CPA Advanced Taxation Taxation of cross border activities Questions & Answers (PDF)

August 2026

4 Questions

Question 2a

Distinguish between “trading in Kenya” and “trading with Kenya” for purposes of taxing cross-border business profits.

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Question 2b

Explain THREE transfer pricing documentation and risk-management measures that Amani Consulting Ltd. should maintain in line with the Income Tax Act, the Transfer Pricing Rules and OECD principles.

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Question 2c

Amani Consulting Ltd., a Kenyan resident company, provides engineering and digital project-management services

in Kenya, Rwanda and Uganda. The following information relates to the year ended 31 December 2025:

Particulars	Sh.
• Profit from Kenyan operations before foreign income and transfer pricing adjustment	80,000,000
• Profit attributable to a permanent establishment in Rwanda after deductible expenses	16,000,000
• Tax paid in Rwanda on the permanent establishment profit	4,000,000
• Gross technical service fees from an unrelated Ugandan customer	12,000,000
• Direct expenses incurred in earning the Ugandan technical service fees	2,000,000
• Withholding tax deducted in Uganda under the applicable DTA	1,200,000
• Arm’s length adjustment for undercharging a related non-resident distributor	5,000,000

Additional information:

1. Amani Consulting Ltd. has no separate foreign subsidiary. All foreign income is earned directly by the Kenyan company.

2. The Rwanda permanent establishment profit is stated after deducting expenses wholly and exclusively incurred in Rwanda. Head office expenses already allocated to Rwanda should not be deducted again in Kenya.

3. Foreign tax credit is available only to the extent of Kenyan corporation tax attributable to the relevant foreign-source income.

4. The related non-resident distributor performs only routine marketing functions and the Commissioner has issued an arm’s length adjustment based on comparable independent margins.

7. The foreign tax credit should be computed separately for each source of foreign income and should not create a refund or be set off against Kenyan tax on purely Kenyan-source income.

6. Unless otherwise stated, all amounts are before Kenyan corporation tax. Amani Consulting Ltd. has no brought forward tax losses, unutilised foreign tax credits or capital allowance claims for the year.

5. The Ugandan technical service fees were earned without a fixed place of business or dependent agent in Uganda; only withholding tax was deducted at source under the applicable tax rules.

Required:

Compute the Kenyan taxable income, foreign tax credit and corporation tax payable by Amani Consulting Ltd.

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Question 4b

Assume that the property group is considering routing future property disposals through a non-resident holding company whose value is substantially derived from immovable property situated in Kenya.

Required:

Explain FOUR anti-avoidance measures that the Commissioner could apply where the arrangement is implemented mainly to avoid Kenyan tax.

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April 2026

1 Questions

Question 3a

In a Tax Master Class, one of the facilitators noted that “International tax relations are shaped by frameworks intended to balance domestic revenue needs with trade facilitation”.

With reference to the above statement:

(i) Assess the effectiveness of Advance Pricing Agreements (APAs) in providing tax certainty for cross-border transactions involving related persons in Kenya.

(ii) Evaluate TWO anti-avoidance measures a government might deploy to counter the erosion of the tax base caused by entities routing transactions through Tax Havens.

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December 2025

2 Questions

Question 5a

The Most Favoured Nation (MFN) status is fundamental in international trade agreements and if well designed, the participating countries may derive major benefits.

Required:

Explain FOUR benefits that a granting country derives from conferring MFN status to another nation.

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Question 2a

The East African Community (EAC) has implemented several harmonised tax policies to dismantle fiscal barriers and create a unified economic space.

With reference to the above statement, explain TWO tax policies within EAC that have promoted trade and economic integration across the EAC region.

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August 2025

2 Questions

Question 2a

Treaty policies are central in shaping a country’s external tax relations, facilitating trade and investments and ultimately fostering economic co-operation. However, their implementation is subject to hurdles which affect the realisation of their objectives.

Required:

Evaluate FOUR structural hinderances to the implementation of tax treaty policies in your country.

