Applied Skills

TX – BWA
Taxation
– Botswana
(TX – BWA)
Tuesday 4 December 2018

TX BWA BICA

Time allowed: 3 hours 15 minutes

This question paper is divided into two sections:

Section A – A
 LL 15 questions are compulsory and MUST be attempted

Section B – ALL
 SIX questions are compulsory and MUST be attempted

Tax rates and allowances are printed on pages 2–5.

Do NOT open this question paper until instructed by the supervisor.

Do NOT record any of your answers on the question paper.

This question paper must not be removed from the examination hall.

The Association of Chartered

Certified Accountants

The Botswana Institute of

Chartered Accountants
SUPPLEMENTARY INSTRUCTIONS:
1. Calculations and workings need only be made to the nearest P.
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 rates of tax and allowances are to be used when answering the questions.

Rates of tax
2017/2018 tax year
Resident companies On taxable income
Standard rate 22%
Manufacturing company rate 15%

Resident individuals
P0 – P36,000 P0 + 0%
P36,001 – P72,000 P0 + 5%
P72,001 – P108,000 P1,800 + 12·5%
P108,001 – P144,000 P6,300 + 18·75%
P144,001 + P13,050 + 25%
Non-resident individuals, trusts and estates
P0 – P72,000 P0 + 5%
P72,001 – P108,000 P3,600 + 12·5%
P108,001 – P144,000 P8,100 + 18·75%
P144,001 + P14,850 + 25%

Capital gains – individuals

P0 – P18,000 P0 + 0%
P18,001 – P72,000 P0 + 5%
P72,001 – P108,000 P2,700 + 12·5%
P108,001 – P144,000 P7,200 + 18·75%
P144,001 + P13,950 + 25%

Capital gains – companies

Net aggregate gains are taxable at the company rates of tax.

Valued added tax (VAT) rate 12%

Basis of valuation of benefits

Individual’s vehicle benefit
Employee’s Fuel cost
Vehicle cost benefit adjustment
P1 – P50,000 P2,500 P1,000
P50,001 – P100,000 P5,000 P2,000
P100,001 – P150,000 P7,500 P3,000
P150,001 – P200,000 P10,000 P4,000
Benefit on the excess of P200,000 will be 15% thereof with a maximum fuel benefit of P5,000.
Where the cost of fuel is paid for by the employee the fuel cost adjustment is deducted from the benefit, but
where the cost is borne by the employer the full benefit is taxable.

2
 Medical contributions
The employer’s contributions to a medical benefit fund on behalf of his employee up to an amount equal to
100% of the required contributions shall not become taxable in the hands of the employee.

Individual’s housing benefit

If rated:
10% of the property’s rateable value prorated by occupation and reduced by any charge borne by the employee.
If not rated:
The lower of (a) or (b) prorated by occupation and reduced by any charge borne by the employee:
(a) Gross floor area x P250 per sq metre x 8%
(b) 25% of taxable employment income before housing benefit

Individual’s furniture benefit

10% of furniture cost in excess of P15,000 by usage.

Capital allowances
The annual allowance on plant and machinery is between 10% and 25% of the cost incurred. The following are
the rates fixed by the Commissioner General of Taxes as fair and reasonable having regard to the expected lives
of the assets listed.
Capital allowances
Furniture and fittings 10%
Office equipment and machinery 15%
Plant and machinery including farming 15%
Motor vehicles, boats and aircraft 25%
Heavy plant and machinery 25%
Computer hardware 25%
Industrial and commercial buildings
Industrial building – initial allowance 25%
Industrial building – annual allowance 2·5%
Commercial building – annual allowance 2·5%

Withholding tax rates

Residents Non-residents
Interest (Note) 10% 15%
Dividends 7·5% 7·5%
Entertainment fees – 10%
Management and consultancy fees – 15%
Commercial royalty – 15%
Rent 5% 5%
Commission or brokerage 10% 10%
Construction contracts 3% 3%
Note: Withholding tax on interest paid to residents is calculated at 10% of interest paid to a resident in excess of
P1,950 in a quarter of a year.

3 [P.T.O.
 Capital gains tax
Indexation allowance
Paragraph 8 of the Tenth Schedule to the Income Tax Act 1995.
Table of factors from the National Cost of Living Indices.

