Section A

1. Kubu works as a lab technician for Lazi Private Hospital. His basic annual salary is M194,600.
During the year ended 31 March 2022, Kubu was transferred to a local clinic to assist for a period
of three months. The hospital paid Kubu M2,900 for all the travel costs relating to this transfer. On
arrival at the clinic, Kubu purchased new protective lab clothing at a cost of M3,300. He also
incurred an additional amount of M1,300 in respect of some reading glasses.

What is the chargeable employment income of Kubu for the year ended 31 March 2022?

A. M191,300
B. M192,900
C. M194,200
D. M190,000

2. MPL Logistics Limited (MPL) received insurance compensation of M250,000 in June 2021. This
was in respect of a truck which had been stolen in May 2021. The adjusted cost base of the truck
on the date of the theft was M230,900. MPL purchased a similar replacement truck at a cost of
M210,500.

What is the chargeable gain realised by MPL Logistics Limited in the year ended 31 March
2022 in respect of the truck?

A. M0
B. M19,100
C. M39,500
D. M20,400

3. On 2 June 2022, Molise, a resident individual, filed an objection to an amended income tax
assessment with the Lesotho Revenue Authority (LRA). It is now December 2022 and he is
concerned that he has not yet received the objection decision from the Commissioner General.

In the absence of any objection decision being made by the Commissioner General, by
when is Molise deemed to have been served with a decision disallowing the objection?

A. 31 July 2022
B. 31 August 2022
C. 31 December 2022
D. 31 March 2023
4. Paul is a member of the senior management team of CP New Agency (CP). During the year ended
31 March 2022, he received free meals and refreshments which had cost CP a total of M2,235,
analysed as follows:

- M1,550 per person spent on social dining events arranged for members of the senior management
team and their spouses.
- M260 for meals provided at the staff canteen. All of CP’s staff are entitled to meals from the staff
canteen on an equal basis.
- M425 per person spent during senior management team retreat sessions to decide upon CP’s
future policies and strategy.

What is the amount of fringe benefit tax (FBT), and exempt fringe benefit(s), in respect of the
meals and refreshments provided to Paul by CP New Agency during the year ended 31
March 2022?

Option FBT Exempt Fringe Benefits

M M
1 294 1,550
2 846 260
3 664 685
4 776 425

A. Option 1
B. Option 2
C. Option 3
D. Option 4

5. Mbewe, a Zimbabwe national, came to Lesotho on 1 November 2021 to take up a one-year fixed-
term contract of employment. He returned to Zimbabwe on 31 October 2022 when his contract
ended.

Which of the following correctly describes the Lesotho residence status of Mbewe for the
year of assessment ended 31 March 2022?

A. He is not resident because his normal place of abode is in Zimbabwe

B. He is not resident because he is not a Lesotho national
C. He is not resident because he is not present in Lesotho for more than 182 days in the tax year
ended 31 March 2022
D. He is resident because he is present in Lesotho for more than 182 days in a consecutive 12-
month period, part of which falls in the tax year ended 31 March 2022
6. Lolo Business Consultants Pty started to trade on 1 April 2020. For the year ended 31 March 2021
(its first year of trading) it had a total income tax liability of M26,000. M2,500 of this amount was
settled by way of tax withheld on income received from overseas and M4,000 by way of advance
corporation tax with respect to a dividend which was paid in November 2020.

What amount of tax will Lolo Business Consultants Pty need to pay on 30 September 2021
as its first instalment for the year ended 31 March 2022?

A. M7,800
B. M7,050
C. M5,850
D. M6,600

7. Basotho Hats Pty, a vendor for value added tax (VAT) purposes, specialises in weaving traditional
hats, most of which are exported abroad. The following transactions occurred during the tax period
ended 31 March 2022. All amounts exclude VAT where appropriate:

M M
Revenue:
Exports 65,000
Local sales 12,000
77,000
Material costs:
Attributable to export sales 22,750
Attributable to local sales 7,900
(30,650)
Profit 46,350

Note: All materials are sourced in Lesotho.