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Question 3a

As a regional trade consultant working with the East African Community (EAC) secretariat, explain FOUR ways on how the implementation of One Stop Border Posts (OSBPs) have contributed to the growth of regional trade in East Africa.

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April 2025

3 Questions

Question 3a

Afri Reach Ltd. is a multinational company registered in Kenya and it has its headquarters in Nairobi. In order to take advantage of investment opportunities arising from the recent treaties within East Africa region, the company intends to open a branch in Tanzania and a subsidiary company in Rwanda (Afri Reach Rwanda).

Required:

As a tax consultant, you are required to advise the management of Afri Reach (Kenya) on the following:

(i) Taxation of the income of the branch in Tanzania and the subsidiary company in Rwanda.

(ii) THREE methods that the company could use to adjust the transfer prices in arriving at taxable income in Kenya.

(iii) THREE requirements to be met in order to qualify for double taxation relief in Kenya.

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Question 2a

Analyse THREE tax planning avenues available to importers of goods in your country.

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Question 4a

Explain the term “tax haven” as used in taxation.

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December 2024

3 Questions

Question 4a

(i) Explain the term “treaty shopping” as used in taxation.

(ii) Evaluate THREE obstacles that the government in your country could encounter when dealing with multinational corporations engaging in treaty shopping to undermine government efforts in maximising tax revenue.

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Question 5c

Tamala Nyambura is a resident of Kenya. During the year ended 31 December 2023, she received the following income:

From employment in Kenya Sh.720,000 gross.

From employment in Zambia Sh.540,000 (net of Sh.78,000 paid as tax in Zambia)

Assume that:

Kenya has a double taxation agreement with Zambia.
Income from Zambia has already been converted into equivalent Kenya Shillings.

Required:

Compute double taxation relief due to Tamala Nyambura and net tax payable if any for the year ended 31 December 2023.

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Question 3b

Tax Information Exchange Agreements (TIEAs) are bilateral agreements between two countries aimed at improving tax compliance and reducing tax evasion. While TIEAs are intended to enhance transparency and ensure that taxpayers are meeting their obligations through information sharing, they also present challenges for developing countries.

Required:

Argue FOUR cases against Tax Information Exchange Agreements (TIEAs) that are encountered by developing countries.

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August 2024

2 Questions

Question 2a

Analyse FOUR challenges of taxing digital economy by the Revenue Authority of your country.

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Question 5b

In a tax seminar one of the facilitators noted that “most governments in developing countries are faced with challenges of regulating and combating the use of tax haven”.

With reference to the above statement, analyse FIVE challenges faced by governments in regulating and combating the use of tax havens.

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April 2024

3 Questions

Question 4b

John Pritt, a citizen of Rwanda has received two job offers in Kenya for which he has approached you to advise on which job offer to accept.

Job offer A:

John Pritt would be employed as a finance officer with African Airway Ltd., a regional airline with its head office in Kenya. The offer provided for the following:

Basic salary of Sh.130,000 per month to be increased semi-annually by 10%.
A monthly bonus of 5% of the basic salary to be paid on the ninth day of the following month.
Fuel allowance of Sh.10 per kilometer where he is estimated to be covering 10,000 kilometers in a year, three quarters of which will be on official duties.
He will be provided with free return air ticket worth Sh.16,000 for each travel on 30 June and 31 December each year to visit his family in Rwanda.
The company will provide him with a house whose market rental value is Sh.30,000 per month.
The employer will deduct Sh.5,000 per month as rent. The house will be fully furnished at a cost of Sh.480,000.

Job offer B.

John Pritt would be employed as an accountant by Watts Ltd. The offer provides for:

Basic salary of Sh.145,000 per month and an allowance of Sh.5,000 per month for attending finance committee meetings.
An annual allowance of Sh.150,000 for the purchase of office attire in line with the company’s dress code.
A provision for sending him to their Uganda office on a one month per year job rotation. He will be sent to Uganda in November every year and he will receive his monthly pay as usual. During that month he will attend the finance committee meeting as planned in Kenya, as the company will facilitate him with a return air ticket.
He will be provided with a saloon car costing Sh.2,800,000 of 3000 cc.
The company will cater for his night watchman’s monthly salary of Sh.18,000. His monthly water bills and electricity bills will also be paid by the company.