1982 1983 1984 1985 1986 1987 1988

January 104·1 113·5 119·9 133·9 147·4 157·8
February 104·8 113·5 120·7 135·5 148·5 158·7
March 105·5 115·2 122·0 135·5 148·9 160·8
April 106·6 116·0 124·1 136·8 151·9 163·4
May 108·3 116·9 126·6 138·0 153·6 164·0
June 108·4 118·3 128·6 140·9 154·1 165·5
July 100·0 109·0 119·1 130·1 141·2 154·9 168·0
August 101·2 110·2 120·1 129·8 141·8 156·6 169·3
September 101·2 110·2 119·8 131·1 142·7 156·7 171·0
October 102·1 110·7 120·7 131·5 143·4 157·1 172·6
November 103·3 111·7 119·7 131·8 144·7 157·5 173·9
December 103·8 112·3 119·5 132·0 146·3 158·1 174·4

1989 1990 1991 1992 1993 1994 1995

January 176·9 196·6 220·5 248·5 291·0 324·2 357·9
February 178·0 199·0 221·4 250·4 293·1 326·8 361·0
March 180·1 200·5 223·5 256·6 295·8 328·3 364·1
April 182·7 204·1 225·8 262·1 301·1 332·7 368·6
May 184·1 205·1 227·3 265·5 303·3 337·3 370·5
June 186·2 206·0 229·0 269·4 306·0 340·3 374·9
July 187·3 207·2 232·0 273·3 308·7 343·2 377·8
August 188·7 209·2 234·2 275·0 311·4 345·3 381·6
September 190·2 210·7 237·2 277·6 315·0 347·0 384·3
October 191·1 212·6 239·5 280·1 317·6 348·4 386·0
November 191·5 216·0 242·4 283·0 320·1 351·4 387·9
December 194·2 217·6 245·1 285·4 321·5 353·1 391·3

1996 1997 1998 1999 2000 2001 2002

January 395·5 431·6 464·8 495·1 530·8 581·4 613·1
February 398·1 435·5 466·0 499·7 536·8 582·1 613·9
March 402·2 439·7 469·9 504·3 538·8 587·2 622·1
April 405·6 443·6 476·0 507·5 545·5 589·9 629·6
May 408·8 448·7 477·9 509·2 548·9 596·9 631·3
June 413·9 451·2 478·9 513·3 552·0 598·6 634·0
July 417·0 454·2 481·0 514·3 568·6 601·3 654·0
August 419·1 455·1 484·0 517·7 569·8 603·0 662·4
September 421·6 457·6 484·4 521·1 571·4 605·4 666·7
October 423·8 459·7 486·9 523·5 576·0 608·5 670·7
November 426·0 460·9 489·5 524·0 577·5 610·2 677·6
December 428·7 461·9 491·2 525·2 578·7 611·0 679·3

4
 2003 2004 2005 2006 2007 2008 2009
January 683·2 721·3 779·2 877·4 942·9 1022·2 1152·7
February 689·0 728·6 781·7 884·0 948·5 1034·4 1151·1
March 692·2 735·8 783·8 891·5 949·5 1043·1 1165·0
April 701·4 743·6 789·4 901·4 957·7 1064·7 1172·8
May 705·8 754·0 801·4 909·6 968·1 1085·0 1176·0
June 715·0 721·3 813·2 915·0 974·5 1115·1 1193·4
July 714·5 758·9 821·2 918·6 988·5 1136·7 1204·8
August 698·0 761·3 834·8 924·2 991·2 1140·6 1209·7
September 707·0 765·7 842·3 930·8 994·1 1133·8 1213·0
October 715·9 770·7 857·1 936·4 1004·3 1135·5 1213·3
November 717·9 772·4 859·7 935·4 1007·2 1159·0 1217·2
December 718·9 774·9 863·1 936·4 1012·8 1151·2 1218·4

