D3 – Business Taxation

D3-BUSINESS TAXATION

This Paper builds on the knowledge gained in Paper D 4 – Direct Taxes. It covers topics such as Sole trader income tax, Partnerships, Taxation of Mining Operations, Taxation of Farming enterprises, Taxation of Insurance & Financial Services, Tax Aspects of Corporate Social Responsibility, Taxation of Consolidated Groups, Corporate Mergers, Acquisitions & Disposals, Taxation of Financial Arrangements and the tax treatment of Liquidations and Insolvency.

Objectives

On completion of this paper, the student should be able to:

1. Discuss the characteristics of various business organisations from a tax point of view,
2. Calculate Income tax payable by sole traders on their business profits,
3. Calculate income tax payable by partners on their share of business profits,
4. Calculate income tax payable by incorporated businesses on their trading income,
5. Explain the characteristics of mining operations and calculate income tax payable on mining income,
6. Explain the characteristics of farming and fishing enterprises and calculate income tax thereon,
7. Apply the principles of income tax to insurance and financial services sectors,
8. Apply the VAT principles to various business transactions,
9. Apply the principles of Customs and Excise Duties to various business transactions,
10. Discuss the role of the employer as regards employees’ tax affairs.

Structure of the examination paper

There shall be a three hour examination consisting of four (4) compulsory questions of twentyfive (25) marks each. Candidates will be allowed fifteen minutes’ reading and planning time.

Detailed syllabus

• UNIT 1 - BUSINESS ORGANISATIONS

• Element 1: Characteristics of sole proprietorships
• Element 2: Characteristics of partnerships
• Element 3: Characteristics of incorporated businesses
• Element 4: Distinguishing features of various business organisations

• UNIT 2 - SOLE TRADERS’ BUSINESSES AND INCOME TAX

• Element 1: Computing business profits, including capital allowances
• Element 2: Accounting dates and basis of assessment
• Element 3: Trading losses
• Element 4: Computing and paying income tax on business profits

• UNIT 3 - PARTNERSHIPS AND INCOME TAX

• Element 1: Computing taxable business profits of partnerships
• Element 2: Capital allowances for partnerships
• Element 3: Allocation of partnership profits between partners
• Element 4: Changes in partnership agreement
• Element 5: Payment of income tax by partners

• UNIT 4 - INCORPORATED BUSINESSES AND INCOME TAX

• Element 1: Residence of companies
• Element 2: Computing taxable income of companies
• Element 3: Payment of income tax by companies

• UNIT 5 - MINING OPERATIONS

• Element 1: The characteristics of Mining Operations
• Element 2: Treatment of Revenue and Capital Expenditure
• Element 3: Mining Tax losses
• Element 4: Tax incentives for mining operations
• Element 5: Capital Allowances for Mining Companies
• Element 6: Indexation of Mining Losses and Capital Allowances
• Element 7: Maintenance of Books in Foreign Currency
• Element 8: Thin Capitalization Element
• 9: Environmental Expenditure
• Element 10: Tax Treatment of Hedging Income
• Element 11: Income Tax Computations for Mining Operations
• Element 12: Mineral Royalty Tax
• Element 13: Variable Profit Tax

• UNIT 6 - FARMING ENTERPRISES AND INCOME TAX

• Element 1: Characteristics of farming and fishing enterprises
• Element 2: Computing farming profits for companies
• Element 3: Capital allowances for farming enterprises
• Element 4: Averaging of farming and fishing income

• UNIT 7 - INSURANCE AND FINANCIAL SERVICES

• Element 1: Computing taxable income for insurance companies
• Element 2: Computing taxable income for Banks
• Element 3: Computing income tax payable by insurance companies
• Element 4: Computing income tax payable by Banks

• UNIT 8 - VALUE ADDED TAX

• Element 1: Registration and deregistration to include groups and branches
• Element 2: Further aspects of the tax point on specialized transactions
• Element 3: VAT application to farming and mining enterprises
• Element 4: VAT on insurance and financial services products
• Element 5: VAT on imports and exports
• Element 6: Reverse Charge VAT
• Element 7: Pre- registration input VAT
• Element 8: Sale of business compared with sale of individual assets

• UNIT 9 - CUSTOMS AND EXCISE

• Element 1: Importation of business assets
• Element 2: Exports and their tax treatment
• Element 3: Rules of origin and tax implications
• Element 4: Trade agreements and their benefits to the economy of Zambia

• UNIT 10 - CONSOLIDATED GROUPS

• Element 1: Income Tax Assessment of Consolidated Groups
• Element 2: Treatment of Entry and Exits from a Group
• Element 3: Treatment of Group Losses
• Element 4: Property Transfer Tax for Groups of Companies

• UNIT 11 - CORPORATE SOCIAL RESPONSIBILITIES

• Element 1: The Meaning of Corporate Social Responsibility
• Element 2: Donations to Government Institutions
• Element 3: Donations to Charitable Organisations
• Element 4: Donations to Political Parties & Similar Ventures

• UNIT 12 - TAKEOVERS, MERGERS, ACQUISITIONS & DISPOSALS

• Element 1: Legal rules applicable in the taxation of corporate mergers and acquisitions, particularly as they apply to consolidated groups;
• Element 2: Legal and tax structures used for corporate mergers and acquisitions in practice; and
• Element 3: Modifications for restructures, group takeovers and acquisitions, including the treatment of losses in mergers and acquisitions and Liability issues and tax sharing agreements;
• Element 4: Demergers and Deemed Dividends

• UNIT 13 - FINANCIAL ARRANGEMENTS

• Element 1: General tax policy and financial principles relevant to the income tax treatment of financial instruments;
• Element 2: Zambian tax law applicable to financial instruments including debt/equity rules and finance leases;
• Element 3: Debt-financing techniques, particularly the treatment of interest surrogates and hybrid debt instruments;
• Element 4: Equity-financing techniques and the classification of instruments as debt or equity; Element 5: Income tax treatment of hedging transactions and synthetic instruments;
• Element 6: Income tax issues raised by the cross-border use of financial instruments; and
• Element 7: Finance leasing and infrastructure finance.

• UNIT 14 - CORPORATE INSOLVENCY & RECONSTRUCTION

• Element 1: The aims of insolvency law, historical background, basic concepts and definitions
• Element 2: Assets available for distribution: The ranking of claims, proprietary and non- proprietary claims and their significance, equitable interests, retention of title, set-offs and other forms of quasi-security
• Element 3: Groups of companies and the liability of officers: Pooling, directors’ duties and liability for insolvent trading
• Element 4: Liquidation: Winding up in insolvency
• Element 5: Avoidance of antecedent transactions
• Element 6: Corporate rescue: Voluntary administration and deeds of company arrangement
• Element 7: Receivers and agents: Appointment, duties and liabilities of receivers and liquidators
• Element 8: Employee entitlements
• Element 9: Reconstruction Schemes
• Element 10: Directions to liquidators, receivers, administrators and deed administrators
• Element 11: Liquidation Dividends

Reading material

1. ZICA, Business Taxation, 2010 edition, Lusaka