Required:

(i) Evaluate the two job offers and advise John Pritt on which job offer to accept based on net annual income using the tax rates for the year 2023 as provided in the tax table.

(ii) Advise John Pritt on FOUR conditions that one is required to meet in order to qualify for double taxation relief in Kenya or your country.

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Question 2b

Describe FOUR strategies employed by multinational corporations in mitigating complex tax risks during corporate restructuring across multiple jurisdictions.

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Question 1a

SpeedTech Corporation is a multinational technology company operating in Kenya. The company provides digital services to consumers in the country.

Required:

Analyse the impact of digital service tax on SpeedTech Corporation’s operations in Kenya.

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December 2023

4 Questions

Question 4a

Describe FOUR ways through which the Revenue Authority may address potential tax risks associated with the import and export activities of manufacturing firms in your country.

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Question 5c

Alexia Gosselin was resident in Kenya during the year ended 31 December 2022. She has provided the following information on her income both from Kenya and Country Z during the year ended 31 December 2022:

Kenya and Country Z have signed a double taxation agreement.

Income from Country Z:

Employment income from Country Z was Zx. 72,000,000 (PAYE Zx. 9,000,000). The applicable foreign exchange rate was Ksh.1: Zx.30.

Income from Kenya:

Basic salary Sh.202,800 net of PAYE of Sh.37,200 per month.
Subsistence allowance Sh.14,000 per day for 10 days that she worked out of office.
Medical allowance of Sh.40,000 per month in respect of a policy that covered all employees.
Commercial property rental income for the year of Sh.2,400,000 after deducting cost of partitions Sh.460,000,
mortgage repayment Sh.540,000 (out of which Sh.120,000 was mortgage interest) and agent fees of Sh.180,000.
Interest income from Mjengo Company Ltd., Sh.405,000 net.

Required:

(i) Compute double taxation relief due to Alexia Gosselin for the year ended 31 December 2022.

(ii) Net tax liability (if any) payable by Alexia Gosselin in Kenya for the year ended 31 December 2022.

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Question 2b

Explain THREE ways in which the implementation of the Most Favoured Nation (MFN) status may impede the attainment of economic goals of individual member states within the East African Customs Union.

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Question 1a

Assume that you work for a tax consultancy firm. A client, Masterway Ltd., intends to develop a Transfer Pricing Policy document and has approached your firm for advice on information that it should include in the document.

Required:

Advise Masterway Ltd. on FOUR items that should be included in a transfer pricing policy document.

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August 2023

2 Questions

Question 3a

Evaluate FOUR methods that multinational companies operating in Kenya can use in order to adjust transfer prices for purposes of computing taxable income as provided under the Transfer Pricing Rules (2006).

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Question 1d

Citing FOUR reasons, argue the case for double taxation agreements as tax incentives.

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April 2023

1 Questions

Question 2b

Rick Lenon, a citizen of United Kingdom was recruited in London by Faux PLC, an international non-governmental organisation (NGO) with its head office in Nairobi, Kenya. Its activities are carried on in the Eastern Africa and Horn of Africa region through field stations, except in Kenya where the head office is based.

The following details relate to his earnings in Kenya Shillings for the year ended 31 December 2022:

His basic salary for the year aggregated to Sh.12,000,000.
He was provided with air tickets valued at Sh.360,000 to visit his family.
Owing to the environment in the field stations, hardship allowance of Sh.1,200,000 was paid.
His movement to and from the field stations outside Kenya was facilitated by Faux PLC in form of air tickets that costed Sh.4,800,000 in the year.
During the year, he was away in the foreign field stations for more than 156 days.
In an arrangement where Faux PLC has with a five-star hotel in Kenya, he consumed meals valued at Sh.270,000 which were paid for by the employer.
Assume that he was an “other-than-resident” employee for the year 2022.