2010 2011 2012 2013 2014 2015 2016

January 1223·2 1320·0 1436·1 1544·3 1611·2 1670·7 1715·4
February 1225·4 1330·2 1440·0 1546·9 1618·7 1664·2 1714·5
March 1234·6 1338·9 1446·5 1555·4 1624·3 1669·8 1721·0
April 1256·2 1359·0 1460·4 1565·6 1637·1 1687·5 1735·9
May 1268·6 1373·6 1480·0 1570·2 1641·0 1690·3 1737·8
June 1285·3 1386·4 1487·3 1573·8 1645·6 1696.8 1741·5
July 1289·7 1380·6 1492·1 1576·7 1647·5 1698·7 1744·3
August 1290·6 1403·4 1496·7 1580·4 1652·1 1701·5 1747·1
September 1297·9 1409·0 1508·9 1584·3 1654·8 1704·2 1751·7
October 1300·6 1415·0 1515·4 1587·9 1656·8 1708·9 1755·2
November 1304·2 1424·0 1530·2 1593·5 1661·4 1709·8 1758·7
December 1309·1 1428·8 1534·8 1598·1 1657·7 1708·9 1760·5

2017
January 1769·2
February 1772·7
March 1781·5
April 1795·5
May 1799·0
June 1802·5
July 1804·3
August
September
October
November
December

5 [P.T.O.
Section A – ALL 15 questions are compulsory and MUST be attempted

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 Payton Enterprises (Pty) Ltd (PEL) has an estimated taxable income of P2,350,000 for the financial year ended 30
September 2017. PEL has the following credits at that date:
P
Self-assessment tax (SAT) paid 265,000
Withholding tax on dividends received 28,000
Withholding tax on interest received 16,000
Withholding tax on construction receipts 63,000

What is the minimum self-assessment tax (SAT) PEL should pay on 30 September 2017 in order to avoid any
interest charge?
A P148,600
B P69,600
C P85,600
D P41,600

2 Nicky has the following earnings/loss for the 2017/2018 tax year:
P
Business income 875,400
Non-bank interest 42,165
Dividends 72,995
Rental – loss (137,845 )

How much is Nicky’s chargeable income for the 2017/2018 tax year?
A P852,715
B P779,720
C P737,555
D P917,565

3 Orion Financial Services (Pty) Ltd (OFS) is registered for value added tax (VAT) and made the following supplies during
the tax period ended 25 October 2017:
P
Interest received 178,329
Commission received 142,897
Residential rent received 43,922
Loan facility fee received 76,296

What are the standard rated output supplies made by OFS during the tax period ended 25 October 2017?
A P120,218
B P263,115
C P254,625
D P219,193

6
4 The Botswana Unified Revenue Service (BURS) carried out a tax audit of Thusanyo Holdings (Pty) Ltd and raised
revised tax assessments for the last eight years instead of four years.

In relation to the Botswana Unified Revenue Service (BURS) raising revised tax assessments for an additional four
years, which of the following statements is/are true?
(1) An assessment can be made at any time prior to eight years after the end of the tax year to which it relates
(2) An assessment can be made at any time prior to eight years after the end of the tax year to which it relates if the
taxpayer has misrepresented material facts
(3) An assessment can be made at any time prior to eight years after the end of the tax year to which it relates if the
taxpayer has submitted an incorrect tax return
(4) A revised assessment can be made at any time if there has been fraud
A 1 and 4
B 2, 3 and 4
C 4 only
D 2 and 3 only

5 During the year ended 31 August 2017, Francistown Hotels (Pty) Ltd (FHL) paid interest amounting to P350,000 to
a non-resident individual, P180,000 to a resident individual and P56,000 to a resident bank.

How much tax should FHL have deducted?

A P76,100
B P53,000
C P70,500
D P58,600

6 Koketso sold her principal private residence in the 2014 tax year and purchased another residence in the same tax year.
The gain on the sale was exempt from tax. Koketso is now considering selling her current principal private residence.

