Exam (elaborations)
TAX3701 EXAM PACK 2023.
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- University Of South Africa
TAX3701 EXAM PACK 2023.
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TAX3701 EXAM PACK2023
ADMIN
[COMPANY NAME] [Company address]
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, TAX3701
UNIVERSITY EXAMINATIONS
September-November 2021
TAX3701
Taxation of Business Activities
100 Marks
Duration 3 Hours
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, This paper consists of seven (8) pages
IMPORTANT INSTRUCTIONS:
Assumptions:
1. All amounts exclude Value-Added Tax (VAT) unless specifically stated otherwise.
2. The VAT rate changed from 14% to 15% on 1 April 2018.
3. All persons mentioned are residents of the Republic of South Africa unless stated
otherwise.
4. SARS = South African Revenue Service.
The answering of this paper:
1. This paper consists of five (5) questions.
2. All questions must be answered.
3. Each question must be commenced on a new (separate) page.
4. All workings, where applicable, must be shown. Where an amount is subject to a limitation,
clearly indicate the application of the limitation. Where any item is exempt from tax or not
allowable as a deduction, this must specifically be indicated, and a short reason should be
provided. All amounts must be rounded to the nearest Rand.
5. Please complete the cover page of the answer book in full.
6. You are reminded that answers may NOT be written in pencil.
7. Proposed timetable:
(As far as possible, try not to deviate from this timetable):
Question Topic Marks Minutes
1 Company income tax liability 30 54
2 Provisional tax and dividends tax 25 45
3 Value-Added Tax (VAT) 20 36
4 Capital gains tax 20 36
5 General deduction formula 5 9
TOTAL 100 180
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TAX3701
Sept – Nov 2021
QUESTION 1 (30 marks, 54 minutes)
Pharma Clinic (Pty) Ltd (“Pharma”) is a company that manufactures and sells pharmaceutical products to
local and other African country customers. The company is based in Potchefstroom, South Africa. Pharma
is a registered category B VAT vendor, making 100% taxable supplies and has a financial year that ends
on the last day of June each year. Pharma is not a ”small business corporation” as defined in section
12E(4) of the Income Tax Act. SARS approves the manufacturing of pharmaceutical products as a process
of manufacture.
Pharma concludes transactions with registered VAT vendors only, unless otherwise stated. Where
relevant, Pharma is in possession of valid tax invoices, unless otherwise stated or the context indicates
otherwise. All amounts exclude VAT, unless otherwise stated.
During the financial year ended 30 June 2021, the financial accountant of Pharma calculated the
preliminary taxable income to be R6 980 000, before taking the following transactions into account:
1. Sales
1.1 Total sales to local customers for the financial year amounted to R14 470 352 has been taken into
account in the calculation of the preliminary taxable income as stated above.
1.2 On 28 June 2021, a customer in Namibia made an enquiry and a quotation for pharmaceutical products
valued at R400 000 was given to the customer. The order was placed by the customer for the
products on 1 July and the goods valued at R400 000, were only delivered to the customer on 5 July
2021 and invoiced on 6 July 2021. The customer settled the debt on 30 July 2021 (this amount is
not included in the sales amount in 1.1 above).
2. Cost of sales
The cost of sales was calculated as follows:
R
Opening stock (at cost price) 1 842 014
Plus: Purchases of raw materials 8 856 454
Less: Closing stock (at cost price) (927 879)
Cost of sales 9 770 589
The market value of the opening stock and closing stock was R1 658 987 and R1 120 000 respectively.
3. Employees’ cost
Employees cost for financial year ended on 30 June 2021 consisted of the following:
R
Salaries and wages 1 200 000
Employer’s contributions to provident
fund for the benefit of employees 120 000
Provision for leave pay 70 000
Total 1 390 000
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