Assignment Group 3

a) Coopers & Lybrand, an accounting firm has 2 partners who are both chartered
accountants. One is based in Zimbabwe and the other in South Africa. Discuss how ZIMRA
would determine the residence status of the partnership, supporting your answer with
relevant statutes and/or Case Law
Section 2 of the Income Tax describes a person as “person” includes a company, body of persons
corporate or unincorporated (not being a partnership), local or like authority, deceased or insolvent
estate and, in relation to income the subject of a trust to which no beneficiary is entitled, the trust;
A partnership is not a person or legal persona and is deemed to be not liable to tax, but tax liability is
beard or charged individually on partners. The profits of a partnership are shared amongst partners
in their profit sharing ratios (PSR).
A partnership is a trading business run by two or more persons. There is neither separate legal entity
nor an employer-employee relationship, this means that all decisions making are significantly on the
partners. More so, its residence status is determined by the residence of the partners.
With our given state, the partners are rendering services in two different countries. The other
partner is rendering services to be within Zimbabwe so thus his profits are realised in Zimbabwe.
whilst the other partner is rendering their services in South Africa so is their profits realised in South
Africa. It should be done separately to avoid Double Taxation.
b) If a vehicle belonging to a partnership is used by a partner mainly for private purposes,

what will be the tax implication? Would this constitute a Motoring benefit? Either way,
how would you measure the “benefit’? Do we grant capital allowances to the partnership
on such an asset? If so, how? Justify your answer with relevant statutes and/or Case law
A partnership is not a legal person and cannot hold any property, but the partners do hold
the property either a co-owners or as individuals. When a motor vehicle is used by a partner
for private purposes for more than 10% private usage but is under partnership, the entry in
calculating is that we allow the expense as a deduction under Partnership and tax charged it
to partner as an expense. The partner will be benefiting from its use whilst under
partnership it will be an expense, implying that the partnership is paying the benefit to the
partner.
This will be a motoring benefit to the partner who is in use of the motor vehicle. In such a
case the partner is allowed to use an asset owned by the partnership and the usage exceeds
10% on private use, then such an asset is not granted SIA even if there is an election. The
asset will be granted Wear and Tear with only the business part of Wear and Tear being
charged to the income statement. The private element of the Wear and Tear will be credited
to the partner concerned.
c) The adjusted Income Statement before and after admission of a partner for the two
periods
Details $ $
Gross Profit 2 350 000
Add :
Interest on Drawings 1300
Depreciation
prepayments 1 300
Income 2 351 300
Less Exemptions
Unrealised Exchange gain (62 000) (62 000)
Gross Income 2 289 300
Less Deductions
Capital Allowances:Toyota Corolla 11 000
Machinery 17 500
Motoring Vehicle 135 000
Salaries 468 000
Insurance Policies: (Pee is the beneficiary) 9 000
Firm is the beneficiary on Eee’s Insurance _
Motor Vehicle 25 000
Gym Subscriptions 8 500
Interest on Capital 8 200
RAF Contributions 84 000
Subscriptions to IEZ 8 000

Bad Debt 10 000
Pension Contribution 216 000
Medical Aid 11 600
Medical Contribution 91 000
School Fees 69 000
Trade Mission 50 000
Convention 50 000
Passage benefit 23 000
Wear and Tear(Industrial Building) 35 600
Wear and Tear Office Block 15 000 1 203 400
Taxable Income 1 085 900
Tax Liability(refund) of each of the partners (Pee, Eee and Perfect) for the year ended 2020
tax year
Details Total ($) PEE $ EEE $ PERFECT $
Joint Taxable 361 967 241 311 120 656

Income(Jan-
Jun)2:1
Joint Taxable 723 933 321 748 294 935 107 249
Income(Jul-
Dec)4:2:3
Salaries 410 000 190 000 140 000 80 000
Insurance 9 000
Policies: Pee
Beneficiary
Medical Aid 5 120 2 560 1 600

Contribution
Interest on 4 200 2 400 1 600

capital ac
Asset 4 400
W&T:private use
Recoupment 22 500
Motoring 54 000 54 000 27 000

benefit: Toyota
corolla
Gym Subs 8 500
Medical exp 91 000
Drawings(capital _____ ______ ______

nature)
Passage benefit: 23 000

Holiday
School fees 69 000
Gross Income 929 279 614 551 331 949
Less Deductions
Bad debts ______ _____ _____
Subs:IEZ (3 500) (2 800) (1 700)
Medical Aid (1 280) (640) (400)
Bank Interest (37 500)
Taxable Income
Less Assessed (28 000)

Loss
Total Taxable 924 499 611 111 264 349

Income
25% Tax 231 124 152 778 66 087
Less Credits
Medical credit (31 000) (47 100) (29 000)
Elderly credit (9 000)
Disability credit (18 000)
Tax Liability 191 124 105 678 19 087

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a) Coopers & Lybrand, an accounting firm has 2 partners who are both chartered

b) If a vehicle belonging to a partnership is used by a partner mainly for private purposes,

Gross Profit 2 350 000

Interest on Drawings 1300

Income 2 351 300

Unrealised Exchange gain (62 000) (62 000)

Gross Income 2 289 300

Capital Allowances:Toyota Corolla 11 000

Motoring Vehicle 135 000

Salaries 468 000

Insurance Policies: (Pee is the beneficiary) 9 000

Firm is the beneficiary on Eee’s Insurance _

Motor Vehicle 25 000

Gym Subscriptions 8 500

Interest on Capital 8 200

RAF Contributions 84 000

Subscriptions to IEZ 8 000

Pension Contribution 216 000

Medical Aid 11 600

Medical Contribution 91 000

School Fees 69 000

Trade Mission 50 000

Passage benefit 23 000

Wear and Tear(Industrial Building) 35 600

Wear and Tear Office Block 15 000 1 203 400

Taxable Income 1 085 900

Details Total ($) PEE $ EEE $ PERFECT $

Joint Taxable 361 967 241 311 120 656

Salaries 410 000 190 000 140 000 80 000

Medical Aid 5 120 2 560 1 600

Interest on 4 200 2 400 1 600

Motoring 54 000 54 000 27 000

Gym Subs 8 500

Medical exp 91 000

Drawings(capital _____ ______ ______

Passage benefit: 23 000

School fees 69 000

Gross Income 929 279 614 551 331 949

Bad debts ______ _____ _____

Subs:IEZ (3 500) (2 800) (1 700)

Medical Aid (1 280) (640) (400)

Bank Interest (37 500)

Less Assessed (28 000)

Total Taxable 924 499 611 111 264 349

25% Tax 231 124 152 778 66 087

Medical credit (31 000) (47 100) (29 000)

Elderly credit (9 000)

Disability credit (18 000)

Tax Liability 191 124 105 678 19 087

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Drawings(capital _ ____

Bad debts ____ _ ___