FINAL EXAMINATION
PROGRAMME Bachelor of Commerce in Financial Management
MODULE Taxation 2B
YEAR Two (2)
INTAKE July 2018
DATE 02 May 2019
TIME 09h00 – 12h00
DURATION 3 hours
TOTAL MARKS 100
INSTRUCTIONS TO THE CANDIDATE
1. Questions must be attempted in the answer book provided.
2. All queries should be directed to the invigilator; do not communicate or attempt to communicate with any
other candidate.
3. You have THREE HOURS to complete this paper. You are not allowed to leave the examination room within
the first hour and in the last 15 minutes of this examination.
4. This is a CLOSED BOOK examination.
5. Read ALL instructions carefully.
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Answer ALL questions.
QUESTION 1 (20 Marks)
1.1 REQUIRED:
Calculate the dividends tax payable on the following transactions. (10 marks)
INFORMATION:
Ottimo (Pty) Ltd, a resident company that was formed in 2004, has a 31 March financial year-end.
The company distributed the following amounts/assets to its sole shareholder, Mr Otto, on 1 July 2018:
• a cash distribution of R1 000 000;
• an in specie distribution of trading stock with a market value of R500 000 (the trading stock was acquired on 10
April 2016 at a cost price of R300 000);
• an in specie distribution of a building with a market value of R1 500 000 (the building was acquired on 12 July
2006 for R1 200 000; the building did not qualify for any capital allowances).
• A capitalisation issue of equity shares amounting to R150 000
1.2 Discuss five factors that must be considered when deciding on the type of business to trade. (10 marks)
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QUESTION 2 (20 Marks)
2.1
REQUIRED:
Calculate Gaterite Limited’s taxable income for the year ending 31 March 2019. (10 marks)
INFORMATION:
On 1 October 2018, Gaterite Limited commenced operating a business. The company was registered in October 2018
and has a March year end. Trading only commenced on 1 January 2019. However, certain expenditure was incurred
between the time of registration in October 2018 and commencement of trading on 1 January 2019.
Pre-trade expenditure between1 October 2018 to 31 December 2018 was as follows:
Materials purchased R24 000
Three months rental of premises R 6 000
Electricity, water and insurance R2 000
The following information relates to the period during which Gaterite was trading i.e. 1 January 2019 to 31 March 2019
Gross income R150 000
Materials purchased R145 000
Closing stock R110 000
Rental of premises R 9 000
Electricity, water and insurance R3 000
2.2
REQUIRED:
Calculate the tax payable by Greenacres Trading for the year of assessment ending 28 February 2019. (7 marks)
INFORMATION
Greenacres Trading is a registered micro business. Its receipts and expenses for the year ended 28 February 2019 are
as follows:
R
Turnover of micro business 450 000
Interest received 20 000
Rental from fixed property 48 000
Running costs of micro business 275 000
Repairs to fixed property 40 000
2.3 Discuss the requirements for a voluntary deregistration as a Micro Business (3 marks)
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QUESTION 3 (20 Marks)
REQUIRED:
Calculate VAT payable to or refundable by the Commissioner for the VAT period ending 30 June. Show all workings.
(round off to the nearest rand)
INFORMATION:
Greenstar Limited, a vendor registered for VAT purposes on the invoice basis, provides the following information for the
period May and June (all amounts, where applicable, include VAT at 15%, and tax invoices have been issued for all
sales and, where applicable, received from all suppliers):
Extract from the cashbook and journals:
Cash receipts R
Cash sales in the Republic 380 000
Credit sales in the Republic 240 000
Sales in Lesotho (delivery was made outside the Republic) 140 000
Sales in Namibia (delivery was made outside the Republic) 80 000
Cash Payments
Bank charges 9 600
Interest on bank overdraft 8 500
Fuel 22 000
Entertainment costs 6 200
Cash purchases – stock 180 000
Credit purchases – stock 85 000
Rent paid 60 000
Water and electricity paid 18 000
Motor vehicle purchased 110 000
Short term insurance premiums – fire , theft and stock 18 000
Notes
1 A new delivery vehicle was purchased and delivered on 1 June under an instalment credit agreement. The purchase
price was R126 500 (including VAT at 15%). The first payment of R8 000 was payable on 30 June and includes interest
of R7 100.
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QUESTION 4 (20 Marks)
4.1
INFORMATION:
Arctic Limited (a registered VAT vendor) purchased a machine on 1 August 2016 for R934 800 (incl. Vat @ 14%). The
machine was used from that date in a process not regarded as a manufacturing process. This machine was sold on 15
December 2018 for R126 500(incl. Vat@15%).
