Practice Note No 04/2004 Date of Issue 15th December 2004 ... - TRA

Foreign business losses can offset only foreign business income,losses on the sale of foreign business assets can offset only gainson sale of foreign business assets.Example.A corporation C Ltd made during the year of income 01 investment loss ofsh. 1,200,000 and business loss of Tsh. 2,800,000. During the year 02 thecorporation made Investment gain of shs. 4,200,000 and business profitsof sh. 2,000,000. The corporation’s taxable income from business andinvestment in year 02 will be calculated as follows:-Investment incomeInvestment gain shs. 4,200,000Less Loss carry forward from year 01 “ 1,200,000Net gain shs. 3,000,000Business incomeProfit from business shs. 2,000,000Business loss carried forward “ (2,800,000)Net business loss carry forward to year 03 shs. (800,000)xi)Bad debtDeduction is allowed for the purposes of calculating income of a personfrom any business in respect of any debt or part thereof which hasbecome bad or irrecoverable during the year of income subject to thefollowing conditions.In the case of a debt claim of a financial institution, only after theclaim has become bad debt as determined in accordance with therelevant standards established by the Bank of Tanzania.In any other case, only after the person has taken all reasonable stepsin pursuing payment and the person reasonably believes that the debtclaim will not be satisfied.The debt must have been included in calculating the person’s incomefor the year of income.The debt must have been written off as irrecoverable in the books ofaccounts of the person for that year of income in which the debt isclaimed to have become bad.Taxable income of C Ltd for the year 02 is as follows:-Investment income shs. 3,000,000