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GTA711S-TAXATION 310-2ND OPP JULY 2024 |
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nAm I BIA un IVERSITY
OF SCIEnCE Ano TECHnOLOGY
FACULTY OF COMMERCE, HUMAN SCIENCES& EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
QUALIFICATION: BACHELOROF ACCOUNTING
QUALIFICATION CODE: 07BAOC
LEVEL: 7
COURSE CODE: GTA711S
COURSE NAME: TAXATION 310
SESSION: JULY 2024
PAPER: THEORY& APPLICATION
DURATION: 3 HOURS
MARKS: 100
SECOND OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINER(S) Mrs. Y van Wyk, Mr. T Elago & Mrs G Uises
MODERATOR: Ms. F Haimbala
INSTRUCTIONS
1. This question paper is made up of FOUR (4) questions.
2. Answer ALL the questions and in blue or black ink.
3. Start each question on a new page in your answer booklet.
4. Draw a line through all unused spaces in your answer booklet.
5. The names of people and businesses used throughout this examination paper do not
reflect reality and may be purely coincidental.
6. Questions relating to this examination may be raised in the initial 30 minutes after the
start of the paper. Thereafter, candidates must use their initiative to deal with any
perceived error or ambiguities & any assumption made by the candidate should be
clearly stated.
THIS QUESTION PAPER CONSISTS OF 7 PAGES (excluding this front page)
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QUESTION 1
(30 MARKS)
Tanya Adams, a resident of Namibia who completed her master's degree in sports science,
started a fitness gymnasium business called Stay-Fit Entity, in Windhoek. She signed a 15-year
lease agreement for a gym in Olympia, Windhoek, on 01 August 2023. A monthly rental of N$10
000 is payable from the commencement of the lease. In addition, she is obliged to improve the
gym at a cost of N$1 500 000. A lease premium of N$80 000 was also payable on 01 August
2023. The improvements were completed on 01 January 2024 at a cost of N$1300 000.
The statement of profit or loss for the year of assessment 2024 revealed a net profit before tax
of N$2 350 000 before the following amounts were taken into account:
Receipts and Accruals:
Local dividends were received from Sanlam Namibia, N$50 000.
Interest from a loan granted to her lazy brother, N$11 000.
Expenses:
Employee benefits expenses totalling N$400 000 were paid to employees. This amount consists
of:
Permanent employees
N$ 300 000.
Non-permanent employees
N$ 17 000.
Pension fund contribution for permanent staff
N$ 33 000.
Medical aid contributions (employer only)
N$ 50 000.
Administrative expenses:
Rent expenses (Gym in Olympia)
Municipality costs
Telephone expenses
Repairs and Maintenance
N$70 000.
N$28 000.
N$24 000.
N$18 000.
Annuities paid to employees:
On 1 September 2023 one of the employees, Uncle Jay, was killed during the repairs done to
the gym. Due to the poor financial status of his widow, the business decided to pay her an
annuity of N$2,000 per month for the next 2 years. On the same day, James, who is currently
employed by Stay-Fit Entity was injured in the same accident. Due to the severity of his injuries,
he will not be able to take up employment. An annuity of N$5,000 per month is payable to him.
Credit losses:
An interest free loan was granted to Uncle Jay on 1 March 2023 to enable him to do repairs on
his private vehicle. Tanya Adams decided not to recover the sum from Uncle Jay's widow. The
amount of the loan was N$50,000.
Provision for credit losses:
Stay-Fit considers 5% of the outstanding accounts receivable to be doubtful.
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The outstanding accounts receivables (excluding the loan interest relating to Uncle Jay above)
for the 2023 year of assessment amounted to N$75,000 and N$130,000 for the 2024 year of
assessment.
Other:
Stay-Fit incurred other tax-deductible expenses of N$20,000.
Tanya also purchased a gym equipment at a cash price of N$200,000. Delivery and transport
charges were N$5,000 and a total amount of N$ 15 000 has been paid as import duties (customs
and exercise) on the gym equipment.
