Exam (elaborations)
Tax3701 Assignment 1 Semester 2 (2023) solutions
- Institution
- University Of South Africa (Unisa)
Solutions to the first assignment. Distinction guaranteed
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TAX3701 ASSIGNMENT 1PLEASE NOTE – ORDER OF QUESTIONS IS DIFFERENT FOR EACH STUDENT!!!
(Q1) Siyavuya (Pty) Ltd is a South African resident company that provides electronic gadgets repair
services. The company is registered as a category B vendor on the invoice basis for Value-Added Tax
(VAT) purposes.
The company provides its employees with free lunch meals on a daily basis. The total value of meals
provided during January and February 2023 amounts to R8 900 (excluding VAT).
The input tax on the value of the free lunch meals provided to employees during the two months
period ended 28 February 2023 amounts to:
a. R1 335
b. Rnil - denied supply
c. Rnil - exempt supply
d. Rnil - zero rated supply
Free lunch for employees will be classified as “entertainment” therefore VAT input is “denied”.
There are 3 instances when Vat input is denied:
1. On the supply of goods for entertainment purposes.
2. On subscriptions of a social, sporting or recreational nature
3. on the purchase of a “motor vehicle” as define
(Q2) Turnover tax may be calculated on the following amounts:
a. Gross dividends received by virtue of shares held in another company
b. Proceeds received from suppliers in respect of returned goods
c. South African receipts that are revenue in nature
d. Half of the profits made from the disposal of fixed assets
The taxable turnover includes all amounts that are:
• not of a capital nature;
• received by the registered micro business (in other words cash receipts);
• during that year of assessment; and
• from carrying on business activities in the Republic.
(Q3) Just-in-time (Pty) Ltd (‘JIT’) is a South African resident company that operates in the
manufacturing industry. The company produces luxurious office desks for distribution to clients in
and around South Africa. JIT is registered as a category B vendor for Value-Added Tax (VAT) purposes
and is making 75% taxable supplies. PLEASE NOTE SOME QUESTIONS SAY 95%
All amounts exclude VAT unless stated otherwise.
The following information relates to JIT’s transactions for the two-months period ended 30 April
2023:
On 20 March 2023, JIT imported 15 improved quality office desks from a renowned supplier situated
in Germany. The cost
price of the office desks was R10 800 per office desk and the value for customs duty purposes was
, R10 500 per office desk.
Non-refundable import surcharges of R1 250 were charged on the transaction. The date reflected on
the Customs Billing of Entry is 8 April 2023.
The VAT payable/refundable to JIT for the two-months period ended 30 April 2023 is:
a. R22 761 payable
b. R26 174 refundable
c. R23 813 refundable
d. R26 850 payable
VAT on imports is calculated as follows:
Customs duty value (10 500 x 15) 157 500
Add 10% of customs duty value (157 500 x 10%) 15 750
Import surcharges 1 250
174 500
VAT on imported desks (174 500 x 15%) 26 175
VAT IS NOT APPORTIONED AS IT IS LEVIED IN FULL BY CUSTOMS AT THE POINT OF
ENTRY
(Q4) Various court cases have tested the practical application of the principles of s11(a), the general
deduction formula. Which one of the following is one of the most notable court cases? Select all
possible options
a. Caltex Oil (SA) Ltd V SIR 37 SATC 1) v (actually incurred)
b. Port Elizabeth Electric Tramway Co Ltd v CIR 8 SATC 13 (in the production of income)
c. Joffe & Co (Pty) Ltd v CIR 13 SATC 354 (expenditure and losses)
d. All stated court cases
(Q5) Which of the following elements is not a component of the general deduction formula?
a. Expenditure and losses
b. In cash or otherwise
c. Actually incurred
d. Carrying on trade
In cash or otherwise is part of the gross income definition and not the general deduction formula.
(Q6) Which of the following amounts is/are exempt from the normal tax of a South African
company? Select all applicable options.
a. Rental received from the letting of residential property situated in a foreign country
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