What is the amount of value added tax (VAT) payable by/(refundable to) Basotho Hats Pty
for the tax period ended 31 March 2022?

A. (M2,432) refundable
B. M615 payable
C. (M2,798) refundable
D. M6,953 payable
8. Lisebo works as a public relations officer for AD Communications Ltd and earns an annual salary of
M220,000. She lives in a house provided by the company, free of charge. The annual market rate
rent for such a property is M72,000. Lisebo is entitled to other benefits to the total value of
M60,000.

What is the annual taxable value of the housing fringe benefit with respect to the
accommodation provided to Lisebo by AD Communications Ltd?

A. M70,400
B. M56,000
C. M72,000
D. M44,000

9. Apolo Business Solutions Pty uses a substituted accounting period ending 31 August every year.

By which date must Apolo Business Solutions Pty submit its fringe benefits tax return for
the first quarter of every year of assessment?

A. 14 July
B. 14 December
C. 30 June
D. 30 November

10. Toti, an entrepreneur, runs an upholstery business. He has elected for the pooling method of
depreciation to apply.

Details of Toti’s depreciable assets for the year ended 31 March 2022 are as follows:

Opening balance at 1 April 2021 Disposal proceeds

M M
Equipment 180,400 180,100
Delivery van 220,300 -

There were no acquisitions during the year.

The delivery van is used 70% for business purposes and 30% for private purposes.

What is the depreciation allowance which can be claimed by Toti for the year ended 31
March 2022?

A. M38,613
B. M38,853
C. M55,375
D. M55,135
11. Dr Peru, a medical practitioner, installed built-in air conditioners at a cost of M66,600 in all of the
rooms of his private hospital on 30 September 2021. He deliberately misrepresented the
installations to an officer of the Lesotho Revenue Authority (LRA) as free-standing office
equipment in order to be able to treat the associated costs as Group 2 depreciable assets. Dr
Peru’s chargeable income for the year ended 31 March 2022 amounted to M205,000.

What is the amount of additional tax payable as a result of the misleading statements
provided by Dr Peru in respect of the air conditioners?

A. M1,998
B. M0
C. M3,996
D. M5,000

12. Which of the following costs incurred by Letsatsi Financial Institution Pty, a money lending
business, are FULLY allowable expenses for tax purposes?

(1) Interest payable on a long-term loan

(2) A donation of M1,200 paid to the Lesotho Sports & Recreation Commission
(3) Directors' fees
(4) Christmas staff party costs

A. 1, 2, 3 and 4
B. 2, 3 and 4 only
C. 1, 2 and 3 only
D. 1, 2 and 4 only

13. On 1 April 2021, Rori, a fashion designer, purchased a six-year franchise at a cost of M192,000.

What is the amount of tax deduction that Rori can take in respect of the franchise in the
year ended 31 March 2022?

A. M192,000
B. M32,000
C. M48,000
D. M38,400
14. Tele Concrete Bricks Pty, a manufacturer of bricks and retailer of hardware, paid a dividend of
M75,200 during the year ended 31 March 2022. 30% of this dividend was paid out of qualified
income. The payment was made to the following shareholders:

M
Pona (Botswana resident individual) 30,000
Nkau (Lesotho resident individual) 25,000
Klas Properties (Zimbabwean resident corporation) 20,200
75,200

What is the withholding tax payable by Tele Concrete Bricks Pty in respect of the dividends
paid during the year ended 31 March 2022?

A. M8,785
B. M18,800
C. M3,514
D. M3,765

15. Motaung received terminal benefits of M550,800 when his employment contract came to an end
on 31 December 2021. These were in addition to the total employment income of M1,638,000
which he had received over the three year period of his employment.

What is the tax payable by Motaung on his terminal benefits?