Depreciation:
PPE ITEM
Honda Bike
Gym Equipment
Office Furniture
Purchase date
1/8/2023
1/7/2022
1/1/2024
Cost Price
25,000
200,000
100,000
Depreciation
policy
5 years, straight
line method
2 years, straight
line method
4 years, reducing
balance method
REQUIRED:
Calculate the taxable income of Tanya Adams for the year of assessment ending 29 February
2024. Commence your answer with the Net Profit before tax of N$2 350 000. Provide reasons
for the exclusion of any amount from your calculation. Show all workings. Round off all amounts
to the nearest Namibian dollars (N$).
(35)
QUESTION 2
(25 MARKS)
Mr. Shikomba is a Namibian resident, he is a full-time farmer, farming in Omangetti area in the
Northern side of Namibia. Mr. Shikomba never attended a formal University; therefore, he has
no clue on Taxation of Farming. During the 2024 year of assessment, Nam RA organized a seminar
aimed at equipping all farmers on the importance of Taxation of Farming. It was at this Seminar,
that you were approached by Mr. Shikomba to assist him with all the taxation issues on his
farming business, subsequently you have agreed to assist.
Mr. Shikomba provided you with the following information for the 2024 year of assessment:
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1. On the 28 February 2023, Mr. Shikomba together with his employees did a manual stock
take of the animals. They counted 7 bulls, 250 cows, 125 oxen, and tallies and heifers
were 170. 160 were also counted on the same day.
2. During the year under review, the area where Mr. Shikomba farms received good rainfall,
which resulted in 210 calves being born.
3. In August 2023, Mr. Shikomba's Grandfather passed on due hyperkalemia. As a norm Mr.
Shikomba took 20 cows for himself, that were owned by the deceased. He also had to
transfer 20 tallies and heifers and 95 calves to the Otjimbingwe farm. In the same month
he received 40 cows, 8 oxen and 30 to Ilies and heifers as result of the transfer to his farm.
4. In September, he sold 100 Oxen and 40 cows at price of N$7 500 and N$5 000
respectively. He intended to sell 10 calves but unfortunately, they got stolen at the selling
pan.
5. Mr. Shikomba donated 3 oxen to the Queen of Ondonga kingdom, her majesty Adelheid
Nangolo.
6. During the current year of assessment, he slaughtered 2 oxen for home consumption and
lost 10 calves and 4 tallies and heifers due to foot and mouth disease. He decided to
replace them at a price of N$3 500 and N$2 500, respectively.
7. The following are a list of balance of Mr. Shikomba's Receipts and Accruals:
Road construction paid
N$
(7 000)
Fencing expenses
(10 000)
Cottage for farm workers paid
(250 000)
Income from leasing farm tractor
5 000
Land rentals received
20 000
Accounting fees paid
(3 500)
Bank charges
(450)
Fuel and oil
(2 300)
Ration for workers
(1800)
New tractor acquired
(350 000)
Veterinary surgeons' fees
(900)
Wages
(4 000)
Telephone expenses
(630)
Grazing fees received
30 000
Subsidy received on sale of cows
7 500
Insurance paid
(3 000)
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REQUIRED:
Calculate the taxable income of Mr Shikomba's farming operations for the year of assessment
ending 29 February 2024. Your answer should comply with the Namibian Tax legislation relating
to farming operations. Show all workings. Round off all amounts to the nearest Namibian dollars
(N$).
(25)
QUESTION 3
{30 MARKS)
A few years ago, while on vacation, Mike, John and Andy decided to start a partnership called
MJA Stationers. They sell stationery and are located in Windhoek. The partners share profits and
losses in a ratio of 4:2:3.
An extract from the Statement of Profit and Lossfor the 2024 year of assessment follows:
Revenue
Other Income (Note 1)
Profit on disposal of assets
987 500
54 000
6 000
Expenses
Salaries
Mike
John
Andy
263 000
187 000
202 000
Depreciation (Note 2)
Bad debts
Rent paid (Note 3)
146 000
11000
165 000
Interest on capital
Mike
John
Andy
7 000
5 000
6 000
Retirement annuity fund contribution (Note 4)
Insurance policy (Note 5)
162 000
20000
Notes:
1. Included in other income is an amount of N$5 000 interest received from First National
Bank of Namibia in favour of John. There is also an amount of N$8 500 received from a
debtor who was previously written off as a bad debt. The rest of the other income relates
to printing services that MJA Stationers provides at an ad hoc basis.
