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ATX812S- ADVANCED TAXATION- 1ST OPP- NOV 2023 |
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n Am I BI A u n IVE Rs ITY
OF SCIEnCE Ano TECHnOLOGY
FACULTY OF COMMERCE, HUMAN SCIENCES AND EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
QUALIFICATION: BACHELOR OF ACCOUNTING (HONOURS)
QUALIFICATION CODE: 08BOAH
LEVEL: 8
COURSE: ADVANCED TAXATION
COURSE CODE: ATX812S
DATE: NOVEMBER 2023
SESSION: THEORY & CALCULATIONS
DURATION: 4 HOURS
MARKS: 100
FIRST OPPORTUNITY EXAMINATION - QUESTION PAPER
EXAMINER:
Ms Y Andrew
MODERATOR:
Ms M Amakali
INSTRUCTIONS TO CANDIDATES
1. This paper consists of 7 pages (excluding cover page).
2. Answer all the questions using either blue or black ink.
3. Write neat and clear.
4. A non-programmable calculator is permissible.
5. The Namibian Income Tax Act no.24 of 1981 is permissible.
6. The Namibian Value-added Tax Act no.10 of 2000 is permissible.
7. Round off all amounts to the nearest Namibian Dollar (N$).
8. Cleary state (any) assumptions made (where applicable).
9. Show all your workings.
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QUESTION 1
20 marks (48 min)
Coastal Wholesales Limited is a manufacturer and wholesaler of goods in Walvis Bay. The
company is a registered VAT vendor and has a 30 November year end. A new bookkeeper joined
the company on 1 September 2023. An extract from the VAT ledger account for the two-month
VAT period ending on 30 November 2023 follows:
DR
2023
Oct 7 Entertainment (note 3)
15 NAMRA oavment
31 Motor vehicle (note 4)
Nov 30 Purchases (note 5)
30 Rental (note 6)
30 Sundry expenses (note 7)
30 Computer (note 8)
VAT account
CR
N$ 2023
N$
706 Oct 1 Balance b/d
18 349
14 689 Nov 30 Sales (note 1)
49 761
24 737
30 Bad debt recovered (note 2) 1 726
14 625
3142
1 911
1 575
Notes:
All amounts include VAT, unless stated otherwise.
1. This represents the tax fraction in respect of the following:
N$
Local sales
Export Sales
264 500
117 000
381 500
No VAT had been charged to export customers but the bookkeeper believes the company
should account for VAT otherwise the input tax deductions cannot be claimed.
2. This represents the tax fraction in respect of a bad debt recovered. The bad debt was
written off on 1 October 2020.
3. Entertainment expenses include the following:
Hotel costs of sales manager while away on business (incl VAT)
Teas, coffee and other staff refreshments (incl VAT)
Restaurant bill of managing director on business lunch (incl VAT)
N$
3 886
988
536
.5..A1.Q
4. A new VW T-cross was acquired on 31 October 2023 for the exclusive free use of the
financial manager. The cash cost of the motor car was N$437 000 (including VAT). The
free use of the car was made available from 1 November 2023. The previous vehicle,
which the financial manager had been using since 1 March 2020, a VW pick-up, was stolen
on 1 October 2022. The company's insurance company paid out N$33 000 in full and final
settlement of the insurance claim on 15 November 2023.
The VW pick-up (not double cab) had been originally acquired by Coastal Wholesales
Limited on 1 December 2022 at a cost of N$58 650 (including VAT) and had been used
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for business purposes from this date. Wear and tear on this vehicle is allowed by NAM RA
in terms of section 17(1)(e).
5. This represents the tax fraction of the purchases for the two-month VAT period. All
purchases were from VAT vendors and Coastal Wholesales Limited was in possession of
all relevant tax invoices.
6. This represents the VAT content in respect of rental of the company's administration
offices.
7. The total sundry expenses for the two-month VAT period are made up as follows:
Expenses incurred in respect of transactions with VAT vendors
Expenses incurred in respect of transactions with non-vendors
(but not second-hand goods)
Fuel expense incurred from the local Puma service station
N$
14 375
1 824
976
17 175
8. This computer, which is second-hand, was acquired from a non-vendor for N$12 075. The
non-vendor was paid on 15 December 2023.
REQUIRED
MARKS
(a) Calculate the correct VAT payable/ receivable to/from NAM RA in respect of the
12
VAT period ending 30 November 2023.
(b) Indicate when the VAT liability, if any, should be paid to NAMRA in respect of
2
the VAT period ending 30 November 2023.