What is the earliest tax year in which the sale of Koketso’s current principal private residence will qualify for capital
gains tax exemption?
A 2019
B 2020
C 2023
D 2024

7 The accounts of Phuti Traders (Pty) Ltd (PTL) for the 2017/2018 tax year include the following provisions:
P
Provision for future expenses 258,227
Provision for interest payable 37,828
Provision for tax payable 62,889
Specific provision for bad debts 107,624

How much can PTL claim as a deduction in its 2017/2018 tax return?
A P37,828
B P466,568
C P403,679
D P145,452

7 [P.T.O.
8 Raju is a non-citizen employee of RK Consultants and received the following employment benefits for the 2017/2018
tax year:
P
Company paid pension contribution 68,440
School fees paid by company 57,500
Contractual leave airfare to his country of hire 32,869
Company paid medical aid contribution 18,772

What amount of employment benefits should be included in Raju’s chargeable income from employment?
A P57,500
B P90,369
C P177,581
D P125,940

9 Star Products (Pty) Ltd (SPL) declared and paid a dividend to its shareholders in the 2017/2018 tax year as follows:
Dividend proposed by the directors on 28 July 2017
Dividend ratified at the annual general meeting on 20 August 2017
Dividend payable to shareholders registered on 30 September 2017
Dividend paid on 6 November 2017

By which date should SPL have paid dividend withholding tax?

A 15 December 2017
B 15 September 2017
C 15 October 2017
D 15 August 2017

10 Gallery Garments (Pty) Ltd (GGL), which is registered for value added tax (VAT), received the following credit notes,
exclusive of VAT, from suppliers relating to the tax period ended 30 September 2017:
P
Goods returned to local suppliers 148,272
Price adjustments from local suppliers 46,007
Discounts given by non-resident suppliers 12,862
Correction of quantities delivered by non-resident suppliers 87,194

How much can GGL report as an output adjustment in its value added tax (VAT) return for the tax period ended
30 September 2017?
A P235,466
B P294,335
C P194,279
D P281,473

11 Halson Manufacturing (Pty) Ltd (HML) is registered as a manufacturer for income tax purposes. In the 2017/2018 tax
year HML expanded its factory premises at a cost of P1,947,560. The original cost in the 2000/2001 tax year was
P5,000,000.

What is the maximum capital allowance claim which HML can make in the 2017/2018 tax year?
A P611,890
B P660,579
C P535,579
D P173,689

8
12 On 12 June 2018, Jason sold the following securities which were all listed on the Botswana Stock Exchange.
Date purchased Gain/(loss)
P
Shares in Company A November 2017 293,882
Debentures in Company B February 2018 (52,531 )
Share rights in Company C December 2015 22,609
Preference shares in Company D August 2013 18,443

What is the net capital gain which Jason should declare in his 2017/2018 tax return?
A P181,013
B P220,411
C P282,403
D P241,351

13 In addition to her salary, Doreen received the following amounts from her employer in the 2017/2018 tax year:
P
Reimbursement of vehicle costs incurred for employment purposes 17,926
Entertainment allowance 24,000
Self-education costs 37,628
Per diem allowance for out of town travelling 12,726

How much of the above amounts constitute chargeable income from employment for Doreen in the 2017/2018 tax
year?
A P74,354
B P92,280
C P36,726
D P24,000

14 Tshepo Textiles (Pty) Ltd (TTL) is registered for value added tax (VAT) and files its VAT returns on a monthly basis. TTL
filed its VAT return for the month ended 30 June 2018 and paid the VAT due on 14 August 2018. The VAT return was
due on 25 July 2018. The VAT payable amounted to P137,840.

What is the penalty TTL will be charged for the late submission of its value added tax (VAT) return, and the late
payment of its VAT liability for the month ended 30 June 2018?
A P13,784
B P2,100
C P27,568
D P2,068

9 [P.T.O.
15 Prestige Bakery (Pty) Ltd (PBL) is considering investing in capital expenditure on new baking ovens in the 2017/2018
tax year.

In relation to PBL making a possible capital allowances claim in respect of the baking ovens for the 2017/2018
tax year, which of the following statements is/are NOT true?
(1) The expenditure must have been incurred by the taxpayer
(2) The asset must have been brought into use
(3) The claim must not be less than 10% and not more than 25%
(4) An initial allowance and an annual allowance may be claimed
A 4 only
B 2 and 4
C 1 and 3
D 3 and 4

(30 marks)

10
Section B – ALL SIX questions are compulsory and MUST be attempted

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

1 Masunga Property Company (Pty) Ltd (MPC) sold Plot 416 Francistown for proceeds of P8,500,000 in July 2017.
Plot 416 Francistown was an industrial building which earned rental income. In January 2018, MPC purchased
Plot 31 Kasane, a commercial property that also earns rental income, for P3,500,000.
MPC also sold shares in Power Lines (Pty) Ltd for P1,450,000 in May 2018.

