Katondo Manufacturing Company (KMC) plc is a Zambian resident company engaged in manufacturing. The company listed its shares on the Lusaka Stock Exchange in the tax year 2018 and 25% of the issued share capital was taken up by indigenous Zambians. The profit before tax as per accounts for the year ended 31 December 2019 was K570, 000. The profit figure was arrived at after taking into account of the following:
1. Depreciation on non-current assets of K121, 600, entertaining employees K40, 000, entertaining suppliers K52, 000 and penalty for late submission of provisional income tax return K12, 780. The balance consists of revenue expenses which are all allowable for tax purposes.
2. Salary for the Managing Director of K420, 000. The Managing Director is accommodated in a company owned house for which he pays no rent to the company.
3. Canteen expenses of K211, 400. The company provides meals to all the employees through its canteen.
4. Rental income K36, 000 (net), bank interest K35,700 (net), royalties K68,000 (net) and profit on disposal of office equipment K20,300.
Other information
1. The estimated tax adjusted business profit for the tax year 2019 was K600, 000 and the company calculated and paid the provisional income tax on this profit.
2. On 1 January 2019 the company had the following implements, plant and machinery:
Cost Income tax value
K K
Manufacturing equipment 160,000 80,000
Office equipment 40,000 20,000
Office building 400,000 240,000
Factory building 600,000 270,000
Toyota Prado car (3000cc) 280,000 224,000
During the tax year 2019 the company sold its office equipment for K50, 000 which was replaced with computers at a cost of K60, 000. The office building was acquired 20 years ago whereas the factory building was constructed 7 years ago. The Toyota Prado car is used by the Chief Finance Officer on personal-to-holder basis. It has been agreed with the Commissioner General that the car is used 60% for private purposes.
Required: Calculate the following:
(a) The maximum capital allowances claimable by the company for the tax year2019.
(b) The adjusted business profit for the tax year 2019.
(c) The amount of provisional income tax paid by Katondo Manufacturing Company (KMC) for the tax year 2019 and state the amount paid on each due date.
(d) The final amount of income tax payable by Katondo Manufacturing Company (KMC) for the tax year 2019.
