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GTA711S-TAXATION 310-1ST OPP- JUNE 2024 |
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nAm I BIA un IVERSITY
OF SCIEnCE
TECHn0L0GY
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: JUNE 2024
PAPER: THEORY& APPLICATION
DURATION: 3 HOURS
MARKS: 100
FIRST 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 THREE(3) 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)
Mr. Randy Brown {"Randy"}, aged 45, was unemployed from 1 March 2023 to 31 May 2023, after
which he managed to get an employment opportunity at Rainbow Corporation Limited. He
commenced employment on 1 June 2023.
1. His'basic salary amounts to N$850 000 per annum.
2. The company contributes 7.5% of his annual basic salary towards his pension fund and
5% of his annual basic salary towards his medical aid fund. Randy's contribution towards
his pension fund and medical aid fund equates to that of his employer.
3. In December 2023 he received a performance bonus of N$35 000. He also en-cashed four
{4} of his leave days for N$12 000.
4. Randy received a 3-bedroom house in Suiderhof, Windhoek from his employer as a fringe
benefit for which he is required to pay a monthly rental of N$500. The company has an
approved housing scheme registered with NamRA.
5. Additionally, he receives a travel allowance of 3% of his annual basic salary. He incurred
operational expenses of N$25 000 on his private vehicle which he uses 70% for business
purposes.
6. Randy further receives a uniform allowance of N$2 000 in January and N$2 000 in June
each year because all the employees are required to wear a distinguishable uniform to
work.
7. The company provides all the employees with a lunch valued at N$100 once a month,
which is required to be consumed at work.
8. Randy received an interest free loan of N$ 40 000 for an urgent family emergency in
November 2023, and was given a grace period of 6 months before he is required to
commence the repayment of the loan.
9. In his personal capacity, he received local dividends of N$10 000, foreign dividends of N$5
000 and interest on his Bank Windhoek Investment of N$7 000.
10. Randy also received an inheritance of N$250 000 in April 2023 from his late brother who
lived in Swakopmund.
11. Due to his generosity, annually in December, Randy makes a donation of N$5 000 to a
local orphanage and N$5 000 to a local church. The orphanage was unable to provide him
with a tax certificate for the donation, however the local church provided him with a tax
certificate for the donation to them.
12. Randy purchased an annuity for the rest of his life, from Old Mutual Namibia. He paid a
cash consideration of N$150 000 for an annuity of N$1 500 per month. He received the
first annuity payment on 1 February 2024. His life expectancy at the time of purchasing
the annuit was 28.65 years.
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13. The Employees tax that was withheld by the Rainbow Corporation Limited amounted to
N$ 13 320 for the 2024 year of assessment.
REQUIRED:
Calculate the normal tax liability of Randy Brown for the year of assessment ending 29 February
2024. Provide reasons for the exclusion of any amount from your calculation. Show all workings.
Round off all amounts to the nearest Namibian dollars (N$}.
(30}
QUESTION 2
(25 MARKS)
Mr Jody Pierce, trading as "Outdoor Sports" sells and repairs sports equipment in the local mall and is
a registered Value-added Tax ("VAT") vendor. The following receipts, accruals and expenditure relates
to his two-month VAT period ending 31 May 2024. Outdoor Sports only makes taxable supplies. All
amounts are inclusive of VAT, unless stated otherwise.
Receipts and accruals:
Sales
Repairs
Interest
Indemnity award (note 1)
fil
207 000
29 900
5 175
51 750
Expenditure:
Bad debts (note 2}
Bank charges
Depreciation (note 3)
Insurance premiums (note 4}
Fuel
Printing and stationery
Purchases (note 5)
Salaries and wages
Rentals (note 6}
13 225
920
19145
3 450
2 990
1564
160 425
41400
13 294
Notes
1. The indemnity award of N$51 750 was received from Mr Pierce's insurer for two
expensive mountain bikes that were stolen from his shop in February 2024.
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2. Bad debts of N$13 225 written off by Outdoor Sports, comprise of the following:
a) N$10 350 owing by one of his long outstanding customers from a credit sale. The
customer has since emigrated and Mr Pierce is unable to trace the customer.
b) N$2 875 was lent to an employee, who has since left town without repaying the
loan.
3. Depreciation (for the two-month period was charged on the following assets:
Manufacturing equipment
Computer
Motor vehicle *
Acquisition date
15 March 2024
1 April 2024
1 May 2024
Cost (incl VAT) N$
276 000
14 375
632 500
Depreciation N$
8 000
695
10 450
*Note: Motor vehicle meets the definition of a passenger vehicle in terms of section 19(1)
of the VAT Act. Mr Pierce has the sole use of the motor vehicle and maintains accurate
records of his travelling. He can prove that his business travel is 40% of his total travelling
expenses.
4. Insurance premiums of N$3 450 were incurred on the following assets that belong to
Outdoor Sports:
a) Manufacturing equipment - N$460
b) Office equipment - N$230
c) Motor vehicle - N$1 035
d) Trading stock - N$1 725
5. Purchases of N$160 425 are made up as follows:
a) Raw materials from local vendors - N$126 500
b) Second-hand tennis racquets from local vendors - N$17 750
c) Second-hand base ball bets from non-vendors - N$16 675.