Further information:
1. The cost price of Plot 416 Francistown was:
P
Land May 2006 120,000
Building November 2006 935,000
Extension February 2011 1,700,000
––––––––––
2,755,000
––––––––––
2. The cost of the shares in Power Lines (Pty) Ltd was P300,000 in September 2010.This amount included P50,000
relating to an option to purchase further shares in Power Lines (Pty) Ltd in January 2012, however, this option has
never been exercised.
3. MPC has a capital loss brought forward amounting to P236,058.

Required:
In respect of Masunga Property Company (Pty) Ltd for the year ended 30 June 2018:
(a) Calculate the net disposal gain or loss resulting from the disposal of Plot 416 Francistown assuming all
available reliefs are claimed. (5 marks)

(b) Calculate the taxable income or loss arising from the disposal of all capital assets, including Plot 416
Francistown. (5 marks)

(10 marks)

11 [P.T.O.
2 Transunion Products (Pty) Ltd (TP) trades in machine parts in Botswana as well as engaging in importing and exporting
activity.
The transactions of TP, exclusive of value added tax (VAT), for the tax period ended 31 August 2017 were as follows:
Notes P
Income
Sales – local 2,638,719
Sales – foreign 782,163
Profit on sale of vehicles 1 37,455
Interest received 26,791
Dividends received 15,992
Discount received 18,210
––––––––––
3,519,330
––––––––––
Expenses
Purchases – local 263,072
Purchases – foreign 1,025,622
Sales returns – foreign 47,224
Purchase of second hand saloon car 160,000
Purchase of second hand machinery 205,000
Salaries and wages 762,981
Administrative expenses 2 862,294
Loss on sale of shares 3 75,000
Bad debt 4 28,937
––––––––––
3,430,130
––––––––––
Notes:
1. The profit on sale of vehicles is made up as follows:
Saloon car Seven ton truck Total
P P P
Cost 275,000 567,000 842,000
Depreciation (187,395 ) (392,060 ) (579,455 )
––––––––– ––––––––– –––––––––
87,605 174,940 262,545
Sales proceeds 100,000 200,000 300,000
––––––––– ––––––––– –––––––––
Profit on sale of vehicles 12,395 25,060 37,455
––––––––– ––––––––– –––––––––
2. Administrative expenses include:
P
Commission paid – local 118,524
Hotel costs of travelling salesmen 18,929
Entertainment allowances 10,752
Repairs to residential houses 27,802
Management fees – local 30,000
––––––––
206,007
––––––––
3. The loss on sale of shares is made up as follows:
P
Cost 225,000
Fair value adjustment 100,000
Less: sale proceeds (250,000 )
––––––––
Loss on sale of shares 75,000
––––––––

12
 4. A trade receivable from a company which had been placed in liquidation was written off as a bad debt in August
2017. The VAT on the original supply was paid in February 2017.
Additional Information:
Where relevant, all suppliers are VAT registered.

Required:
In respect of Transunion Products (Pty) Ltd for the tax period ended 31 August 2017:
(a) Calculate the amount of administrative expenses in respect of which an input deduction can be claimed for
value added tax (VAT) purposes.
Note: You should start your computation with the total administrative expenses figure of P862,294.
(2 marks)

(b) Calculate the VAT payable or refundable.