Required:

Determine taxable income and tax liability (if any) in Kenya for Rick Lenon for the year ended 31 December 2022.

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December 2022

4 Questions

Question 2a

Mawingu Ltd. is a foreign subsidiary company operating a fleet of passenger and cargo aircrafts in Country A. The flights are between Country A and other countries. The operating results for the year ended 31 December 2021 are as follows:

	Sh.“000”
Income from cargo freight: Country A/Country B	567,720
Income from passengers’ freight: Country A/Country C	765,000
Income from passengers’ freight: Country C/Country A	1,001,880
Income from cargo loaded into aircraft on other routes	630,000
Salaries and other costs	1,530,000
Depreciation	288,000
General allowance for credit loss	72,000
Capital expenditure (cost Sh.2,000,000,000)	1,750,000
Compensation costs for stolen baggage	23,600

Additional information:

1.	Salaries and other costs include:	Sh.“000”
	Purchase of twin engines	117,000
	Use of airport facilities	32,400
	Hotel bills for passengers	37,800
	Accommodation for airline crew	9,000
	Gift to airport staff	10,800

2.	Investment allowances were agreed with the Revenue Authority at 85% of depreciation charged in the account.
3.	Assume a corporation tax rate of 30%.

Required:

(i) Compute adjusted taxable profit or loss of Mawingu Ltd. for the year ended 31 December 2021.

(ii) Compute tax payable (or refundable) for Mawingu Ltd.

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Question 4a

The African Growth and Opportunity Act (AGOA) is a United States Trade Act enacted in year 2000 as a legislation that significantly enhances market access to the United States for qualifying Sub-Sahara African countries. Analyse THREE conditions that the above countries must meet in order to qualify and be eligible for AGOA consideration.

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Question 5a

Zamon UK is a multinational corporation in UK with a wholly owned subsidiary, Zamon XL based in your country. In the year ended 31 December 2021, Zamon XL produced 50,000 kilograms of coffee from its farm at a cost of Sh.200 per kilogram exclusively meant for export to Zamon UK at a predetermined price of Sh.300 per kilogram although the market price was Sh.600 per kilogram. Zamon UK sold all the coffee in the UK market at Sh.1,200 per kilogram.

Additional information:

1.	Tax rates are as follows:
		UK	Your country
	Income tax	21%	30%
	Import duty	10%	-
	Withholding tax	-	10%
2.	The subsidiary repatriates all profits as dividends.

Required:

Compute the total tax lost by the Revenue Authority as a result of this transfer pricing arrangement.

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Question 5b

Comparability analysis in transfer pricing arrangements involves comparison of the conditions in a controlled transaction with the conditions that would have been made had the parties been independent and undertaking a comparable transaction under comparable circumstances.

Required:

Evaluate THREE comparability factors that could be identified in commercial and financial relations between related parties in determining the arm’s length price under transfer pricing.

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August 2022

4 Questions

Question 1c

Tax treaties represent an important aspect of the international tax rules of many countries. Experts estimate that over 3,000 bilateral income tax treaties are currently in effect, and the number is growing.

Required:

With reference to the above statement, describe three objectives of international tax treaties.

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Question 3a

The following information relates to Pete Masa who works in both Kenya and in the United Kingdom.

During the year of income 2021, he earned £30,000 from employment, PAYE deducted was £4,200.
His employment income in Kenya was Sh.1,960,000 (PAYE deducted Sh.384,000) in the year.
The employer provided accommodation to his family which lives in Kenya. The house is fully furnished at a cost of Sh.340,000.
He also received consultancy fees of Sh.720,000 and net royalties of Sh.95,000.

Note: Assume the average exchange rate during the year was £1 = Sh.120.

Required:

Calculate tax payable by Pete Masa for the year of income 2021. Assume Kenya and United Kingdom have signed a double taxation agreement.

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Question 3b

Explain four measures that a tax revenue authority might adopt to reduce tax gaps or revenue leakages in taxation of the digital economy.

