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TAX621S-TAXATION 202-NOV 2025 |
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.'
nAmlBIA unlVERSITY
OF SCIEnCE Ano TECHnOLOGY
FACULTY OF COMMERCE, HUMAN SCIENCES & EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
QUALIFICATION: BACHELOR OF ACCOUNTING
QUALIFICATION CODE: 07BOAC/07BGAC
COURSE : TAXATION 202
SESSION: OCTOBER/ NOVEMBER 2025
DURATION: 3 HOURS
LEVEL: 6
COURSE CODE: TAX621S
PAPER: THEORY & CALCULATIONS
MARKS: 100
FIRST OPPORTUNITY EXAMINATION
1st EXAMINER:
Mrs. Y van Wyk
2nd EXAMINERS: Mr. Y Elago; Mr. J Erastus and Ms. Y Tjejamba
MODERATOR:
Dr. Z van der Walt
INSTRUCTIONS TO CANDIDATES
1. This paper consists of 6 pages (excluding cover page and the Annexure).
2. You are reminded that answers may NOT be written in pencil. NO tippex may be used.
3. Answer the questions by the use of:
- Effective structure and presentation; clear explanations.
- Logical arguments; and clear and concise language.
5. Show all calculations clearly. Round off calculated amounts to the nearest Rand.
6. Questions pertaining to this question paper should 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 and any assumption made by the student should be clearly stated .
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QUESTION 1
13 MARKS
Study the table below. It outlines principles from case law related to the definition of "gross income"
as contained in the Income Tax Act 58 of 1962 of South Africa. Answer the question that follows by
applying the appropriate case law or tax principle to each scenario:
No. Case Law
1.
Principle
Ordinary resident. Place to return to after all his wanderings.
2.
Entitled to/ cash or otherwise/ amount has a wider meaning.
3. Natal Estates
4. Stott
s.
Entitled to. Credit sales form part of gross income.
6. Pick n Pay Employee share
Trust
7.
All assets are either classified as fixed or floating capital.
8. MP Finance
9.
10. Pyatt
Where there are mixed intentions, determine the dominant
intention.
11.
12. Butcher Brothers
Only include in gross income if it is received by him for his own
benefit.
13.
If no legal obligation exists to pay over an amount, the amount
remains gross income for the taxpayer.
REQUIRED:
Complete the table above with the correct reference to a court case (case law), or the relevant tax
principle, where applicable . In your answer booklet, write down only the number ofthe question and
your corresponding answer.
(13)
QUESTION 2
15 MARKS
Mr. Jack Sparrow started his own Accounting and Tax consulting business, Sparrow Accounting
Solutions {Pty) Ltd. He commenced with business on 1 March 2018 and has been trading successfully
since then. The company is a registered VAT vendor (Category B). The financial year-end of Sparrow
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Accounting Solutions (Pty) Ltd is the last day of February each year.
Sparrow Accounting Solutions (Pty) Ltd. has concluded the following transactions and requires your
advice on the correct tax treatment of each of the transactions below: All amounts exclude VAT unless
otherwise specified.
Sparrow Accounting Solutions {Pty) Ltd entered into a 14 ½ year lease contract on 1 April 2023 with
Enterprise (Pty) Ltd (a non-connected party) to lease business premises to Sparrow Accounting
Solutions {Pty) Ltd. Sparrow Accounting Solutions (Pty) Ltd will use these premises to meet with
prospective clients to offer advisory services and to consult with its vast range of clients. Sparrow
Accounting Solutions {Pty) Ltd and Enterprise {Pty) Ltd agreed on a lease premium that is payable on
day one of the contract of R150 000 and further agreed for Sparrow Accounting Solutions {Pty) Ltd.
to add a front office to the existing building to attend to clients at the entrance of the business. The
monthly rental amounts to R45 000 and the amount agreed on between the two companies that will
be included in the lessor's income amounts to R795 000.