A. M0
B. M137,700
C. M35,325
D. M25,890
Section B

1. This scenario relates to two requirements.

Tinto is a self-employed resident individual. She runs a successful bakery, producing and selling
various flour-based food products to individuals and to business outlets.

Tinto’s business makes an annual profit of M250,000. This is after deducting an amount of
M45,000 representing her drawings for personal use.

Tinto is contemplating operating as a company, rather than as a sole proprietor. If she does so,
her overall profits will remain the same and she will be entitled to M45,000 of director’s
remuneration which will replace the personal drawings which she was taking out of the business
when operating as a sole proprietor. The company will also pay her dividends of M230,000 per
year.

Under either scenario the business will also receive annual interest income of M6,500 from a
savings account. This amount is net of withholding tax and is in addition to the amounts already
given above.

(a) Calculate the TOTAL taxes payable for the year ended 31 March 2022, if Tinto operates
as a:

(i) sole proprietor; or

(ii) a company.

Notes:
1. Tinto does not have other sources of income, other than those mentioned in the scenario.
2. You should provide explanations for any amounts excluded from your calculations.
(8 marks)

(b) Comment on whether Tinto will realise a tax saving by operating as a company rather
than continuing as a sole proprietor. You should briefly provide two reasons in support of
your conclusion.
(2 marks)

(10 marks)
2. This scenario relates to two requirements.

Mara accepted an offer of employment with TBK Ltd (TBK) and began working as managing
director for the company on 1 June 2021. In addition to his annual salary of M630,000, Mara was
entitled to the following benefits:

(1) Unlimited access to a diesel-powered company car which had cost TBK M420,000 when it was
purchased in November 2020. The market value of the car on 1 June 2021 was M375,000. All the
running costs of the car were borne by TBK. The total costs incurred for the period from 1 June
2021 until 31 March 2022 came to M52,300. Mara paid M500 per month to TBK towards provision
of the company car.

(2) Free accommodation in a townhouse purchased by TBK in 2014 for M350,300. The annual
market rental for similar houses is M117,600.

(3) Payments for the following utilities:

- Electricity and water for which payments to the maximum of M15,700 are reimbursed upon
provision of supporting documents. Mara’s supporting documents for the period from 1 June
2021 until 31 March 2022 came to M18,900.

- Mobile phone in respect of which M6,500 was paid by TBK to the relevant service provider for
the period ended 31 March 2022.

(4) A superannuation fund into which both TBK and Mara contribute. In the period from 1 June 2021
to 31 March 2022, TBK contributed M78,000 for Mara, while Mara personally contributed
M52,000.

(5) Provision of a gardener and a night watchman in respect of which TBK incurred a total cost of
M8,200 for the period from 1 June 2021 to 31 March 2002. This comprised M3,500 for the
gardener and M4,700 for the night watchman.

(a) Calculate the fringe benefits tax (FBT) payable by TBK Ltd in respect of the fringe
benefits provided to Mara for the period ended 31 March 2022.

Note: Your answer should deal with all the benefits mentioned in the question and you should
indicate by the use of a zero (0) any amounts which are either exempt from FBT or to which FBT
is not applicable.
(7 marks)

(b) Explain, with supporting calculations, the tax implications of the superannuation fund
contributions in note (4) for both Mara and TBK Ltd.
(3 marks)

(10 marks)
3. This scenario relates to two requirements.

Ali Printers (Ali) is a value added tax (VAT) vendor who supplies photocopying and printing
services.

Mojau, a newly appointed accountant, has prepared the following draft VAT return for Ali for the
tax period ended 31 March 2022. However, due to Mojau’s inexperience, this return does contain
a number of errors.

Note M
Output VAT
Invoiced services 1 7,935
Input VAT
Motor van expenses 2 1,860
Equipment service and maintenance 3 960
Staff refreshments 81
Debts written off 4 765
VAT payable for the period 4,269

The following notes are relevant. All amounts, where appropriate, exclude VAT at the rate of 15%.