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2. Depreciation was calculated as follows:
• N$30 000 for furniture and fittings that were acquired two years ago at a cost price
of N$150 000 with a depreciation rate of 20% per annum.
• N$116 000 on a vehicle that was purchased for N$ 290 000 two years ago which a
depreciation rate of 20%. During the year, the motor vehicle was sold for N$180
000.
3. In April 2023 the business moved to new premises that are located at a more strategic
location.
They entered into a lease agreement for a period of 60 months. As part of the agreement,
they had to pay a lease premium of N$50 000 and were obliged to do leasehold
improvements to the value of N$300 000. The improvements were completed on 30 June
2023 for a total sum of N$250 000. The monthly rental is N$15 000.
4. The partners make contributions to a Retirement Annuity Fund of N$4 500 per partner
per month.
5. Insurance premiums are paid in respect of a partnership survival policy.
REQUIRED:
Calculate the taxable income of Mike, John and Andy for the 2024 year of assessment. Provide
reasons for amounts excluded in your calculation. Show all workings. Round off all amounts to
the nearest Namibian dollars (N$).
(30)
QUESTION 4
(10 MARKS)
Dress Mania, a manufacturer of clothing in Windhoek imports their raw material from India and
China in order to make dresses, pants and other clothing. Dress Mania has a 30 June year-end,
assume that this also represents their tax year.
During the year, the company imported a machine from England which will industrialize their
current manufacturing process. The cost of the machine was US$ 20,300.
The machine arrived in Walvisbay on 01 May 2023. Assume that on this date the risks & rewards
have transferred to Dress Mania. The creditor will be paid in instalments of 50% each; the first
instalment being due on 30 June 2023 and the 2nd instalment being due on 31 August 2023.
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During the financial year, Dress Mania has also purchased 800 kilograms of white silk at Rupee
(~) 100/kg and 500 kilograms of Crimson coloured Silk at Rupee (~) 120/kg. This shipment arrived
on 30 November 2022, when the risks and rewards were transferred. The creditor was paid on
20th of December 2022.
The following exchange rates have been provided:
30 June 2022
30 November 2022
20 December 2022
01 May 2023
30 June 2023
31 August 2023
N$ to 1 US$
17.00
16.50
16.00
17.50
18.00
16.50
N$ to 1 Indian Rupee(~)
5.00
5.50
5.20
4.80
4.90
4.50
REQUIRED:
Calculate the foreign exchange gain or loss that Dress Mania should take into account in their
taxable income calculation for the year of assessment ending 30 June 2023. Clearly indicate
whether the gain or loss is taxable or tax deductible. Show all workings. Round off all amounts
to the nearest Namibian dollars (N$}.
(10)
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TAX TABLES
TAXABLE INCOME (N$)
0-50000
50 001- 100 000
100 000 - 300 000
300 001- 500 000
500 001- 800 000
800 001-1500000
Above 1 500 000
INDIVIDUAL INCOME TAX
RATES OF TAX FROM YEARS OF ASSESSMENT ENDING 2023/
2024 (N$)
Not taxable
18% for each N$ above 50 000
9 000 + 25% for each N$ above 100 000
59 000 + 28% for each N$ above 300 000
115 000 + 30% for each N$ above 500 000
205 000 + 32% for each N$ above 800 000
429 000 + 37% for each N$ above 1 500 000
HOUSING BENEFITS
Windhoek
500
750
1,000 1,400 1,800 2,200 2,800 3,400 4,000
Walvis Bay
350
550
750
1,000 1,300 1,700 2,100 2,550 3,000
Large Towns 250
375
500
700
900
1,100 1,400 1,700 2,000
Small Towns
125
175 250
300
450
550
700
850
1,000
END OF EXAMINATION PAPER
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