100,000 Interest Income 1,500 Dividend Income 5,500 Expenses Depreciation 20,000 Interest Expenses (1) 7,000 Repairs & Maintenance 1,500 Legal & professional fees (2) 8,000 Salaries 30,000 Bad debts (3) 3,000 Other Expenses (4) 20,000 Notes 1. All Interest was paid and as such there was no accrued interest at year end 2. Professional fees consist of: • Audit and accountancy fees $3,600 • Legal fees re collection of bad debts $2,000 • Cost of setting up business in the selected location $90
In October 2019 Sheldon Anthony was considering setting up a business in either Trinidad & Tobago or Jamaica. Income Statement Projection for 2020 is as follows:
USD
Income
Sales 100,000
Interest Income 1,500
Dividend Income 5,500
Expenses
Depreciation 20,000
Interest Expenses (1) 7,000
Repairs & Maintenance 1,500
Legal & professional fees (2) 8,000
Salaries 30,000
Other Expenses (4) 20,000
Notes
1. All Interest was paid and as such there was no accrued interest at year end
2. Professional fees consist of:
• Audit and accountancy fees $3,600
• Legal fees re collection of bad debts $2,000
• Cost of setting up business in the selected location $900
• Architect’s fee for designing a new Warehouse which was not used $1,500
3. The Bad debts represents a debt which is outstanding for 180 days.
4. Other expenses include $1,000 for expenses paid for another company owned by Sheldon and $600 for fines and penalties.
The following assets were acquired in 2020:
Asset Cost $
1 Honda Motor car purchased in March 2020 38,000
Equipment 50,000
Computes 4,000
Office Building 72,000
5. Based on your research the capital allowance rates in Trinidad & Tobago are calculated on the reducing balance and the rates are as follows:
- Building and improvements – 10%
- Motor vehicles - 30%
- Equipment and Computer equipment 33.33%
6. The Capital Allowance Rate Sheet for Jamaica is attached.
7. Estimated Tax of $700 was paid to the relevant Tax Authority.
8. Assume Exchange Rates: J$ 140: 1 USD and TT$ 6 :1 USD
9. Corporation Tax Rate in Jamaica is 25%. The Corporation Tax rate in Trinidad is 25% on the first TTD 1 million of chargeable income, and 30% on chargeable income in excess of TTD 1 million.
Required
a. Assuming the projection represents actual amounts, calculate the Corporation Tax
payable/ refundable for 2020 if the business operates in Jamaica or Trinidad. Calculation should be for only one country.
b. What would be the difference in capital allowance for 2021 if the company operates in Trinidad and Tobago compared to operating in Jamaica.
c. Advise Sheldon on circumstances in which obtaining capital allowances on the reducing balance basis is more beneficial.
d. Sheldon would like to know whether he should consider payroll taxes and sales taxes. If he should, he would like to know the applicable rates, thresholds, registration and reporting requirements. Advise Sheldon on these requirements if he were to operate in Jamaica or Trinidad & Tobago. (answer for one country only)
e. Identify 2 documents that must accompany the Corporation Tax return when it is filed
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