The construction work commenced on 1 June 2023 and was successfully completed and handed over
by Prohibited Ltd (the construction company) on 31 July 2023. The amount actually incurred by
Sparrow Accounting Solutions {Pty) Ltd amounts to R800 000. Sparrow Accounting Solutions {Pty) Ltd
used the new front- office from 1 August 2023.
REQUIRED:
a) Calculate the section ll(f) lease premium deduction available to the lessee for the 2024 year
of assessment.
(3)
b) Calculate the section ll(f) lease premium deduction available to the lessee for the 2025 year
of assessment.
(2)
c) Calculate the section ll(h) leasehold special allowance deduction available to the lessor for
the 2024 year of assessment.
(6)
d) Calculate the section ll(g) leasehold improvement deduction available to the lessee for the
2024 year of assessment.
(3)
e) Calculate the section ll(g) leasehold improvement deduction available to the lessee for the
2025 year of assessment.
(1)
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Show all workings and round off to the nearest rand (R), where applicable.
QUESTION 3
45 MARKS
John Doe is 45 years old and is married out of community of property. He is employed by West Air
Airways, a local airline. The following information relates to John Doe's income and expenditure for
the year of assessment ended 28 February 2025:
1. In his position as marketing manager for West Air Airways, John Doe received an annual salary
of R580 000.
2. John Doe had to travel for business purposes and accordingly also received a travel allowance
of R75 000 for the year. The vehicle he used was purchased under a finance lease in November
2023. The cost of the vehicle was R234 500 (VAT inclusive) and the finance charges, spread
evenly over the five-year term of the lease, amounted to R23 220 per annum. John kept
accurate records of expenses incurred in connection with the vehicle. During the 2025 year
of assessment, he spent R30 700 on fuel, R12 200 on capital repayments of the finance lease,
and R16 900 on vehicle insurance. John travelled 29 200 kilometres in total during the year of
assessment. He kept an accurate logbook of the distance travelled for business purposes,
which was 11 200 kilometres.
3. From 1 August 2024, John also received the right to use a company car for his private
purposes. The cost of the vehicle was R188 543 (VAT exclusive). All fuel and maintenance
costs are paid by West Air Airways. The company car is not subject to a maintenance plan.
4. During the previous year of assessment, John borrowed a sum of money from his employer
in order to purchase a house. The capital outstanding at 1 March 2024 was R98 000. His
employer charged him a fixed interest rate of 1,5% per annum. Assume further that the
official rate of interest at 1 March 2024 was 6,5%. Assume the official rate increased to 7,5%
on 1 September 2024 and thereafter remained unchanged for the remainder of the year of
assessment. John made no capital repayments during the 2025 year of assessment.
5. John Doe received the following investment income for the 2025 year of assessment:
• Dividends received (Scotland unit trusts)
• Interest received (Stanbic bank) (not a tax-free investment)
Rl 235
R26 914
6. On 1 July 2024, Bruce's employer gave him the right to use a laptop computer for private
purposes. John had the right to use the computer until the end of the year of assessment. The
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company purchased the computer at a cost of R17 500 during May 2023. The market value of
the computer at the time John received the right to use it was R14 700. John paid no
consideration for using the asset.
7. During January 2025 West Air Airways, John Doe's employer, gave him four free return air
tickets to Cape Town, for himself, his wife and his two children. The cost to the employer was
Rl 050 per return ticket. The market value of the tickets was R2 950 per return ticket.
8. To cover himself against the risk of injury or ill health, John Doe paid income protection
insurance premiums totalling R7 320, during the current year of assessment. In terms of the
insurance policy, any amounts paid out to him will not be taxable.
9. John Doe, his wife and two minor children are members of a registered medical scheme. His
youngest child has a disability as defined . John Doe's medical aid contributions for the year of
assessment amounted to R31 360. His employer paid no contributions on his behalf.
10. John Doe is not a member of a pension fund, but he does make contributions to a retirement
annuity fund . During the year of assessment, these contributions totalled R37 800.
