Tax Trivia - Tax expert in Kenya

1: Which of the following is not an advisable way of preventing tax disputes

Keeping proper records

Negotiation with the tax authority

Eliminating less Important documents

Engaging a tax consultant

Correct! Wrong!

2. Which is the following is not a tax assessment under the Tax procedures act

Default assessment

Annual assessment

Amended assessment

Advance assessment

Correct! Wrong!

3. Identify the immediate course of action for a tax payer who is dissatisfied with the commissioner’s assessment

File a case with the high court

Appeal to the Tax appeals Tribunal

Raise an objection with the commissioner

Do nothing

Correct! Wrong!

4. What is the maximum duration allowed by the commissioner for a tax payer to lodge an objection after being served with a notice of assessment?

30 Days

21 Days

60 Days

Specified by the commissioner

Correct! Wrong!

5. What is the maximum duration allowed for the tax appeal tribunal to hear and determine an appeal?

6 Months

30 Days

90 Days

1 year

Correct! Wrong!

6. Which of the following is not true about the Alternative dispute Resolution (ADR) Mechanism

It is Voluntary

It is Participatory

Can only be initiated by the tax payer

Parties are free to disagree with each other

Correct! Wrong!

7. The following are benefits of the Alternative dispute Resolution (ADR) Mechanism except

ADR fosters confidentiality

ADR improves relations between tax payer and tax authority

ADR is a cheaper and faster way of resolving disputes

ADR is appropriate for cleansing tax fraud

Correct! Wrong!

8. Is tax avoidance punishable under the law?

No tax payers are encouraged to avoid taxes

No but it is discouraged

Yes, it attracts a penalty equal to 200% of the amount avoided

Yes it is same as failing to pay taxes

Correct! Wrong!

9. State the penalty for failing to register or de-register as tax payer when required to do so by the law

Shs 100,000 per month

Shs 20,000 per month

Shs. 50,000 per month

Shs 10,000 per month

Correct! Wrong!

10. Mr tax payer has made a VAT refund claim of Shs 100,000. Thorough scrutiny of his claim revealed that he was not entitled to any refund. State the penalty that will be imposed on him

Shs 100,000

Shs 200,000

Shs 50,000

None

Correct! Wrong!

11. What is the maximum period allowed to for a taxpayer to recover losses against profits made in subsequent years?

4 Years

6 years

9 years

12 years

Correct! Wrong!

12. Which of the following gains is not subject to tax in Kenya

Royalties

Business gains

Inheritance gains

Retirement benefits

Correct! Wrong!

13. Which of the following incomes is subject to capital gains tax in Kenya

Sale of land at a gain

Disposal of motor vehicle

Issuance of shares by a company

all of the above

Correct! Wrong!

14. Mashamba Ltd Buys huge parcels of land then subdivides for resale. Which tax is chargeable on their transactions?

Capital gains tax

Property developer’s tax

Excise tax

Income tax

Correct! Wrong!

15. Which of the following entities is not exempt from taxation

Woodworkers trade association

United forces football club

Catholic Church mission school

BBC Bank members club

Correct! Wrong!

16. Which of the following facts is not true about VAT

VAT on credit transactions is payable only when cash is collected

Its is payable on monthly basis

VAT is a multi-stage tax

Excess VAT payment is claimable

Correct! Wrong!

17. Which type of tax is popularly known as “sin tax”

Customs duty

Excise duty

Value added tax

Betting and lotteries tax

Correct! Wrong!

18. Lilly had the following profits and losses for the year 2018. i. Profits from salon business 400,000 ii. Farming loss (100,000) iii. Directors allowance 300,000 iv. Insurance compensation for her car 200,000 What is her taxable income for the year?

Sh.800,000

Sh.700,000

Sh.400,000

Sh.900,000

Correct! Wrong!

19. Taxes

Are mandatory payments

Are necessary for financing government expenditures

Do not relate directly to the benefit of government goods and services received

Are all of the above

Correct! Wrong!

20. The year of income (tax year) for individuals runs from

1 January to the following 31 December

1 July to the following 30 June

1 April to the following 31 March

Any 12 month cycle

Correct! Wrong!

21. An indirect tax is a tax that is charged on

Income

Spending

Profits

Wealth

Correct! Wrong!

22. Which of the following employment benefits is exempted from tax

University fees paid by an employer for the employee

Send off package for a retrenched staff

Employer’s contribution to a registered pension scheme

Hardship allowance paid to a teacher working in a refugee camp

Correct! Wrong!

23. A bank offers its employees loans at Zero interest rate. What is the tax implication of the interest benefit?

Employees will bear tax on the interest benefit

The bank will be taxed on the interest benefit

The benefit will be shared between the bank and the employees

This matter has no tax implication

Correct! Wrong!

24. The tax advantage of a mortgage is

The transaction costs are tax deductible

Up to Sh. 25,000 monthly interest payments are tax deductible

Mortgagers are granted one year tax holiday

Savings of up to Sh.4000 a month are tax deductible

Correct! Wrong!