(c) Calculate the income tax effects in respect of the payout of N$33 000 received
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from the insurance company for the year of assessment ending 30 November
2023.
QUESTION 2
30 marks (72 min)
Mr Joseph, a Namibian resident, is employed by First Rand Namibia as a short-term insurance
broker. He has been working for the company for the past 21 years.
The following information relates to his 2023 year of assessment:
Salary
Long service award
Housing allowance (per month)
Travel allowance (per month)
Staff loan
Employer contribution to pension fund
Cellphone allowance (per month)
Laptop acquired from employer
Note
1
2
3
4
5
6
7
N$
774 000
4424
12 000
6 200
35 000
?
700
5 000
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Notes
1. Mr Joseph received a digital camera to the value of N$4 424 as a long service award.
2. First Rand Namibia has an approved housing scheme registered with the Receiver of
Revenue.
3. Mr Joseph is obligated in terms of his employment agreement to visit clients in order to
prepare insurance schedules that meet the clients' specific needs. He receives a travel
allowance in order to carry out his duties. He uses his own motor vehicle, which he
acquired during the 2021 year of assessment, which cost him N$460 000 (including VAT
and excluding finance charges). First Rand Namibia reimburses Mr Joseph for all his
actual fuel expenses for business. He kept accurate records of his fuel expenses during
the year which amounted to N$14 540. The maintenance cost amounted N$5 400
(including VAT), and license fees were N$805 in respect of his motor vehicle for the current
year of assessment. His logbook reflected his total kilometers travelled for the year as 36
000, of which 27 000 related to business travel.
4. Mr Joseph applied for a staff loan which the company acceded to on 1 November. The
company charged Mr Joseph interest of 6.25% on the loan. The loan is repayable in 12
months.
5. The employer contributes 8.5% per month of his basic salary to a pension fund. In addition
Mr Joseph contributes N$1 250 per month to a Retirement Annuity fund.
6. Mr Joseph kept accurate records of all his business calls during the year which amounted
to N$5 600.
7. Mr Joseph purchased an old laptop from his employer. The market value of the laptop is
N$6 200.
8. He earned local interest and dividends of N$8 200 and N$10 000, respectively during the
year on investments he holds.
9. Employees tax of N$223 480 was deducted by First Rand Namibia, in respect of Mr
Joseph's 2023 year of assessment.
REQUIRED:
MARKS
Calculate Mr Joseph's tax liability for his 2023 year of assessment. Show all 30
calculations and indicate if an amount is not included in or deducted/exempt from
taxable income.
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QUESTION 3
15 marks (36 min)
Mapimpi (Pty) ltd ("Mapimpi") is a Namibian retailer of soccer jerseys. The company imports its
trading stock (soccer jerseys) from suppliers in Manchester, United Kingdom. This trading stock
is then sold in Namibia. The company has a 30 April financial year-end.
On 1 February 2022, Mapimpi ordered trading stock from a supplier in Manchester. The cost price
of the trading stock was £18 650 (inclusive of shipping costs of £1 850). The trading stock was
shipped free-on-board on 15 February 2022. It arrived in Namibia on 24 February 2022. In terms
of the agreement with the supplier, the account had to be settled in full on 15 May 2022. All trading
stock was still on hand on 30 April 2022. On 10 May 2022, Mapimpi donated 18 soccer jerseys to
a local high school. The market value of the stock donated was N$26 200.
The opening stock value on 1 May 2021 was N$400 320.
The relevant exchange rates are as follows:
Date
1 February 2022
£1 = N$18.30
15 February 2022
£1 = N$18.65
24 February 2022
£1 = N$18.78
30 April 2022
£1 =N$19.15
15 May 2022
£1 = N$19.03
REQUIRED
Calculate the effect of the above transactions on Mapimpi's taxable income for its
years of assessment ending 30 April 2022 and 30 April 2023. Show all your workings.
Round off all amounts to the nearest Namibian Dollar (N$).
MARKS
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QUESTION 4
20 marks (48 min)
Woody (Pty) ltd ("Woody") manufactures and sells wooden houses. The company is not a
registered manufacturer for tax purposes and may not claim any allowances allowed for
manufacturers. The draft Statement of Profit or Loss and Other Comprehensive Income for the
year ended 31 March 2023. All amounts exclude VAT, unless stated otherwise:
Sales
Less: Cost of Sales
= Gross Profit
Add Other Income
Dividends
Profit on sale of Factory
Insurance proceeds
= Gross Income
Notes N$
N$
6 883 212
1
(1 879 500)
5 003 712
2
150 000
3
500
5
45 000
5 199 212
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Less: Expenses
Lease premium and payment
4 480 000
Depreciation
6 148 878
Finance charges on lease of machine
12 020
Interest paid
60 000
Other expenses (all deductible for tax purposes
473 698 (1 174 596}
= Net Profit before tax
4 024 616
Notes
1. Purchases amounted to N$1 973 000, opening stock and closing stock were N$202 500
and N$296 000, respectively. The market value of stock has never been below its cost.