6. Rentals of N$13 294 comprise of the following:
a) Shop premises - N$10 925
b) Cash register - N$1 495
c) Coffee machine - N$874 (for the use of all employees)
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REQUIRED:
Calculate the Value-added tax payable or refundable of Outdoor Sports for the two-month VAT
period ended 31 May 2024. State the reasons where no VAT may be applicable. Show all
workings. Round off all amounts to the nearest Namibian dollars (N$).
(25}
QUESTION 3
(45 MARKS)
Windhoek Cement (Pty) Ltd, ("Windhoek Cement"), with a December year-end has started
operations in 2013. Windhoek Cement is a registered manufacturer that has a manufacturing
site in Brakwater, as well as a Head Office in Southern Industrial Windhoek.
The following extract of the Income Statement has been provided to you:
Item
Further note
Gross profit for tax purposes
Operating Expenses - excluding manufacturing staff related Note 1
expenses
Manufacturing Staff related expenses:
• Wages paid
• Approved Training incurred
• Contributions to Pension fund
Dividend Income
N$ 540 000
N$ 34100
N$ 54 000
Note 2
N$
4 354 900
1130 700
628100
26 700
Note 1
The operating expenses above include depreciation charges at a total of N$ 520 100.
Note 2
Excluded in the Dividend income above are the following:
1. Windhoek Cement is a shareholder of Ohorongo Cement. N$ 12 000 worth of dividends
were paid out by Ohorongo Cement, of which 50% was paid out of the Share Premium
Account.
2. Five tickets to the next soccer world cup were given to the five directors of the company.
This was received as a gift out of the fact that Windhoek Cement is a shareholder and
holds 25% of the issued share capital of a listed cement company. The_market value of
one ticket at the time of granting the gift was N$ 15 000.
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The following additional costs/items have not been taken into account above:
Head Office:
Windhoek Cement's head office was moved from the Windhoek Central Business District to the
Southern Industrial Area of Windhoek. The prior head office was leased from Olthaver & List, of
which the contract ended 31 July 2023. The contract had a total lease term of 10 years. The
offices were vacated in the last week of July 2023. The contract required Windhoek Cement to
pay a monthly rental of N$ 20 000, as well as a lease premium of N$ 10 000 and a lease deposit
of N$ 20 000. The deposit was only returned to Windhoek Cement on 31 October 2023.
Windhoek Cement entered into a new lease agreement on 01 August, for a lease term of 30
years, to lease a building in the southern industrial area. According to this contract Windhoek
Cement needs to pay a rental of N$ 15 000 per month, a lease premium of N$ 5 000 and a deposit
equivalent to one month's rental. The contract further requires Windhoek Cement to effect lease
improvements to the property to the value of N$ 200 000. These improvements were completed
30 September at a final cost of N$ 250 000.
Manufacturing site:
Windhoek Cement has historically operated their entire manufacturing process from a building
situated in the northern industrial area of Windhoek. This building was completed on 02 May
2017 at a total cost of N$ 420 500. As Windhoek Cement has expanded their operation,
Windhoek Cement decided in 2020 to construct another manufacturing site which will be used
to manufacture solely the bonding compound used in the manufacturing the cement. The
building was completed in June 2023 at a cost of N$ 3 100 500 and brought into use on 01
September 2023.
Patent:
Windhoek Cement makes use of two registered patents that were developed and registered by
German manufacturers. Windhoek Cement has obtained the right of use of the first patent to be
used in their manufacturing process. Only 10% of the process relies on this patent. This was
acquired in 2016, at a cost of N$100 500 and for which the right of use was granted over 28 years.
The second patent is used in the manufacturing of the bonding compound. To have obtained the
right of use, Windhoek Cement had to spend N$78 500 for which the right of use was granted
for five years on 01 March 2023.
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Fixed Asset Movement:
During the year, Windhoek Cemenf s directors decided to give one of their delivery vehicles as a
farewell gift to one of their former managers who has worked for the company since inception.
This vehicle was purchased on 01 July 2021 at a cost of N$300 000. At the time of transferring
ownership to the former employee, the market value of the vehicle was N$150 000, on 01
November 2023.
Another vehicle was involved in a car accident on 01 May 2023, which was purchased on 05 June
2020 at a cost of N$ 250 000. The insurance cover for the vehicle paid out N$100 000 on 01
August 2023. After repairing the vehicle, Windhoek Cement decided to sell the vehicle at a selling
price of N$100 000 on 01 December 2023. The insurance premiums amounted to N$1 500 per
month, of which the insurance cover ended on 30 November 2023.
The existing fixed assets, excluding those mentioned above are as follows:
Date of purchase
Description
Total Cost - N$
01 April 2016
Miscellaneous Machinery
1000 000
01 December 2016
Manufacturing Equipment
1450 000
30 June 2022
01 November 2023
Vehicle No. 3
Furniture & Fittings
350 000
420 500
REQUIRED:
Calculate the taxable income of Windhoek Cement (Pty} Ltd for the year of assessment ending
31 December 2023. Show all workings. Round off all amounts to the nearest Namibian dollars
(N$}.
{45)
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TAX TABLES
TAXABLE INCOME {N$)
0-50 000
50 001- 100 000
100 000 - 300 000
300 001- 500 000
500 001- 800 000
800 001- 1 500 000
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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