25. Persons with disabilities

Are exempted from income tax

Are not required to register for tax purposes

Up to Sh. 150,000 of their monthly income is exempted from tax

Are entitled to a tax refund

Correct! Wrong!

26. As per the income tax act, income includes

Profits from business

Dividends declared

Patent royalties

All of the above

Correct! Wrong!

27. The following is true about tax residential status except

Has nothing to do with citizenship

A resident person in one year may become nonresident in another

Determines whether a person will be taxed or not

Determines the rates to be applied

Correct! Wrong!

28. Which of the following expenses is generally not deductible against income from employment

Contribution to a pension scheme

Cost of travel from home to work

Subscriptions to relevant professional body

Donation to a registered charity

Correct! Wrong!

29. Free meals provided by an employer to an employee

Are exempted from tax up to Sh 4000 per month

Are exempted from tax up to Sh. 3,000 per month

Are claimable as an allowable deduction

Are fully exempted from tax

Correct! Wrong!

30. Manyumba Ltd collects monthly rent of Sh. 200,000 from its stalls in town. The applicable tax rate is

10%

30%

graduated 10%-30%

5%

Correct! Wrong!

31. What is the maximum allowable deduction for contributions made by employees to registered pension schemes?

Sh. 300,000 per annum

Sh. 240,000 per annum

Sh. 150,000 per annum

Sh. 200,000 per annum

Correct! Wrong!

32. Which of the following professionals is not qualified to act as a tax agent?

A former KRA employee

An advocate of the high court

An accountant registered under ICPAK

A Cyber technology expert

Correct! Wrong!

33. Withholding tax is NOT

A convenient way of collecting taxes

A method of collecting taxes in advance

A type of tax

A way of minimizing tax evasion

Correct! Wrong!

34. The principle of equity in taxation implies

Taxing people in proportion to their income

Eliminating tax evasion to avoid disadvantaging genuine taxpayers

Taxing all incomes irrespective of the source

All of the above

Correct! Wrong!

35. Tax shifting is

Removing unproductive taxes replacing them with new ones

Relocating from high to low tax regimes

Transferring tax burden from one person to another through transactions

Deferring tax payment by rescheduling transactions

Correct! Wrong!

36. Comment on taxation of pension annuities received by a 58-year-old retiree

The first Sh.600,000 per annum is exempted from tax

The first Sh.300,000 per annum is exempted from tax

The entire pension is exempted from tax

The entire pension is taxable

Correct! Wrong!

37. Comment on taxation of pension annuities received by a 68-year-old retiree

The first Sh.600,000 per annum is exempted from tax

The first Sh.300,000 per annum is exempted from tax

The entire pension is exempted from tax

The entire pension is taxable

Correct! Wrong!

38. Comment on taxation of pension lump sum received by a 58-year-old retiree

The first Sh.600,000 per annum is exempted from tax

The first Sh.300,000 per annum is exempted from tax

The entire pension is exempted from tax

The entire pension is taxable

Correct! Wrong!

39. Medical insurance or benefit offered by an employer to employees

Is a non-taxable benefit if offered to all employees

Is exempted from tax up to Sh. 300,000 per annum

Is fully exempted from tax

Is a taxable benefit

Correct! Wrong!

40. Fringe benefit tax is

Tax on employees on benefits from employers

Tax on employers on low interest loans advanced to employees

Tax on irregular incomes like bonuses

A general term describing collection of employee taxes from employers

Correct! Wrong!

41. Tax free remuneration refers to

Employment benefits exempted from tax

Income earned by tax exempt persons

Employment benefits not defined by the income tax act

Tax burden of the employee met by the employer

Correct! Wrong!

42. Mr Taxpayer files his tax return of Sh. 100,000 on 5th July 2020, five days after the due date. His tax penalty shall be

Sh. 5,000

Sh. 2000

Sh. 20,000

Sh. 10,000

Correct! Wrong!

43. Kasuku Ltd Filed July’s PAYE return of Sh. 1000,000 on 12th August 2020. The late PAYE filing penalty shall be

Sh. 10,000

Sh. 25,000

Sh. 20,000

Sh.250,000

Correct! Wrong!

44. Amadi Ltd Filed July’s PAYE return of Sh. 20,000 on 12th August 2020. The late PAYE filing penalty shall be

Sh. 10,000

Sh. 25,000

Sh. 20,000

Sh.5,000

Correct! Wrong!

45. Taylor Ltd deducts withholding tax on professional services offered by Karan consultants in the month of July 2020. The due date for remitting the amount deducted is on

20 July 2020

9 August 2020

9 July 2020

20 August 2020

Correct! Wrong!

46. Taylor Ltd deducts Sh. 100,000 withholding tax on professional services offered by Karan consultants in the month of July 2020. The withholding tax is remitted on 17th August 2020. The late payment penalty shall be

Sh. 20,000

Sh. 5000

Sh. 25,000

Nil

Correct! Wrong!

47. The advance tax payable for a 20 ton truck is

Sh. 24,000

Sh.60,000

Sh.30,000

Sh.48,000

Correct! Wrong!