Contributions, totalling R3 200 that had been disallowed for tax purposes during previous
years of assessment, were brought forward to the current year. Assume Bruce's remuneration
was R689 000 for the current year of assessment.
11. John made a R10 500 donation to his local church in December 2024. He obtained a section
18A certificate.
12. West Air Airways withheld R38 950 in taxes from Bruce's salary during the current year of
assessment.
REQUIRED:
a) Explain to John Doe what Fringe benefits are and how it is treated in relation to his taxable
income. Support your explanation with specific reference to the Income Tax Act, where
applicable.
(5)
b) Calculate the normal tax liability for John Doe for the year of assessment ending 28 February
2025. You are required to provide a short reason for the exclusion or non-deductibility of an
amount from your calculation. Round off all amounts to the nearest RAND. Ignore Capital
Gains Tax.
(40)
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QUESTION 4
27 MARKS
Vitality (Pty) Ltd, a retailer and resident of the Republic, entered into the following transactions
during its financial year ended 28 February 2025:
Taxable income from operations, calculated correctly, before taking the
following items into account:
Prepaid expenses
Donation to public benefit organisation (PBO) - s 18A receipt obtained
Legal expenses
Restraint of trade payment
Annuities paid to dependents of former employee
Bad debt
Repairs
NOTE
1
2
3
4
5
6
RAND
2 065 000
144 000
30000
55 000
160 000
12 000
12 000
15 000
NOTES:
1. Prepaid expenses
Insurance for the period 1 January 2025 - 30 September 2025 was paid on 28 February 2025.
2. Legal Expenses:
The following legal expenses were incurred during the year of assessment:
• Drawing up of restraint-of-trade agreement (note 3)
• Debt collection
• Dispute with one of its customers for supplying a defective product
R12 000
R6 000
R37 000
Judgement was given in favour of the customer, with all legal costs to be borne by
Vitality (Pty) Ltd. Damages paid were R25 000 and legal costs paid were R12 000
(consisting of Vitality (Pty) Ltd's own legal costs of RS 000 and the customer's legal
costs of R7 000).
3. Restraint of trade:
A restraint of trade payment was paid to a former employee in the 2025 year of assessment.
The restraint prohibited the former employee from working for a competitor of the company
within a radius of 15km from the company's business premises, for a period of four years.
4. Annuities paid to dependents of former employee:
One of Vitality (Pty) Ltd's former employees was involved in a fatal car accident. The company
decided to pay an annuity to the dependents of the former employer after the death of the
former employee.
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5. Bad debts / credit losses
Included in bad debt are the following amounts:
Trade debtors from trading in the 2025 year of assessment
A loan to an employee who passed away before the loan was paid back
(no amount could be recovered from the estate)
R10 000
R2 000
The total list of doubtful debt for the 2025 year of assessment amounted to R8 000. Vitality
(Pty) Ltd does not apply IFRS 9 and the trade debtors were 60 days in arrears at the end of
the 2024 year of assessment.
The doubtful debt allowance, allowed by the Commissioner in the 2024 year of assessment,
amounted to R3 500.
6. Repairs
During the 2025 year of assessment, Vitality (Pty) Ltd replaced the windows of its boardroom
with sliding doors. This was done in order to create an easy access to the outdoor "braai" area
when entertaining clients. The building does not qualify for any tax allowance.
