EMPLOYMENT INCOME QUESTIONS

Question 1
Ms Glory was employed for the first time by Fruto International Ltd, a private resident company
since 1st January 2018. As a company’s Marketing Manager, Ms Glory was given a range of
responsibilities. She has been resident of the United Republic of Tanzania solely in the years
2017 and 2018. Her duties are well balanced by a good package of remuneration which is made
up of the following;

(i) Basic salary of Tshs. 800,000 per month and medical service insurance of Tshs. 30,000 per
month and medical service insurance of Tshs. 30,000 per month as per the company’s policy to
its employees.

(ii) Mobility allowances for use when on duty trips within her duty stations of Tshs. 100,000 per
month coupled with life insurance of Tshs. 50,000 each month paid directly by the company to
the Insurance Company. It is estimated that Ms Glory is spending only 50% of the mobility
allowance for the performance of her official duties
.
(iii) It is the policy of the company to pay all of its employees lunch allowances of Tshs. 2,000
each per day for 22 days each month.

(iv) Traveling allowances for home-office-home trips of Tshs. 100,000 per month.

(v) The company pays school fees and uniforms for its employees as its contribution as per the
National Education Policy. Ms Glory received Tshs. 500,000 which the employer ensured that
the sum is spent according to agreed terms.

(vi) A fully furnished residential quarter where the value of furniture itself amount to Tshs.
2,000,000.The company normally recognizes Tshs. 120,000 per month as expense for the
provision of the house while the market rent of a house of the same status is Tshs. 150,000 per
month. The cost of the house to the company was Tshs. 10 million.

(vii) During 2018, Ms Glory traveled to her home country, Uganda, for an annual leave where
she provided consultancy for one month for the following remuneration: Consultancy fees
amounting to Tshs. 40,000 per day for 20 days; Upkeep allowance of Tshs. 200,000 for the
period of consultancy and free accommodation with market value of Tshs. 150,000.

(viii) During her trip to Uganda, the company paid Tshs. 450,000 for her return air ticket, since
the location of the company is Dar es Salaam.

(ix) Ms. Glory acquired a car at a cost of Tshs. 6,000,000 which was fully used in the
employment duties.

(x) Ms. Glory also received interest from her Banker on fixed deposit account, Tshs. 200,000.
 (xi) Retirement contributions are made to the Social Security Fund where the employer
contributes 10% and the employee 10% of the gross monthly salary.

Required:
On the basis of the above information, compute Ms Glory’s taxable income for the year of
income 2018 (assume today is 31st December 2018).

Question 2.Mr. Torres is a Marketing Manager of Food Processors Company Ltd in Tanga
Municipal town since July
2019 .

(i) His monthly salary was Tshs.600,000 with effect from 1/7/2019.
(ii) He received a bonus of Tshs.650,000 in September 2019.
(iii) He received Tshs.250,000 entertainment allowance for the year. Of this amount, he spent
Tshs.170,000 entertaining potential customers.
(iv) He was provided with fully furnished residential quarters at a nominal rent of Tshs.20,000
per month payable to the employer The cost of furniture to the employer was Tshs.350,000.The
market rental value is Tshs 100,000 p.m
(v) He was also provided with subsidized lunches on all working days at leading hotel in the
town. He personally paid Tshs.5,000 only for each executive lunch of Tshs.20,000/=. During
the year of income 2019, he took a total of 100 of such lunches. This benefit is available to
all employees.
(vi) The company provided him with a gardener in order to keep the extensive lawns of his house
in a first class condition and a night security guard. They were both paid directly by the
company Tshs. 50,000 each per month.
(vii) The company settled Mr. Torres’s domestic electricity and water bills of Tshs. 20,000 and
Tshs.10, 000 respectively per month directly. The bills were in the name of the company.
(viii) The company issued shares to all interested employees at an issue price of Tshs.600/= per
share its market sells at Tshs.750 per share. Mr. Torres purchased 1,000 shares.
(ix) Taking into account the number of official trips made by Mr. Torres, the employer insured
his life and paid an annual premium of Tshs.38,000
(x) Mr. Torres purchased a saloon car on 5/10/2019 at Tshs.4,500,000. The employer incurred
Tshs. 1,800,000 running expenses. Mr. Torres uses the car to the proportion of two-thirds
performance of duties and one-third private.
(xi) Mr. Torres makes retirement contributions to NSSF, 10% of the basic salary by the employer
and 10 % his contribution.
(xii) Since he is provided with a residential house by his employer, he offered his own house for
rent to NSA Ltd , a company registered in Tanzania, where he receives Tshs. 80,000 a
month from July 2019.
(xiii) The employer has employees’ non-interest loan scheme. Mr Torres borrowed Tshs. 4
million to finance finishing of his house in August 2019 repayable in twenty monthly
installments from 30th September 2019
Required: On the basis of the above information, compute Mr. Torres’s taxable income
assuming he worked for the end of the year of income 2019 and the Bank of Tanzania discount
rate at 1st January 2019 was 15 percent.

Question 3. Mrs. Kinabo is a resident employee of NAFAKA Ltd, a resident corporation since
1st January 2012working at a position of senior accountant. The information relating to her
employment remuneration and other benefits during the year of income 2014 is as follows:

(i) Gross annual salary TZS.11,826,617. During the year, she contributed 5 per cent of this
salary to an approved pension fund. The employer contributed 15 per cent of the gross
salary to the same fund.

(ii) During February, she was provided with a brand new car, whose engine capacity was
3000cc. The car was used for both, private and employment purposes and the private
use was estimated at 25 per cent of the total mileage. Annual claimable deduction in
relation to maintenance and operation of the car was TZS.5,675,800. The employer
claimed this deduction during the year 2014.

(iii) During April, she was provided with fully furnished four rooms house. These rooms were
self-contained. One room was solely used as a library established by the employer for
the purpose of updating her profession. Another room was used for official purpose while at
home. Rent payable for similar house to this in the nearby area is TZS.200,000 per month. She
was required to contribute a nominal rent of TZS.20,000 per month to the employer. Claimable
annual deduction during the year in relation to the maintenance of this house was TZS.3,600,000.
The company’s entitlement to this claim for the year 2014 was, however, not allowed by the
Commissioner.

(iv) Employees of NAFAKA Ltd are entitled to interest free loans of TZS.15,000,000 since
2012. Mrs. Kinabo secured the loan on 1st January 2014 and agreed to discharge the liability in
60 monthly installments based on average methods with effect from February 2014. By the time
this loan was advanced, her basic salary was fixed at TZS.500,000 per month and the annual
statutory borrowing/lending rate announced by the Bank of Tanzania was 12 per cent.

(v) The employer paid on her behalf, the remunerations for the warden and security services
offered to the house. In aggregate, this amounted to TZS.200,000 per month. Also on 31st
December 2014 employer settled the utility bill of TZS.1,600,000 for the house. This was an
outstanding bill for the whole year 2014.

(vi) During July 2014, the company also paid TZS.1,000,000 for her scholarship’s fees. This
was paid to the Open University of Tanganyika where she enrolled for Master’s degree on a part
time basis.

(vii) She was receiving monthly alimony allowance from her ex-husband worth TZS.100,000 to
support the children. The alimony allowance received by Mrs. Kinabo was neither under any
judicial order nor written agreement; rather it was an informal agreement between the two ex-
spouses.

Required:
Determine the taxable income from employment for Mrs. Kinabo during the year 2014. Show all
your workings clearly.