theory questions and answers

QUESTION
Discuss the taxation of Charitable trusts and Amateur sporting associations.
 

(a)         (i)         Charitable trusts are exempted from taxation under the following conditions:

-   They are public in character serving a section of the public or the whole public.

-   They are for relief of distress or poverty in Kenya.

-   They are for advancement of religion or education.

-   Their incomes are expended in Kenya for charitable purposes and for benefit of Kenyan citizens.

(ii)                 Amateur Sport Associations

The income (apart from their investment income) is exempt from taxation if:

-   The members are amateurs.

-   The aim of the association is foster and control outdoor sports.

-   It’s by-laws provide that should a member turn professional, he ceases to be a member of the association.

 WHICH AREAS SHOULD ONE PAY ATTENTION TO WHEN CONDUCTING PAYE AUDIT

(b)        The areas to pay attention in auditing of PAYE are:

-   Has the employer all the cash and non-cash benefits or emoluments into payroll.

-   Was the correct amount of PAYE deducted?

-   Was all the PAYE deducted remitted to the tax authorities.

-   Were the payroll records correctly transferred to tax deduction cards.

-   Have all the tax deductions correctly completed in all respects?

 WHAT DO YOU UNDERSTAND BY THE TERM PERMANENT  ESTABLISHMENT WHEN USED IN RELATION TO RESIDENCE OF A PERSON.

(c)        Permanent establishment

-   This, in relation to any person (individual or body corporate) means a fixed place of business in which a company carries on business.

-   For the purposes of this definition, a building site or a construction site or assembly project which has existed for six months or more shall be deemed to be a fixed place of business.