48. The following is true about motor vehicle advance tax except

It is not a final tax

Is payable on commercial vehicles

Is due on 20th of January

Passenger vehicles are not required to pay

Correct! Wrong!

49. A Resident person is subject to Turnover tax (TOT) if the turnover for a given year is

Between Sh. 500,000 and sh. 5000,000

Between Sh. 1000,000 and Sh. 5000,000

Between Sh. 1000,000 and Sh. 50,000,000

Above sh. 500,000

Correct! Wrong!

50. TOT does not apply to the following except

Rental Income

Management, Professional and Training Fees

Any income that is subject to a final withholding tax under the Income Tax Act

Amounts that are subject to Value added Tax (VAT)

Correct! Wrong!

51. What is the maximum duration allowed for a trader to claim input tax?

3 months

1 month

6 Months

12 months

Refer to Sec 17(2) VAT act 2013

Show hint

Correct! Wrong!

52. Which of the following documents cannot be used in claiming input tax

Original invoice

Customs entry

A debit note

Remittance advice

Refer to Sec 17(3) VAT act 2013

Show hint

Correct! Wrong!

53. How is a newly registered person supposed to deal with input tax on inventory held at the date of registration?

Input tax on items acquired prior to registration is not claimable

Launch a claim within 3 months of registration for supplies acquired within 24 months immediately preceding registration

Launch a claim within 1 month of registration for supplies acquired within 12 months immediately preceding registration

Claim the input tax in the next VAT return

Refer to Sec 18 VAT act 2013

Show hint

Correct! Wrong!

54. In case of overpayment of VAT, the maximum duration to launch a refund claim is

1 month

3 months

12 months

At the discretion of the commissioner

Refer to Sec 30 VAT act 2013

Show hint

Correct! Wrong!

55. In case of a bad debt written off, an application for refund must be made within

3 years from the date of the supply

4 years from the date of the supply

5 years from the date of the supply

1 year from the date of the supply

Correct! Wrong!

Tax laws amendment act reduced the period from 5 years to 4 years

56. A bad debt written off and refunded by the commissioner is subsequently recovered, the registered person should

Refund the commissioner within 30 days with 2% interest per month for further delay

Refund the commissioner within 60 days with 1% interest per month for further delay

Refund the commissioner within 30 days with 1% interest per month for further delay

Refund the commissioner immediately with 2 % interest per month for further delay

Refer to Sec 31 VAT act 2013

Show hint

Correct! Wrong!

57. Njeuri a registered trader is convicted for interfering with his supermarket cash registers such that they exempt taxable goods. He is liable to

Imprisonment for a term not exceeding 5 years or a fine not exceeding Sh.1, 000, 000

Imprisonment for a term not exceeding 3 years or a fine not exceeding Sh.800, 000

Imprisonment for a term not exceeding 5 years and fine not exceeding Sh.1,000, 000

Imprisonment for a term not exceeding 2 years or a fine not exceeding Sh.200, 000

Refer to Sec 41 VAT act 2013

Show hint

Correct! Wrong!

58. A trader not registered for VAT charges tax on supply of goods. The trader shall

Be required to refund the customer

Be registered immediately for VAT

Pay the tax to the commissioner within 7 days

Wait for the determination of the tax tribunal

Refer to Sec 42(2&3) VAT act 2013

Show hint

Correct! Wrong!

59. The VAT classification of bottled water is

Standard rate-16%

Zero rated

Exempt

Only piped water is exempt (first schedule-95)

Show hint

Correct! Wrong!

60. The VAT classification of Factory plant and machinery is

Standard rate-16%

Zero rated

Exempt

Was initially exempt but now taxed under TLAA 2020

Show hint

Correct! Wrong!

61. The VAT classification of plastic biogas digesters is

Standard rate-16%

Zero rated

Exempt

Was initially exempt but now taxed under TLAA 2020

Show hint

Correct! Wrong!

62. The VAT classification of transfer of a business as a going concern is

Standard rate-16%

Zero rated

Exempt

Was initially exempt but now taxed under TLAA 2020

Show hint

Correct! Wrong!

63. The VAT classification of parts imported for assembly of computers is

Standard rate-16%

Zero rated

Exempt

Was initially exempt but now taxed under TLAA 2020

Show hint

Correct! Wrong!

64. The VAT classification of bread is

Standard rate-16%

Zero rated

Exempt

Zero rated VAT act 2013 second schedule (13A)

Show hint

Correct! Wrong!

65. The VAT classification of maize flour is

Exempt

VAT act 2013 (second schedule 13)

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Correct! Wrong!

66. The VAT classification of unprocessed milk is

Standard rate-16%

Zero rated

Exempt

Exempt (first schedule-21)

Show hint

Correct! Wrong!

67. The VAT classification of processed milk is

Standard rate-16%

Zero rated

Exempt

VAT act 2013 (second schedule 15)

Show hint

Correct! Wrong!

68. The VAT classification of fermented milk (yoghurt) is

Standard rate-16%

Zero rated

Exempt

VAT act 2013 (second schedule 15) zero rates processed milk not concentrated

Show hint

Correct! Wrong!