Alli and Co Partnership Example Alli & Co. is carrying on the business of manufacturing furniture since 1/1/1998.

The business consists of 3 partners: Mr. Alli, Bakari and Challe whose profit/ loss sharing ratio in business are 45%, 40% and 15% respectively. The following is the audited profit and loss account for the year ended 31/12/2008. Alli & Co Income Statement for the Period 1/1/2008- 31/12/2008 [Figures in TZS]
Gross Profit Less: Expenses Salaries Commission Interest on capital Interest on loan Rent and Electricity Reserve for annuity Bad debt reserve Loss on sale of a machinery Depreciation Income Tax General establishment charges Total Expenses Profit for the year 14,000,000 1,500,000 560,000 680,000 520,000 720,000 480,000 240,000 400,000 1,800,000 300,000 2,800,000 10,000,000 4,000,000

After examining the accounts the following information is collected by the commissioner; A] Salaries include the following
i] Alli ii] Bakari iii] Challe iv] Mrs Alli

360,000 240,000 180,000 480,000 (secretary)

B] Commission includes the following payments to partners:

100,000

ii] Bakari 40,000

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iii] Challe 180,000

C] Interest on Capital includes the following payments to partners:

D] Interest on loan includes the following payments to partners:

iii] Challe Nil

paid to the landlord of the shop for the structural alterations made to the shop by him in April, 2008. The rent was not increased by the landlord after this alteration.
F] The loss on machinery of 400,000 to class 2 machinery is due to its being

sold for shs 600,000/= on 21/6/2008 as per the book of accounts of shs 1,000,000. G] General and establishment charges include the following
i] Donation to the church 300,000/=

ii] Annual subscriptions to BRC chamber of commerce

case 20,000/=
vii] Motor car running expenses 720,000/= 1/3 is for private use

NOTE: the depreciation allowance were computed as per ITA 2004 Required:

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For the year of income 2008 compute i] The partnership total income for tax purposes ii] Income of each individual partner iii] Tax liability of each individual partner

Individual Income Tax rates Monthly Income Where total income does not exceed TZS. 135,000/Where total income exceeds TZS. 135,000/= but does not exceed TZS. 360,000/Tax Rate NIL 14% of the amount in excess of TZS. 135,000/-

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Where total income exceeds TZS. 360,000/- but does not exceed TZS. 540,000./Where total income exceeds TZS. 540,000/- but does not exceed TZS. 720,000/Where total income exceeds TZS. 720,000/-

TZS 31,500/- plus 20% of the amount in excess of TZS. 360,000/TZS 67,500/- plus 25% of the amount in excess of TZS. 540,000/TZS 112,500/- plus 30% of the amount in excess of TZS. 720,000/-

Threshold per annum: Income Shs. 1,620,000/Note: 1. For non-resident employees of a resident employer the income is subject to withholding tax at the rate of 15%. However the total income of a non-resident individual is charged at the rate of 20%.

2. An employee who makes donation as per section 12 of Education Fund Act of 2001, such donation is exempted from tax. However such exemption is granted upon approval by the Commissioner.
BUSINESS INCOME ILLUSTRATION: KIGONGO COMPANY LIMITED Kigongo Company Limited was incorporated in Tanzania and commenced its business on 1st February 2008 as a retailer of audio- visual products in Tanzania. It has drawn up its first accounts to 31st December 2008, the draft of which together with the additional information was as follows:

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Sales Dividends Interest income Contract penalties Expenses Directors fees Salaries Interest expenses Rent and Rates Legal and professional fees Contributions and retirement fund Depreciation Traveling and entertainment Provisions Insurance Sundries Loss for the year

Notes 1 2 3 4 5 6 7 8 9 10 11

TZS 000 950,000 5,000 12,000 5,000 320,000 300,000 80,000 220,000 20,000 15,000 120,000 22,000 28,000 18,000 10,000

TZS 000

972,000

1,153,000 (186,000)

Additional notes: 1. Sales figure includes Tshs 1 m for sale of furniture, which was used by the company. 2. The company had bought some shares from city stock exchange. These were share of Sungura Cement Company which distributed dividends during the period. 3. The company earned Tshs 8m as interest from its bank deposits and another Tshs 4m from director to whom the company had extended a person loan. The Director used the loan to acquire a building in Kenya. 4. The amount was received as a result of business contract which the other party breached it. 5. Directors fee were paid to the following persons: Mr. A Tshs 200m Mrs A (wife of Mr. A) Mr B (Brother of Mr. A) 320m 50m 70m

6. Interest paid to bank on overdraft Finance charge on hire purchase Interest on failure to pay previous years VAT 80m

Tshs 20m 50m 10m

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7. Audit fees 10m Legal fees for staff contracts and retirement funds 6m Amount paid to Tender Board members to win a bid 20m 8. Employee Contributions Employers contribution 7.50m 7.50m 15m The contributions were made to an approved retirement fund. 4m

9. The company acquired the following assets: On 15th February 2005- furniture and equipment Tshs 100,000 On 15th February 2005-Computers and accessories 700,000 On 1st September 2005- Motor car ( station wagon) 10,000,000

10.Provision for debtors ( specific) 11m Provisions for repairs 8m Provision for stock obsolescence 28m 9m

11.Sundries included a traffic fine of Tshs 3.5m. The balance was general consumables used by the office. 12.Depreciation allowances computed for the year 2008 according to the 3rd schedule of ITA 2004 amounts to 74,000,000 Required: Based on the information available, determine the taxable income of Kigongo Company Limited and its tax liability for the year of income 2008

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The Individual Presumptive Tax Assessment Turnover Tax Payable where Incomplete records are kept (i) Where turnover does not exceed TZS 3,000,000/TZS 35,000/Tax payable where records are kept.

1.1% of the annual turnover. TZS 33,000/plus 1.3% of the turnover in excess of TZS 3,000,000/-

(ii) Where turnover is between TZS 3,000,000/- and TZS 7,000,000/-

TZS 95,000/-

(iii) Where turnover is between TZS 7,000,000/- and TZS 14,000,000/-

TZS 291,000/-

TZS 85,000/pus 2.5% of the turnover in excess of TZS 7,000,000/TZS 260,000/plus 3.3% of the turnover in excess of TZS 14,000,000/-

(iv) Where turnover is between TZS 14,000,000/- and TZS 20,000,000/-

TZS 520,000/-

Note: Where turnover exceeds TZS 20,000,000/- the taxpayer is obliged to prepare audited financial statements in respect of his/her business.

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