Mr. Ole Mboga is married to Pesa Mboga. Ole Mboga is a registered engineer and he
is the proprietor of Leta Engineering Services a firm of consulting engineers. He is
nevertheless fully occupied as an employee of Zeta Construction Limited. His
company is therefore managed by his wife who draws Sh.50,000 per month as salary.
PAYE of Sh.20,000 per month is deducted and remitted to the Commissioner.
Zeta Construction Ltd. provided the following emoluments to Mr. Ole Mboga for the
year ended 31 December 2005:
1. Salary of Sh.150,000 per month (PAYE deducted and paid to the
Commissioner Sh.62,000 per month).
2. Housing – Free housing is provided, with water and electricity. He pays a
nominal sh.10,000 per month. Water consumed was for Sh.4,800 and
electricity consumed was for Sh.18,000 during the year.
3. 1,000 ordinary shares for past years of service. Last valuation of shares was at
sh.50 each. The issued share capital is now 25,000 shares. The company paid
a dividend of Sh.10 per share on 31 December 2005.
4. Company car of 2000 cc.
5. Leave pay equal to one month’s salary.
6. Life insurance premium per each household member of Sh.10,000 per annum.
This covers himself, wife and son.
7. Pension at 10% per month. He contributes 5% towards the same scheme.
The scheme is registered.
Leta Engineering Services made an assessed loss of Sh.400,000 for the year of
Mr. Ole Mboga owns property which he bought many years ago.
Rent income account for the year 2005 is as follows:
Interest on loan
Insurance, rent and
Loss to be carried
(a) Taxable income of Mr. Ole Mboga for the year of income 2005.
(b) Tax payable by Mr. Ole Mboga for the year of income 2005.
( 5 marks)
(c) Mr. Ole Mboga is being invited by Tana Ranching Company Limited to be
their manager and reside at the farm. What will be the tax implications of this?
Explain but do not compute if he takes up the offer and every thing remains
unchanged other than the residence. ( 3 marks)