1. **Stating the problem:** Compute Elio Meta's taxable income for the year ended 31 December 2022, and determine the tax payable on this income. 2. **Calculate basic salary and PAYE:** - Annual basic salary = $102,500 \times 12 = 1,230,000$ - PAYE (pay as you earn) = $23,000 \times 12 = 276,000$ (deducted monthly tax, not deductible from taxable income) 3. **Add non-cash benefits and allowances:** - Gifts from company = $60,000$ (taxable) - Company car: monthly rental paid by company = $30,000 \times 12 = 360,000$ - Fuel allowance = $12,500 \times 12 = 150,000$ - Furnished house rent = $50,000 \times 12 = 600,000$ - Furniture cost (typically 20% of value is taxable as benefit) = $240,000 \times 20\% = 48,000$ 4. **Insurance and allowances:** - Life insurance premium paid by company = $72,000$ - Per diem for 5 days = $5,750 \times 5 = 28,750$ (per diem paid for official duty is usually not taxable, so excluded) 5. **Medical bills:** - Medical bills = $675,000$ - Since medical scheme is only for senior officers, medical benefits are taxable. 6. **Pension contributions:** - Employee contribution = $22,500 \times 12 = 270,000$ - Employer contribution = $270,000$ - Only employee contribution is deductible for tax purposes. 7. **Employers' servants salaries:** - Cook's salary = $9,000 \times 12 = 108,000$ - Security guard's salary = $12,000 \times 12 = 144,000$ - These are benefits to the employee and thus taxable. 8. **School fees:** - School fees paid by employer = $240,000$ (taxable benefit, not recorded in company's books but still taxable to employee) 9. **Calculate total employment income before deductions:** $$\text{Total income} = 1,230,000 + 60,000 + 360,000 + 150,000 + 600,000 + 48,000 + 72,000 + 675,000 + 108,000 + 144,000 + 240,000 = 3,387,000$$ 10. **Deduct employee pension contributions:** $$\text{Taxable income} = 3,387,000 - 270,000 = 3,117,000$$ 11. **Tax payable computation:** - Use Kenyan PAYE tax bands (assumed): - First 288,000 @10% = 28,800 - Next 100,000 @15% = 15,000 - Next 100,000 @20% = 20,000 - Next 100,000 @25% = 25,000 - Remainder (3,117,000 - 688,000 = 2,429,000) @30% = 728,700 - Total tax = $28,800 + 15,000 + 20,000 + 25,000 + 728,700 = 817,500$ 12. **Final answers:** - (i) Taxable income = Sh. 3,117,000 - (ii) Tax payable = Sh. 817,500 Note: PAYE deducted monthly (276,000) is likely interim tax deducted at source; actual tax payable is as computed above.