Question

Mubita intends to commence in business on 1 January 2019, supplying Computers and computer accessories She expects her turnover to be in the range of K87,000 per month. Revenue expenditure will include salaries of K30,000 per month for her employees, her own monthly basic salary of K10,500, employer's NAPSA contributions of K1,500 per month, rent for her business premises of K12,000 per month and rent for her personal accommodation will be K7,000 per month. She will purchase equipment at a cost of K30,000 for exclusive use in her business and motor van at a cost of K90, 000 on 1 January 2019. She estimates that her private use of the motor van in the tax year 2019 will be 25%. All of the above figures are stated at Value Added Tax exclusive amounts.

Required:

Advise Mubita of the income tax and VAT implication of the above matters in respect of the tax year 2019

Answer 1

Purchase of computers and computers accessories will attract Value Added Tax. Purchase of motor van and equipment will attract Value added Tax.  

Rent of personal accomodation will not be allowed to be deducted under Income Tax. Depreciation and operating cost of motor van only upto 75% is allowed as deduction under Income Tax. Personal use of motor van is not allowed under Income Tax. Salaries for self and employees, employer's NAPSA contributions, rent for business premises, depreciation and maintenance of equipment and 75% of depreciation and operating cost of motor van will be allowed for deduction under Income tax.  

Deductions are not allowed from business income for expenses incurred for personal use.