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Question 5a

A recent publication from a leading international advisory group opines that, of all forms of tax incentives, tax holidays are the most popular among developing countries.

Required:

Discuss four limitations of tax holidays in developing countries.

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April 2022

2 Questions

Question 3b

Mika Ltd. sold a machine to Bora Ltd., an associate enterprise and in turn Bora Ltd. sold the same machine to Ceda Ltd., an independent party at a sales margin of 30% for Sh.4,000,000. Bora Ltd. had incurred Sh.40,000 as expenses in shipping the machine to Ceda Ltd.

Required:

Calculate the arms length price charged to Ceda Ltd.

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Question 3a

Evaluate four factors to be considered in determining the appropriate methods for transfer pricing for multinational corporations in your country.

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Pilot December 2021

3 Questions

Question 2b

Explain the meaning of thin capitalisation in relation to an entity.

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Question 3a

(i) Explain how a company operating in Kenya but with its headquarters in another country may avoid taxation through transfer pricing.

(ii) A few countries and regions in the world have established themselves as tax havens. Briefly summarise three benefits that might accrue to an investor in a tax haven.

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Question 5a

Explain the challenges in implementing special economic zones (SEZs).

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December 2021

2 Questions

Question 4a

Describe the features that indicate the possible existence of a tax haven.

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Question 1b

A delegation comprising government officials and entrepreneurs from a neighbouring country has visited your country, which is a beneficiary of the African Growth and Opportunity Act (AGOA) to learn more on AGOA and its benefits.

Required:

Prepare a brief to be presented to the delegation covering the following:

(i) Background information on AGOA.

(ii) Conditions to be considered as an AGOA beneficiary country.

(iii) Trade benefits provided under AGOA.

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September 2021

2 Questions

Question 1a

One of the recent trends in the field of taxation is the introduction of digital services tax (DST).

Required:

(i) Explain the meaning and operations of the digital services tax (DST).

(ii) Describe three types of transactions where DST is applicable.

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Question 3c

A Single Customs Territory (SCT) is the full attainment of the customs union achievable through removal of trade restrictions and minimisation of internal border controls.

Required:

Explain the benefits of a single customs territory (SCT).

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May 2021

4 Questions

Question 5b

Safari Aviators Ltd. is an air transport company registered in the United Kingdom. On their scheduled flights to East Africa, the company's planes land in Nairobi to connect passengers to other destinations in Africa. Ticketing and other transactions are done through an airline agent in Nairobi, Kenya, who would sell tickets and meet other necessary obligations on behalf of Safari Aviators Ltd.

The agent sold Sh.12,690,000 worth of tickets on behalf of the company in year 2020. The following expenses were incurred in carrying out airline operations in Kenya.

		Sh.
•	Salaries for security officers	1,480,000
•	Furniture for Agency offices	240,000
•	Trade subscriptions	96,000
•	Computers	180,000
•	Purchase of Aircraft (UK) cost	126,000,000
•	Jet fuel	4,900,000
•	Covid-19 tests for staff members	148,000
•	Upgrading Agency website	60,000
•	Airline Authority clearance fees	360,000
•	Purchase of saloon car	3,500,000

Additional information:

1. 15% of ticket sales are allowed annually by the Tax Authority in UK to cover for depreciation of other office equipment.

2. 2% of total ticket sales are allowed annually to cover head office expenses relating to the agency.

3. Operating expenses for the agency are allowed in full.

4. 5% of the investment allowance is allowable to the agent for tax purposes on investment in aircrafts.

Required:

(i) A statement of adjusted taxable income or loss for the year ended 31 December 2020.

(ii) Comment on any further information you may seek from the airline agency to facilitate accuracy of tax liability.

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Question 5a

The Tax Authority in your country has appointed you as a tax auditor for digital services in Abacus Ltd.

Describe three specific operational aspects in Abacus Ltd. that would constitute evidence of existence of digital services in the company.

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Question 4a

Discuss the factors that may have inhibited the full integration of the customs union in your regional trading block.