Note: Your answer should split supplies and inputs between standard rated, zero-rated, exempt and
non-taxable. (8 marks)

(10 marks)

13 [P.T.O.
3 The following payments, exclusive of withholding tax, were made by Thobega Enterprises (Pty) Ltd for the year ended
30 September 2017:
Expenses paid to non-resident individuals P
Purchases 1,378,295
Advertising 26,881
Rent of premises 150,680
Marketing fees 321,160
Transport 580,496
Insurance 177,528
Technical fees 267,180
Expenses paid to resident individuals P
Interest 36,830
Rent of equipment 127,629
Construction contractor 648,400
Royalties 62,814
Commission 182,910

Required:
In respect of Thobega Enterprises (Pty) Ltd for the year ended 30 September 2017:
(a) Calculate the tax which should have been withheld from the above payments.
Note: You should indicate the expenses paid from which withholding tax should not have been deducted, by
the use of a zero (0). (6 marks)

(b) Identify the expenses paid by Thobega Enterprises (Pty) Ltd and the associated withholding tax, which
represent a final charge to Botswana tax on the recipient. (2 marks)

(c) Identify the expenses paid by Thobega Enterprises (Pty) Ltd and the associated withholding tax, which the
recipient can claim as a tax credit against their Botswana tax liability. (2 marks)

(10 marks)

14
4 You should assume today’s date is 2 December 2018.
Ronald Nakedi runs his own business. He approaches you to advise him on his tax affairs and what action he should
take in relation to the following matters:
(i) Ronald received his tax assessment for the tax year 2015/2016 on 17 November 2018. He is aggrieved that the
Botswana Unified Revenue Service (BURS) has disallowed the following costs:
P
Travel and entertainment 56,721
Repairs and maintenance 35,096
Consultancy fees 47,319
Public relations costs 30,722
Ronald is adamant that the above costs are genuine business costs.
(ii) Ronald also disputes his tax assessment for the tax year 2014/2015 which he received on 12 February 2018. He
paid the uncontested amount but has not paid the disputed amount of P42,847, and he has not entered into any
correspondence with BURS.
(iii) Ronald has not yet submitted his tax returns for the tax years 2016/2017 and 2017/2018.

Required:
(a) Explain the options available to Ronald in respect of the disputed tax assessments for the tax years 2014/2015
and 2015/2016. (5 marks)

(b) What must Ronald demonstrate to the Botswana Unified Revenue Service to show the disallowed costs are
deductible for income tax purposes? (2 marks)

(c) Calculate the monthly interest Ronald is being charged in respect of unpaid tax.
Note: You should ignore the effect of compounding and assume that only tax in respect of the 2014/2015 tax
year is outstanding. (1 mark)

(d) Explain whether any penalties will apply to Ronald as a result of the late submission of his tax returns for the
tax years 2016/2017 and 2017/2018.
Note: You are not required to prepare a calculation in this part. (2 marks)

(10 marks)

15 [P.T.O.
5 Metropolitan Properties Ltd is a property investment company. The results for the year ended 30 June 2018 are as
follows:
Notes P
Income
Rental income 1 8,555,787
Revaluation of immoveable properties 2,158,243
Profit on sale of immoveable property A 2 1,100,000
–––––––––––
11,814,030
–––––––––––
Expenses
Administrative expenses (all deductible) 2,673,527
Impairment of intangible assets 1,672,453
Loss on sale of fixed assets 3 61,128
Interest paid on loan 4 2,678,841
Interest paid on late tax payments 83,675
Repairs and maintenance to properties 5 2,152,664
–––––––––––
9,322,288
–––––––––––
Net profit 2,491,742
–––––––––––
Notes:
1. Rental income is made up as follows:
P
Rents received and accrued 8,362,915
IAS 17 rental smoothing adjustment year ended 30 June 2017 (367,951 )
IAS 17 rental smoothing adjustment year ended 30 June 2018 560,823
––––––––––
8,555,787
––––––––––
2. The profit on sale of immoveable property A is as follows:
P
Sales proceeds 3,500,000
Cost (1,850,000 )
Fair value adjustments (550,000 )
––––––––––
1,100,000
––––––––––
Capital allowances amounting to P236,530 had been granted in respect of property A.
The capital gain on disposal of property A amounted to P1,450,675. A new property B costing P4,500,000 was
purchased during the year.
3. During the year, the company sold all of its fixed assets apart from immoveable property. The loss on sale of fixed
assets owned by the company is made up as follows:
P
Cost 426,906
Depreciation (178,256 )
–––––––––
248,650
Sales proceeds 187,522
–––––––––
Loss on sale of fixed assets (61,128)
–––––––––
Capital allowances on these assets amounting to P296,834 have been granted.
4. All loan interest was paid to a non-resident individual. Withholding tax amounting to P234,662 was paid during
the year in relation to that interest.

