seven year loan of Rs500,000 from his company. The loan was granted at an interest rate of 5% while the outside borrowing rate was 12%. The loan was used partly to buy a house located on a plot of land of 12 perches(i.e. 506.5 sq metres). He paid rates amounting to Rs1,560 on 31st January 2009. Mr Sinha has two children. He has a son who is following a full-time course at the University of Technology, and a daughter at college. Mr.Sinha has some fixed deposits on which he received interest of Rs212,500 net of tax for the year to 30th June 2009. Interests earned by his wife was Rs25,000 gross and his children earned Rs22,000 gross. During the year to 30th June 2009, Mr Sinha bought shares from a listed company, from which he received dividends of Rs8,000. Mr Sinha received a refund of Rs35,000 gross for sick leave not taken. He also received a net income of Rs63,750 from part-time lecturing in two equal installments from another employer. The amount of tax deducted under the PAYE system was Rs6,300 per month, apart from the month of December 2008 when it was Rs12,700 and February 2009 when it was Rs11,000. He has not kept a record of the amount of PAYE deducted from his part-time lecturing

Mr Sinha is a partner in Smith and Associates, which expects to make a tax adjusted profit of Rs450,000 for the year to 30th June 2009. Mr Sinha is entitled to 30% of the profit. Mr Sinha wife works as an administrative officer, earning Rs20,000 month

Required

Calculate the tax liability of Mr Sinha for the year ended 30th June 2009

QUESTION 4

(a) The concept of permanent establishment (PE) connotes extension of business activity in another jurisdiction and underlines that a country has a right, under international taxation laws, to tax a foreign enterprise if the enterprise has a PE within that country. Both the OECD Model Convention and the UN Model convention include three types of PE

Required

(i) List the three types of PE

(ii) For each type, give a brief description indicating also the conditions that must be satisfied in order to constitute a PE

(b) Big Boss Corporation Ltd, an Indian company engaged in the construction of buildings has been awarded a contract by the Government of Mauritius to erect a cultural centre at Triolet. The construction will last for a period of 12 months

Required

(i) Will the Indian company be assessable to Mauritius income tax? If so, on what profits and at what rate?

(ii) As regards the personnel of the Indian company involved in the construction, will they be subject to Mauritius income tax?
Give reasons for your answers

(c) A Mauritian resident company received royalties of Rs 9 million (net after foreign tax) from a foreign country during the income year 2007/2008. No double tax treaty exists between Mauritius and the foreign country and the royalties have been subject to income tax at source at the rate of 12%

Required

Calculate the amount of income tax that is payable by the Mauritian company to the Mauritius Revenue Authority (MRA) on the royalties assuming that the company has no expenditure that can be deducted against the royalties

(d) During the income year 2007/2008 a Mauritian resident received dividends from overseas as follows

From Australia Rs 880,000 (net after Australian tax @ 12%)
From New Zealand Rs 450,000 (net after New Zealand tax @ 10%)

Required

Calculate the amount of Mauritius income tax which is payable on the foreign dividends given that the Mauritian resident has already deducted all his allowable deductions against his Mauritian source income

(e) Would your answer to the question set out in part (d) above be different if the rate of income tax in New Zealand was 20% instead of 10%? If so, by how much would the Mauritius tax liability differ?

QUESTION 5

(a) Distinguish between exemption and zero-rating for VAT purposes

(b) Give four examples of transactions normally-

(i) Zero-rated

(ii) Exempt from VAT

(c) Why is it important for a business to register for VAT?

(d) Registration under the VAT Act brings with it both duties and rights for the persons concerned. List some of the duties and the most important right

(e) Allan has been the owner of a hardware shop for a number of years. He has not previously registered for VAT as his turnover has consistently been below the minimum criteria. However, he now feels that he should register and seeks your advice. Turnover since January 2008 has been as indicated below-

Required:

Provide suitable advice to Allan

(f) A VAT registered trader is engaged in the sale of computer hardware and software. The following supplies are made to him in a particular month, by VAT registered suppliers

Required

Calculate the allowable input tax