(1) Invoiced services relate to invoices to the value of M52,900. Included within this amount are
invoices to the value of M24,300, where a 5% prompt payment discount was offered and taken
by customers. The amount of M24,300 is after applying the 5% discount.

(2) The motor van is used by Ali for both business and private purposes. The total motor van
expenses incurred amounted to M12,400. The business proportion is 65%.

(3) Ali incurred M6,400 for the service and maintenance of printing equipment. M1,800 of this
amount was paid to a person who is not registered for VAT.

(4) During the month, Ali decided to write off an amount of M5,100 relating to two long-standing
debts owed to the business and which had proved to be irrecoverable. One amount was for
M1,600 and the VAT on this sale had originally been included in the return for the period ended
28 February 2021. The second amount was for M3,500 and the VAT on this sale had originally
been included in the return for the period ended 31 May 2021.

Additional information:

On 15 April 2022, Ali ordered a printer cartridge. On 2 May 2022, Ali transferred the amount due
to MK Supplies’ bank account, and an invoice was issued on the same date. The cartridge was
delivered to Ali on 5 June 2022.
(a) Prepare the corrected value added tax (VAT) return for Ali Printers for the tax period
ended 31 March 2022, and provide a brief explanation for any amounts excluded from your
calculations.

Note: Indicate, by the use of a zero (0), any items mentioned in the question for which no VAT is
payable or claimable.
(7 marks)

(b) Explain the rules which determine how the time of a supply is determined for VAT
purposes and, by reference to these rules, state the period in which the supply of the
printer cartridge to Ali will be deemed to take place.
(3 marks)

(10 marks)
4. This scenario relates to two requirements.

Lesia is a resident individual and entrepreneur with various business interests. In March 2022, he
made the following disposals of investments due to severe cash flow constraints:

(1) Sale of 8,000 ordinary shares in Basia Ltd, an unquoted company, for M680,000. He had
originally purchased 4,500 shares in May 2001 at their market price of M40 per share. The
remaining 3,500 shares were acquired in 2012 through a rights issue for M30 per share, when
their market price was M35 per share.

(2) Sale of business premises for M320,000. In October 2020, the entire premises had been
destroyed by fire. The adjusted cost base (ACB) of the premises on the date that the fire occurred
was M180,900. Lesia received insurance proceeds of M205,300 by way of compensation for the
damage. Lesia spent M195,500 of the insurance compensation on reconstructing the premises.

(3) Sale of a freehold commercial property which had always been let out by Lesia. Sale proceeds
amounted to M4,950,530. The property had originally cost M304,600 in March 2005. Lesia had
tried to sell the property in March 2015 when its ACB was M920,500 but the sale had fallen
through at the last minute. In October 2016, Lesia had constructed a boundary wall at a total cost
of M210,700.

(4) Legal fees paid in respect of these disposals amounted to M4,800.

Note:

Relevant price indices are as follows:

March 2022 550

October 2020 390
October 2016 320
March 2015 280

(a) Calculate Lesia’s total chargeable gains arising from the disposal of assets in the year
ended 31 March 2022.
(8 marks)

(b) Explain when it is permissible, for tax purposes, for the cost of an asset to be indexed
for inflation on its disposal.
(2 marks)

(10 marks)
5. This scenario relates to three requirements.

RM Retailers is a Lesotho resident partnership, which is owned by two partners, Robert and Mike.
Robert is a Lesotho national and resides in Maputsoe, Lesotho. Mike is a South African national.
He resides in Ficksburg, South Africa and has never visited Lesotho.

The partnership runs two businesses. One business operates in Maputsoe, and is managed by
Robert. The other is in Ficksburg and it is managed by Mike.

The partners share profits and losses equally.

The summarised financial results of the partnership for the year ended 31 March 2022 are given
as follows:

Note M M
Turnover
Maputsoe business 609,070
Ficksburg business 261,030
870,100
Expenses:
Interest on capital 1
Robert 15,000
Mike 15,000
30,000
Staff costs 2 357,000
Sundry expenses 3 180,000
567,000

Notes:

(1) Interest on capital is paid out of Lesotho source income.