16
 5. Repairs and maintenance to properties is made up as follows:
P
Costs incurred 1,902,664
Provision for maintenance year ended 30 June 2017 (500,000 )
Provision for maintenance year ended 30 June 2018 750,000
––––––––––
2,152,664
––––––––––
6. The cost of immoveable property is as follows:
Commercial Industrial Total
P P P
Cost at 1 July 2017 31,973,924 10,888,889 42,862,813
Sale of property A (1,850,000 ) (1,850,000 )
Cost of new property B 4,500,000 4,500,000
––––––––––– ––––––––––– –––––––––––
Cost at 30 June 2018 30,123,924 15,388,889 45,512,813
––––––––––– ––––––––––– –––––––––––
7. The following tax payments and withholding tax payments were made during the year. These amounts are in
addition to the withholding tax paid on interest (Note 4):
P
Self-assessment tax (SAT) 50,000
Withholding tax on rents 418,145
––––––––
468,145
––––––––

Required:
In respect of Metropolitan Properties Ltd for the year ended 30 June 2018:
(a) Calculate the capital gain on the sale of property A after all available reliefs. (1 mark)

(b) Calculate the claim for capital allowances on immoveable property. (4 marks)

(c) Calculate the balancing charge or allowance on the disposal of all of the company’s fixed assets apart from
immoveable property. (1 mark)

(d) Calculate the taxable income. (9 marks)

(15 marks)

17 [P.T.O.
6 Benson Tangane is a business person, resident in Botswana, who owns and manages a retail outlet called Strategic
Concepts. In addition, Benson is the local agent for a foreign based company.
The results of Strategic Concepts for the year ended 30 June 2018 are as follows:
Notes P P
Income
Sales 8,938,253
Cost of sales 1 (6,372,186 )
–––––––––––
2,566,067
Medical aid refunds 27,518
Proceeds on sale of shares 2 142,765
Interest received 37,619
Proceeds on sale of personal assets 28,624 236,526
–––––––––– –––––––––––
2,802,593
Expenses
Salary Benson Tangane 720,000
Salary James Tangane 3 480,000
Stock written off 4 300,000
Mortgage bond payments in respect of Benson’s private house 5 252,348
Wages 892,567
Deductible costs 1,056,293
Benson’s holiday costs 28,715
Architects’ fees in respect of Benson’s private house 76,218
Donation to political party 15,000 (3,821,141 )
–––––––––– –––––––––––
Net loss (1,018,548 )
–––––––––––

Notes:
1. Cost of sales includes a purchase of building materials for Benson’s house costing P263,905.
2. Shares were sold in ABC Ltd – a company listed on the Botswana Stock Exchange. The original cost was P47,500
in March 2011.
3. James Tangane is Benson’s brother who works full time in the business.
4. Certain stock that had been on hand for a number of years was written off due to obsolescence.
5. Benson built himself a house during the year which was funded by a mortgage bond from a financial institution.
Additional Information:
1. Benson received agent’s commission amounting to P852,173 from the foreign company for which he is the local
agent. This amount was paid directly into a bank account which he holds outside of Botswana. One of the sales
was subsequently cancelled and in August 2018 Benson had to repay the commission received which amounted
to P48,167. During the year, Benson travelled overseas for essential training on the products he represents. The
travel costs of P178,261 were borne by Benson.
2. Benson has a share in his uncle’s farm. There was no income in the current year and he has a farming loss carried
forward of P68,024.

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 Required:
In respect of Benson Tangane for the year ended 30 June 2018:
(a) Calculate his chargeable income or loss from the Strategic Concepts business.
Note: You should start your computation with the net loss figure of P1,018,548. (6 marks)

(b) Calculate his chargeable income or loss from his agency activities. (3 marks)

(c) Calculate his taxable income from all sources, briefly explaining your treatment of the farming loss and the
gain on sale of shares. (3 marks)

(d) Benson has questioned why he should pay Botswana tax on his commission from the foreign company, which
he believes to be foreign sourced income.
Provide three reasons why Benson’s commission is liable to tax in Botswana. (3 marks)

(15 marks)

End of Question Paper

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