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Question 3c

Ali Salama is a resident tax payer in Kenya. During the year of income 2020, he had Sh.4,380,000 from employment in Kenya. He had also received Sh.480,000 from the United Kingdom (UK), which has a double taxation relief treaty with Kenya. Tax deducted in UK was equivalent to Sh.80,000.

Required:

(i) Double taxation relief in Kenya.

(ii) Tax payable in Kenya by Mr. Ali Salama.

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November 2020

2 Questions

Question 1a

Three countries; X, Y and Z established an economic trading block some years back. One of the key objectives of the trading block was to promote the harmonisation of tax systems and policies among the three countries. However, this objective has not been realised to date.

Required:

Discuss five possible challenges to the harmonisation of tax systems and policies among the three countries above

.

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Question 5a

Globalisation, diversification and expansion have forced companies to form groups where a large number of transactions are between related parties.

In light of the above statement:

(i) Explain the terms "related party transactions" and "transfer pricing"

(ii) Evaluate two benefits that may accrue to an entity that applies transfer pricing in transactions between related parties.

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November 2019

2 Questions

Question 4a

One-stop border posts (OSBPs) are a fairly recent cross-border trade initiative which have significantly changed the way neighbouring countries conduct business with each other.

Required:

(i) Explain the meaning of OSBPs.

(ii) Summarise four benefits of OSBPs.

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Question 1a

Examine four reasons for the increased importance of information exchange programmes in relation to taxation among various countries.

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May 2019

1 Questions

Question 3a

(i) Explain four factors to be considered when selecting the most appropriate transfer pricing method. (

(ii) A Ltd. sold a processing machine to B Ltd., an associate company. B Ltd. sold the same machine to C Ltd., an independent party, for Sh.400,000 at a profit margin of 30%. B Ltd's incidental costs before selling to C Ltd. were Sh.4,000.

Using the resale price method, calculate the arms length price/transfer price of the machine.

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November 2018

2 Questions

Question 5b

Certain countries have attracted high net worth individuals due to their status as tax havens.

(i) Explain the term "tax haven".

(ii) Summarise four characteristics of a tax haven.

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Question 3b

Safari Ltd. imported goods from China with an assessable value of Sh.500,000. Customs duty imposed included basic customs duty at 20% and an additional duty for this category of goods at 15%. Other levies included railway levy at 2%, secondary education cess of 2% and higher education cess at 1% of duty paid.

Required:

(i) Total value of goods imported.

(ii) Total duty payable.

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May 2018

1 Questions

Question 3b

Transfer pricing remains a major threat in bridging the tax revenue gap in your country.

In light of the above statement, evaluate three factors to be considered in the selection of an appropriate transfer pricing method.

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November 2017

2 Questions

Question 1c

The Common Market for Eastern and Southern Africa (COMESA) has played a key role in enhancing trade and integration within its jurisdiction.

Required:

(i) Summarise specific objectives of COMESA.

(ii) Some experts have argued that COMESA has been overtaken by globalisation and should be dissolved.

Required:
Citing reasons, support the above view.

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Question 1b

The following statement was made by the Commissioner General of your country's revenue authority during an international conference to discuss the challenges of taxation in the era of electronic commerce (e-commerce) and mobile commerce (m-commerce).

"The rapid growth of electronic commerce and mobile commerce fuelled by the developments in digital technology has shaped a revolution in global retail trade that is opening up markets across borders and continents. The growth in e-commerce and m-commerce has imposed a number of challenges to the government in relation to the tax system

With reference to the above statement. analyse challenges of taxing businesses and transactions arising from the adoption of e-commerce and m-commerce.

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May 2017

1 Questions

Question 1b

Assess factors that might hinder the optimal growth of the East African Community (EAC) or the equivalent trading block In your region.