REQUIRED:
Calculate the taxable income of Vitality (Pty) Ltd for the 2025 year of assessment. Support your
calculations with relevant explanations and motivate the deductibility of the compensation for
damages paid to the customer (refer to note 2} as well as the repairs (refer to note 6). (27)
END OF FIRST OPPORTUNITY EXAMINATION
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TAX RATES
Taxable income
R
0 - R 237 100
R 237 101 - R 370 500
R 370 501 - R 512 800
R 512 801 - R 673 000
R 673 001 - R 857 900
R 857 901 - R1 817 000
R1 817 001 +
Rates of tax
18% of each R1
R 42 678 + 26% of the amount over
R 77 362 + 31 % of the amount over
R121 475 + 36% of the amount over
R179 147 + 39% of the amount over
R251 258 + 41 % of the amount over
R644 489 + 45% of the amount over
R 237 100
R 370 500
R 512 800
R 673 000
R 857 900
R1 817 000
TAX RATES
Taxable income
R
0-R 237100
R 237 101 - R 370 500
R 370 501 - R 512 800
R 512 801 - R 673 000
R 673 001 - R 857 900
R 857 901 - R1 817 000
R1 817 001 +
Rates of tax
18% of each R1
R 42 678 + 26% of the amount over
R 77 362 + 31 % of the amount over
R121 475 + 36% of the amount over
R179147 + 39% of the amount over
R251 258 + 41 % of the amount over
R644 489 + 45% of the amount over
R 237 100
R 370 500
R 512 800
R 673 000
R 857 900
R1 817 000
Persons under 65
Persons 65 and under 75
Persons 75 and over
Taxable income
2025
2026
R 95 750
R 95 750
R148 217
R148 217
R165 689
R165 689
Amounts deductible from the tax payable
Persons under 65
Persons 65 and under 75
Persons 75 and over
2025
R17 235
R26 679
R29 824
2026
R17 235
R26 679
R29 824
MEDICAL AID
Monthly amounts deductible from tax payable 2025
Main member
R364
Main member with one dependant
R728
Main member with two dependants
R97 4
2026
R364
R728
R97 4
Each additional dependant qualifies for a credit of R246 (2023 : R234)
per month.
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DEDUCTIONS TRAVE.L 'EXPENSES
The deduction in respect of business travel is limited to the allowance
granted and may be determined using actual expenditure incurred or on a
deemed cost per kilometre basis in accordance with the table below.
Accurate records of the opening and closing odometer readings must be
maintained in all circumstances.
As from 1 March 2010, the claim must be based on the actual distance
travelled for business purposes, supported by a detailed log book.
The cost of the vehicle includes VAT but excludes finance costs.
Where actual expenditure is used the value of the vehicle is limited to
R800 000 (2023 : R665 000) for purposes of calculating wear and tear, which
must be spread over a seven year period.
The finance costs are also limited to a debt of R800 000 (2023 : R665 000).
In the case of a leased vehicle, the instalments in any year of assessment
may not exceed the fixed cost component in the table.
DEEMED EXPENDITURE - 2025
Cost of vehicle
Does not exceed R100 000
Exceeds R100 000 but not R200 000
Exceeds R200 000 but not R300 000
Exceeds R300 000 but not R400 000
Exceeds R400 000 but not R500 000
Exceeds R500 000 but not R600 000
Exceeds R600 000 but not R700 000
Exceeds R700 000
Fixed
R
34 480
61 770
89 119
113 436
137 752
163 178
188 653
215 447
Fuel
C
151,7
169,4
184,0
197,9
211,8
243,0
247,1
251,2
Repairs
C
46,0
57,6
63,5
69,3
81,5
95,6
107,3
118,9
DEEMED EXPENDITURE - 2026
Cost of vehicle
Does not exceed R100 000
Exceeds R100 000 but not R200 000
Exceeds R200 000 but not R300 000
Exceeds R300 000 but not R400 000
Exceeds R400 000 but not R500 000
Exceeds R500 000 but not R600 000
Exceeds R600 000 but not R700 000
Exceeds R700 000
Fixed
R
33 940
60 688
87 497
111 273
135 048
159 934
184 867
211 121
Fuel
C
146,7
163,8
177,9
191,4
204,8
234,9
238,9
242,9
Repairs
C
47,4
59,3
65,4
71,4
83,9
98,5
110,5
122,5
VARIABLE REM·UN6RATION
Variable remuneration, such as commission, bonuses, overtime, leave pay,
night shift or standby allowances and reimbursive travel, is taxed on a
payment basis.
As from 1 March 2023, this includes performance-based remuneration. The
rule applies to the deduction of PAYE, the employee's gross income inclusion
and the employer's income tax deduction.
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