Corporate Tax Overview

Questions and Answers

What is the maximum deductible amount for donations to medical or educational institutions per year?

Z$750,000

Z$2 million

Z$1 million (correct)

Z$500,000

For how many years can an assessed loss be carried forward?

5 years

7 years

6 years (correct)

Unlimited

Which of the following repairs is deductible?

Cost of improving an asset

Cost of restoring an asset to its original form (correct)

Upgrades to increase an asset's value

Routine maintenance for equipment

Which types of buildings qualify for capital allowances?

Commercial buildings Signup and view all the answers

What is the limit on donations to charities for infrastructure development?

Z$750,000 Signup and view all the answers

What can be considered a capital expenditure?

Cost of buying machinery Signup and view all the answers

What is a scrapping allowance related to?

Loss incurred from selling an asset with previous capital allowances Signup and view all the answers

What kind of vehicle qualifies for trading purposes under this regulation?

Passenger vehicles designed for fewer than 15 persons Signup and view all the answers

What approach does the tax authority take concerning depreciation?

Applies capital allowances instead of depreciation Signup and view all the answers

What is the maximum allowable expense for the construction of a staff house?

Z$250,000 Signup and view all the answers

What is the main tax imposed on legal persons such as companies?

Corporate tax Signup and view all the answers

Which of the following is considered an exempt income according to the content?

Dividends from local companies Signup and view all the answers

Which of the following is an example of a capital amount?

Loan proceeds received Signup and view all the answers

What type of deductions does the law allow related to pension contributions?

Employer contributions to employee pensions Signup and view all the answers

What is the limit for allowable deductions when attending a trade convention?

Z$25,000 per trip Signup and view all the answers

Which of these is NOT a form of allowable deduction?

Personal expenses of employees Signup and view all the answers

What must be identified to establish the corporate tax?

Capital allowances and exempt income Signup and view all the answers

Which of the following is a capital nature expense that is NOT deductible?

Depreciation of machinery Signup and view all the answers

Study Notes

Corporate Tax Overview

Corporate tax is an income tax on legal entities like companies, also termed company tax.
Governed primarily by the Income Tax Act, similar to employees' tax.
Establishing corporate tax involves determining gross income per the Gross Income formula.

Capital Amounts

Includes income from asset disposals such as buildings, machinery, and vehicles.
Proceeds from loans and share sales also classified as capital amounts.
Income of a capital nature is deducted from total receipts in calculating gross income.

Exemptions

Local bank interest and dividends from local companies are exempt.
Firms in special economic zones enjoy exemption on accruals for the first 5 years.
Statutory corporations (like RBZ, ZINARA, ZUPCO, NRZ) also receive exemption on accruals.

Allowable Deductions

Contributions to employee pensions by employers are deductible.
Trade-related expenditures, including rent, electricity, salaries, and wages can be deducted.
Deductions for attendance to trade conventions are capped at Z$25,000 per trip.
Full deduction allowed for subscriptions to professional associations and donations to the National Scholarship Fund.
Donations to medical or educational institutions capped at Z$1 million annually from 2020.
Medical aid contributions on behalf of employees are deductible.
Stock values, assessed losses (limited to 6 years carry forward), and donations for charity infrastructure (limited to Z$750,000) are also deductible.
Repairs to trading assets may be deducted, but improvements are not allowable due to capital nature of the expense.

Capital Allowances

Capital expenditures involve acquiring assets, either tangible or intangible, which generate income but are not typically deductible.
Section 15(2)(c) permits deductions for capital allowances, reflecting loss of asset value due to use and wear.
Capital allowances replace accountants' depreciation in taxable income assessments.

Qualified Assets for Capital Allowances

Industrial Buildings: Utilized for industrial activities, including hotels with liquor licenses or factory buildings.
Commercial Buildings: Encompasses shops, hotels under the Tourism Act (without liquor or casino licenses), and rental flats.
Staff Houses: Accommodation provided for employees, with building costs capped at Z$250,000 since January 2020.
Passenger Motor Vehicles: Designed for up to 14 passengers (excluding the driver) and used for business purposes.

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Description

This quiz explores the fundamental concepts of corporate tax, including its definition, purpose, and the guiding Income Tax Act. Special focus is placed on understanding Gross Income as it applies to companies and the relevance of capital allowances in corporate tax calculations.