Public Taxation

UNIT DESCRIPTION

This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to solve complex tax issues, implement tax planning initiatives and administer tax in various business environments.

LEARNING OUTCOMES

A candidate who passes this paper should be able to:

• Compute the tax liability of enterprises, entities and specialised business
• Handle all value added tax matters
• Apply the procedure for conducting a tax investigation
• Explain the tax dispute resolution mechanism
• Explain the tax implications for cross border business
• Develop tax policies

CONTENT

1. Taxation of business income and specialized business activities

1.1   Partnership business

• Admission of a new partner and retiring partners during the year
• Conversion of partnerships into liability companies
• Incomplete records pertaining to partnership businesses
• Case law on taxation of partnership businesses

2.  Limited companies

• Taxation of companies, including holding company, subsidiaries, branches and related parties
• Incomplete records pertaining to limited companies
• Minimum tax
• Shortfall tax computation
• Taxation of dividends
• Case law on taxation of limited companies
• Rental income, including residential rent income, Commercial rent income and Real estate investment trusts (REITS)
• Charitable institutions
• Leasing entities, including hire purchase lease agreements
• Co-operative societies, Saccos
• Trade associations, amateur sporting association and clubs
• Trust bodies, settlements and estates under administration
• Financial institutions: Banks, insurance companies
• Sea and air transport undertakings
• Collective investment schemes
• Professional, training, management, agency, and consultancy fees
• Property developers and contractors
• Taxation of extractive industries
• Capital gain tax
• Digital service tax
• Application of relevant case law

3. Value added tax administration

• Obligations of a taxable person and offences relating to VAT
• Value added tax computation
• Restriction of input tax claimable
• Imported services and VAT withholding agents
• VAT refunds and bad debt relief computation
• VAT Accountant certificate
• Value added tax automated assessments
• I tax significance and application in value added tax administration
• Application of relevant case law

4.  Tax investigations

• Tax fraud
• Civil and criminal tax investigation
• Events which may trigger an investigation
• Back duty and in-depth examination
• Customs and excise investigations
• Negotiation for settlement: Tax amnesty, Tax Penalties and Enforcement for outstanding taxes
• Types of tax audit and their significance
• Application of relevant case law

5. Tax dispute resolution mechanism

• Tax disputes
• Stages of tax dispute resolution process
• Tax dispute resolution process cycle
• Legal framework and objectives of Alternative Dispute Resolution
• Types of tax disputes eligible for Alternative Dispute Resolution
• Benefits of Alternative Dispute Resolution
• Parties to Alternative Dispute Resolution and their roles
• Issues exempted from Alternative Dispute Resolution
• Alternative Dispute Resolution agreement terms and timelines
• Termination of alternative dispute resolution

6.   Taxation of cross border activities

• Distinction between trading in and trading with a country
• Double taxation agreements; theory, design and application
• Regional perspective with reference to the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA)
• Most favored nation status
• Nature, characteristics and significance of One Stop Border Posts (OSBPs)
• Generalized system of preference and AGOA
• Tax havens and treaty shopping
• Tax information exchange agreements (TIEAS)
• Transfer pricing: oecd guidelines
• Application of relevant case law

7.   Tax planning

• Tax planning for individuals: By way of Tax exempt activities, transactions that are allowable expenses and transactions attracting tax setoffs
• Tax planning for body corporates
• Identifying opportunities to alleviate, mitigate or defer the impact of direct or
• indirect taxation
• Evaluating remuneration packages
• Tax avoidance and anti-tax avoidance provisions in the tax Act, short-fall distributions of dividends
• Sectoral tax incentives
• Disposal of business operations and restructuring of activities
• Tax risk management

8.   Tax systems and policies

• Types of tax systems
• Role of taxation in economic development; tax base expansion, efficiency in tax systems
• Design of a tax policy
• Criteria for evaluation of a tax system
• Tax reforms and modernisation of tax systems under various Acts
• KRA structure – Large Tax Payer and Medium Tax Payer organisations

9.    Professional practice in taxation

• Forms of tax practice and matters relating thereto
• Matters relating to new clients
• Handling of client work
• Disclosures in tax returns, computations and correspondence with the Revenue Authority
• Moral and ethical issues in taxation
• Tax agents, appointment, obligations, professional liability
• Cancellation of tax agents license
• Role of tax agents in appeals procedure
• Tax health check

Sample Reading and Reference Material

1. East African Community Customs Management Act, 2004 (Revised Edition 2017)
2. Excise Duty Act 23 Of 2015 Revised Edition 2017 [2015]
3. Income Tax Act Revised Edition 2018
4. Tax Procedures Act of 2015,Revised Edition 2018
5. Value Added Tax Act of 2013 Revised Edition 2018
6. Kasneb e-learning resources (link on kasneb website)
7. Kasneb approved study packs
8. Sample books from local authors