SARS granted a wear-and-tear allowance amounting to R588 000 up to the date of sale.
REQUIRED:
Calculate the Section 8 recoupment Arctic Limited will have to add to income. (7 marks)
4.2
INFORMATION:
Nitro Ltd is a manufacturer of motor vehicle components. It disposed of a plant on 28 February 2019 for R3 680 000
(incl.VAT @15%). The plant was purchased second hand on 1 November 2017 from another manufacturing company
for R 2 052 000 (incl. VAT @14%)
REQUIRED
4.2.1 Calculate the Section 8 recoupment for Nitro Ltd on the sale of this asset based on the Section 12 C allowance.
(6 marks)
4.2.2 Calculate taxable capital gain. (7 marks)
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QUESTION 5 (20 Marks)
5.1 REQUIRED:
Calculate the amounts that Larry and Harry can claim as deduction. (6 marks)
INFORMATION:
Larry and Harry, who are partners in a business paid the following annuities to former employees and partners and their
dependants.
Sally, a former partner who retired after 8 years (not repayment of her share) R12 000
Esther, the widow of a deceased employee and her three children R 8 000
Sue, a retired employee R 5 000
Larry and Harry share the profits and losses in the ratio 70:30, respectively
5.2 Discuss SIX (6) requirements that must be met before a taxpayer can apply for a Voluntary disclosure programme
(VSP). (6 marks)
5.3 Discuss the four requirements which must be met before the provisions of ss 80A-80L (impermissible tax
avoidance arrangements) can be applied in the context of business. (8 marks)
END OF PAPER
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APPENDIX A – TAX TABLES
a) Turnover Tax
2019 year of assessment – financial years ending on any date between 1 March 2018 and 28 February 2019.
Taxable turnover Rate of tax
R0 - R335 000 0% of taxable turnover
R335 001 – R500 000 1% of taxable turnover above R335 000
R500 001 - R750 000 R1 650 plus 2% of taxable turnover above R500 000
R750 001 and above R6 650 plus 3% of taxable turnover above R750 000
* The turnover tax rates for 2016, 2017 and 2018 year of assessments remain the same
b.) Small Business Corporations [section 12(E)]
2019 year of assessment – financial years ending on any date between 1 April 2018 and 31 March 2019
Taxable Income Rate of tax
R0 – R78 150 0% of taxable income
R78 151 – R365 000 7% of taxable income above R78 150
R365 001 – R550 000 R20 080 + 21% of taxable income above R365 000
R550 001 and above R58 930 + 28% of taxable income above R550 000
2018 year of assessment – financial years ending on any date between 1 April 2017 and 31 March 2018
Taxable Income Rate of tax
R0 – R75 750 0% of taxable income
R75 751 – R365 000 7 % of taxable income above R75 750
R 365 001 – R550 000 R20 248 + 21% of taxable income above R365 000
R550 001 and above R59 098 + 28% of taxable income above R550 000
2017 year of assessment – financial years ending on any date between 1 April 2016 and 31 March 2017
Taxable Income Rate of tax
R0 – R75 000 R nil
R75 000 – R365 000 7% of taxable income above R75 000
R365 000 – R550 000 R20 300 + 21% of taxable income above R365 000
Exceeding R550 000 R59 150 + 28% of taxable income above R550 000
2016 year of assessment – financial years ending on any date between 1 April 2015 and 31 March 2016
Taxable Income Rate of tax
R0 – R73 650 R nil
R73 651 – R365 000 7% of taxable income above R73 650
R365 000 – R550 000 R20 395 + 21% of taxable income above R365 000
Exceeding R550 000 R59 245 + 28% of taxable income above R550 000
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APPENDIX B – QUICK REFERENCE TABLES
COMPANIES – YEARS OF ASSESSMENT ENDING DURING THE PERIODS FROM 1 APRIL TO 31 MARCH IN THE
FOLLOWING YEAR
Private and public companies and To 31 March To 31 March To 31 March To 31 March
close corporations 2019 2018 2017 2016
Normal tax rate 28% 28% 28% 28%
Dividends tax 20% 20% 15% 15%
Capital gain inclusion rate 80% 80% 80% 66.6%
VAT
2018/2019 2017/2018 2016/2017 2015/2016
Rate 15% 14% 14% 14%
Registration threshold:
Compulsory R1m R1m R1m R1m
Voluntary R50 000 R50 000 R50 000 R50 000
END OF PAPER
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