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November 2016

2 Questions

Question 4b

Mr. Sylvanus Jirani was a resident of Kenya in the year of income 2015. During part of the year, he was in United Kingdom (UK) and earned income amounting to UK £43,500. Taxes paid on UK income amounted to £8,700. His employment income from Kenya was Ksh.950,000 (PAYE deducted Ksh.184,800). Further, he had provided consultancy services at a fee of KSh.190,000 (net of withholding tax).

Other income comprised the following:

1. Rental income of KSh.400,000 after deducting; cost of furniture Ksh.36,000, estate agents fees before letting Ksh.48,000 and caretakers wages Ksh.8,000 per month.

2. Patent rights where he received net royalty income of Ksh.95,000. Expenses relating to patent rights were; registration of patent Ksh.8,900 and operating expenses Ksh. 18,000.

Assume the applicable exchange rate was Ksh.100 to £1. Kenya has signed a double taxation agreement with UK.

Required:

(i) Double taxation relief (if any) due to Mr. Sylvanus Jirani for the year of income 2015.

(ii) Tax payable (or refundable) by Mr. Jirani for the year of income 2015.

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Question 1a

Tax havens have increasingly been used as avenues for tax avoidance. The Organisation for Economic Co-operation and Development (OECD) specifies three key factors in considering whether a jurisdiction is a tax haven.

Required:

(i) Citing two examples of countries considered as tax havens, evaluate the three factors referred to in the above statement.

(ii) Explain the terms "tax arbitrage" and "transfer pricing" in the context of international taxation systems.

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May 2016

3 Questions

Question 3a

Tax information exchange agreements (TIEAs) are increasingly forming part of the agenda during bilateral and multilateral trade discussions among various countries.

(i) Explain the nature of tax information exchange agreements.

(ii) Citing three reasons, discuss the purpose of TIEAs.

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Question 4a

Evaluate four features that distinguish tax havens from other taxation regimes.

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Question 5a

Country Z has recently been admitted into a regional economic block. As part of the country's full integration into the economic block, it is required to undertake certain legislative and other reforms.

Required:

Advise Country Z on four fundamental reforms that could be considered in the process of integration into the economic block.

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November 2015

2 Questions

Question 5a

Summarise three legal provisions relating to double taxation relief as applicable in your country.

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Question 4a

Highlight four factors to be considered when selecting an appropriate transfer price.

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Pilot September 2015

6 Questions

Question 4c

Outline five harmful effects of tax havens.

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Question 4a

Multi-national corporations (MNCs) that have cross-border inter-company dealings (iike purchases and sales) can deliberately move profits from one tax jurisdiction to another by manipulating the transfer price. Such companies, if left unchecked would make inter-company transactions at prices that may lead to low profits or losses in countries with high tax rates.

Required:

Explain the documentation and disclosure requirements imposed by your country to address the above challenges.

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Question 4b

One major shortcoming of globalisation is that it provides the incentive for tax competition among countries.

In the context of the above statement, explain the meaning of the following:

(i) Tax competition.

(ii) Tax haven.

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Question 4d

Explain four circumstances under which goods are deemed to have been dumped in your country.

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Question 5a

The main focus of bilateral tax treaties is the elimination of double taxation and fiscal evasion.

Explain the meaning of the following as used in the context of tax treaties:

(i) Double taxation.

(ii) Fiscal evasion.

(iii) Treaty shopping.

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Question 5b

Rahab Tola, who is a Kenyan, was employed in the United Kingdom (UK) for the first 6 months in the year 2014 for which she was paid a tota] of £12,000. She later moved to Kenya where she was employed at a salary of Sh.2,400,000 for the 6 months to the end of the year 2014.

The UK authorities had charged Rahab Tola a tax on her pay amounting to £2,200.

Assume that the applicable foreign exchange rate was Sh.140/£. Kenya has a double taxation agreement with United Kingdom.

Required:

Calculate the amount of double taxation relief due to Rahab Tola for the year 2014.

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May 2015

1 Questions

Question 4a

Citing examples, explain the following terms in the context of the global environment of taxation:

(i) Tax haven

(ii) Transfer pricing

(iii) Most favoured notion status

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Taxation of cross border activities

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