(2) Staff costs relate to the following:

(i) Wages and salaries of M330,000 paid to both partners and their employees. Each partner
earned M120,000, which is entirely funded from the business in Lesotho. The balance relates
to wages paid to the employees of both businesses and should be split in proportion to the
turnover of the respective businesses.

(ii) Superannuation fund contributions of M13,500 for each partner. The contributions are entirely
paid out of Lesotho-source income by the partnership on behalf of both partners. In addition,
the partners contributed M4,500 each from their own personal finances.

(3) Sundry expenses include a loss of M45,600 brought forward from the year of assessment ended
31 March 2021. The loss relates to the business in Ficksburg. Residual sundry expenses relate to
the partnership in its entirety and should be split in proportion to the turnover of the respective
businesses.
Additional information:

On 31 August 2021, the partnership sold a delivery van for M160,000. The van was used for the
business in Maputsoe. It had cost the partnership M210,000 when it was acquired on 1 May 2020.
Neither this year’s depreciation allowance nor the profit or loss on disposal have been included
within this year’s financial results.

(a) State the reason why RM Retailers would be considered to be a Lesotho resident
partnership for the year ended 31 March 2022.

(1 mark)

(b) Calculate the notional chargeable income of RM Retailers for the year ended 31 March
2022.

Note: Your calculation of notional chargeable income should be split between Lesotho and foreign
source.
(7 marks)

(c) Calculate the tax payable in Lesotho by Robert and Mike for the year ended 31 March
2022.
(7 marks)

(15 marks)
6. This scenario relates to two requirements.

MJ Textile Manufacturer Ltd (MJ), a company manufacturing textiles, has provided you with the
following information with respect to its results for the year ended 31 March 2022.

Note M
Revenue 1 1,203,400
Less operating costs 2 (674,600)
Operating profit 528,800
Investment income 3 111,500
Research and development costs 4 (284,200)
Legal and other costs 5 (215,040)
Net profit 141,060

Notes:

(1) Revenue includes income from export sales amounting to M310,700. This amount is inclusive of
foreign withholding tax of M15,535. All revenue relates to manufacturing income.

(2) Operating costs include expenses of M23,800 which need to be disallowed for tax purposes.
Depreciation allowance calculated on all assets held on 1 April 2021 has been included within
operating costs.

(3) Investment income comprises Lesotho source dividends of M6,500 and foreign source dividends
of M105,000. The amount of M105,000 includes foreign tax of M31,500 which had been
deducted from these dividends. Otherwise the balance of the company’s net profit relates to its
manufacturing operations.

(4) The amount of M284,200 in respect of research and development costs comprises the following:

M
Market research costs 74,300
Cost of production design 124,000
Cost of purchase of new equipment 85,900
284,200

The new equipment was purchased on 1 July 2021.

(5) The amount of M215,040 in respect of legal and other costs has been analysed as follows:

- A penalty of M35,400 for late renewal of a trader's licence.

- Taxes of M114,140, comprising M3,500 for municipality rates and M110,640 for fringe benefits
tax.

- An annuity payment of M65,500 which was made to a former employee who was injured and
paralysed whilst on duty.
Additional information:

- During the year the company sold a van to an executive director who is also one of MJ’s
shareholders. The van was sold for M130,000 when its market value was M220,100.

- MJ paid dividends of M85,900 on 30 November 2021. 85% of these dividends were paid out of
qualified income.

(a) Calculate the advance corporation tax payable by MJ Textile Manufacturer Ltd during
the year ended 31 March 2022.
(3 marks)

(b) Calculate the corporation tax payable by/repayable to MJ Textile Manufacturer Ltd for
the year ended 31 March 2022.

Note: You should start your answer with the net profit of M141,060.
(12 marks)

(15 marks)