Calculate the Corporation Tax Payable for New Life using the Barbados Income Tax Act, or any other relevant document to explain the treatment of the items included or omitted from the income tax computation.
New Life Manufacturing for year-end December 31, 2022, show an accounting profit after tax of $16,500,000 after charging the following:
•
• Tax for the year $500,000
• Property Tax $1,000,000
• Interest expense $15,000
• Preference dividends of $40,000
• Legal fees $1,110,000
• Insurance of $750,000
•
• Foreign Travel $20,000
• Repairs and Maintenance $1,500,000
• General expenses $600,000
Other Information
1. Property Tax of $600,000 was paid for the property on which the company’s factory is located; $300,000 for the office premises and $100,000 for the CEO’s home.
2. The insurance was paid for the factory and office premises.
3. Loss on disposal of fixed assets $350,000
4. Income Tax Refund of $700,000 was included as part of the entity’s income.
5. The bad debt expense includes a general provision of $10,000 and a specific provision of $30,000.
6. The company paid final ordinary dividends totaling $100,000.
7. Repairs and maintenance include $500,00 for removing the office ceramic floor titles and replacing it with wooden flooring.
8. Included in the company’s total assessable income is exempt income of $50,000.
$16,500 relates to expenses incurred in earning this exempt income.
9. Legal fees include:
- $155,000 in respect of recovery of commercial debts for New Life Manufacturing.
- $40,000 in respect of recovery of commercial debts for the head office in Cayman. The company was reimbursed this amount.
- $415,000 in respect of recovery of commercial debts for the subsidiary company in the United States. The company was not reimbursed for this amount.
- $500,000 relating to the purchase of a new company that will be located in Barbados.
10. General expenses include $72,000 for the school fees of the CEO’s son.
11. The capital allowances have been calculated at $1,330,500. Based on the items included in the fixed asset schedule.
12. There was an increase in wages of $2,000,000 which qualifies for the Employment Tax Credit (all other conditions to qualify for this credit were met).
13. Assume a capital allowance rate of 5 % per annum for building/ leasehold improvements.
1. Calculate the Corporation Tax Payable for New Life using the Barbados Income Tax Act, or any other relevant document to explain the treatment of the items included or omitted from the income tax computation.
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