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QUESTION ONE

a$)$ David Kamau, a resident of Kenya earned income from the countries listed below during the year ended $31$ December $2023.$ Employment Income and Business income from Kenya amounted to Ksh$.1,765,000$ and Ksh: $2,500,000$ respectively.

Income from United Kingdom $($UK$)$ UK $4,800$ net Tax deducted amounted to UK $960.$ The average exchange rate during the year was $1UK=140KSH,.$A double taxation agreement exists between Kenya and United Kingdom.

Required:

i$)$The double taxation relief $($in Kenya shillings$)$ due to David Kamau for the year ended $31$ December $2023.(4$ marks$)$

ii$)$ Calculate the net tax liability for the year $(2$ marks$)$

b$)$ Mr$.$ Elias Hodari is a businessman dealing in both vatable and non vatable goods. He is registered for value added tax $($VAT$)$ purposes.

The following transactions relate to his business during the month of February $2024.$

$7$ February: Imported men's suits from Dubai $($United Arab Emirate$)$ for Sh$.3,600,000.$

$9$ February: Purchased motor vehicle spare parts from a local dealer for Sh$.500,000.$

$10$ February: Exported motor vehicle spare parts to Uganda and received Sh$.800,000.$

$14$ February: Sold ten bales of second hand clothes to retail traders at a local market for Sh$.80,000$ per bale.

$14$ February: Purchased materials to construct a godown at Nairobi's Industrial Area for Sh$.960,000.$

$17$ February: Paid the godown construction firm a deposit of Sh$.800,000$ to commence the construction.

The contract price was agreed at Sh$.1,800,000$ with the balance being payable on completion of the godown construction.

$21$ February: Sold men's suits to a local trader for Sh$.4,800,000.$

$22$ February: Supplied motor vehicle spare parts worth Sh$.600,000$ to the Armed Forces of Kenya.

$25$ February: Purchased women's clothes from a local fashion designer for Sh$.1,200,000.$

$25$ February: Supplied non$-$vatable goods to a VAT registered trader for Sh$.900,000.$

$26$ February: Some of the men's suits imported from Dubai were found to be of poor quality and returned to the exporter in Dubai. A credit note of Sh$.450,000$ was issued by the exporter to Mr$.$Hodari.

$30$ February: The Company's hired godown was broken into and men's suits valued at Sh$.720,000$ were stolen.

Transactions are stated as VAT inclusive where applicable

The standard rate of VAT is $16\%.$

Required:

The VAT payable $($or refundable$)$ by Mr$.$ Hodari for the month of February $2024($ignore customs duty and restrictions on deductible input tax$)(9$ marks$)$

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