2. "Local" dividends of N$150 000 accruing during the 2023 year of assessment.
3. During its 2017 year of assessment, the company purchased a factory (industrial building)
at a cost of N$1 000 000. The seller was entitled to a building allowance in terms of s
17(1)(f) from 2010 (year brought into use) to the 2016 year of assessment. As a result of
rapid developments, this factory became too small to meet the company's needs and it
was sold on 31 October 2022 for N$1 000 000.
4. After the old factory was sold, and as from 1 November 2022, the company leased a new
factory building for a period of 20 years. In terms of the lease agreement, a once off lease
premium of N$80 000 had to be paid and rental of N$80 000 per month was payable as
well. The new factory was occupied from 1 November 2022. In terms of the lease
agreement, Woody was obliged to make improvements to the factory at a cost of N$ 1
500 000. The improvements were completed on 1 March 2023, but their actual cost
amounted to N$2 100 000.
5. In the early morning hours of 1 April 2022, a fire destroyed Machine A The following
amounts (net of the relevant output tax) were received from the insurer:
N$
Loss of profits due to fire:
28 000
Loss of Machine A:
17 000
45 000
The cost price of Machine A was N$50 000 and its tax value on 1 April 2022 was N$20
000 (refer to note 6 for details of Machine B which replaced Machine A).
6. Depreciation was calculated as follows on the following assets:
Asset
Machine B
Leased Machine C
Acquisition
date
2 November
2022
N/a
Brought
into use
2 November
2022
N/a
Cost (excl Market
VAT)N$
Value N$
100 000 N/a
N/a
24 000
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Computer Printer
Delivery vehicle on hand
(tax value N$ 28 333 at
vear end)
Delivery vehicle
1 August
2022
N/a
1 August
2022
N/a
959
N/a
85 000
N/a
1 November 1 November 120 000 N/a
2022
2022
From 1 July 2019, Machine C was leased to Woody under a finance lease agreement for
a period of 40 months. When the lease agreement expired on 31 October 2022, Woody
bought the machine from the lessor at market value of N$24 000 on that date and
continued using it in its manufacturing process.
The write off periods of the assets according to the company's accounting policies are as
follows:
Computer printers:
Machinery & equipment
Delivery vehicles
3 years
5 years
4 years
REQUIRED
Calculate the income tax liability of Woody (Pty) Ltd for its year of assessment ending
31 March 2023. Start your calculation with the Net profit before tax. Show all your
workings.
MARKS
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QUESTION 5
15 marks (36 min)
Leigh Rothman has always believed in investing any extra money in the bank, as such she has a
fixed deposit on which she earns 4% interest per year.
She is 50 years old and is entitled to the annual interest exemption in terms of section 16(1)(I) to
(m). Leigh heard on the radio that investing in an investment that pays local dividends will be a
tax-free investment. Leigh decided to investigate and found that if she rather invested her money
in shares listed on the NSX, her return would be dividends which would qualify for the section
16(1)(n) dividend exemption. This would result in her having a complete tax saving on her dividend
income earned. Leigh also found out that she might have to include a recoupment on the disposal
of the investment. After some careful consideration and looking at the performance of share
investment on the NSX, Leigh decided to switch from an interest-bearing investment to a dividend-
yielding investment.
REQUIRED:
MARKS
Discuss whether the Commissioner could successfully apply the provisions of 15
general anti-avoidance rules, in terms of section 95 of the Income Tax Act.
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ANNEXURE
Individual Inco1ne Tax
All individuals (incl. deceased estates and trusts) other than companies.
0-50000
50 001 - 100 000
100 001 - 300 000
300 001 - 500 000
500 001 - 800 000
800 001 - 1 500 000
Above 1 500 000
Not taxable
18% for each NS above 50 000
9 000 + 25% for each NS 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
420 000 + 37% for each N$ above 1 500 000
Hottsing loa11s a11d111ortgage sttbsidies
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 1,100 2, mo 2,550 3,ooo
LargeTowns 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 FIRST OPPORTUNITY EXAMINATION
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