GTA711S- TAXATION 310- 1ST OPP- JUNE 2023


GTA711S- TAXATION 310- 1ST OPP- JUNE 2023



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n Am I BI A u n IVE Rs ITY
OF SCIEn CE Ano TECHn 0 LOGY
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 2023
PAPER: THEORY& APPLICATION
DURATION: 3 HOURS
MARKS: 100
FIRST OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINER(S) Mr. G Jansen, Mrs. Y van Wyk & Mr. T Elago
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. Please remove the last page of this paper and insert it 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 10 PAGES (Including this front page)
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QUESTION 1
(22 MARKS)
The following question consist of two independent parts.
PART A
(12 MARKS)
Below find the VAT summary of Transworld Cements (Pty) Ltd for the two-month period ended
31 January 2023. Study the information below and answer the questions that follows.
Transworld Cements (Pty) Ltd is a Category A Vendor.
VAT SUMMARY
Standard Rate
Zero rated
Exempt
Grand Total
Note 1
VAT
?
?
?
OUTPUT VAT ~'
Inclusive amount
2 500 000
1200 000
-
-
?
VAT
?
?
?
-,
INPUT VAT
Inclusive amount
2 211500
520 000
-
-
?
Note: Included in the INPUTVAT figure above for the standard rate supplies is an amount for a
Credit Note issued to a customer, Will work Ltd of N$11500 that relates to goods returned by
Will Work Ltd that were of a wrong specification. This transaction relates to a credit sale on 15
November 2022. You may assume that Transworld Cements (Pty) Ltd has complied with all the
previous VAT submissions and that all documentary evidence is in place.
REQUIRED:
Complete the VAT return (Annexure A) for Transworld Cements (Pty) Ltd for the two-month
period ended 31 January 2023 as it appears on the NAMRA ITAS system. Please remove
Annexure A at the back of the test paper and ensure that you hand it in with answer booklet.
Pleaseindicate your student number on Annexure A. Pleasetake note that you are only entitled
to one Annexure A as attached to this assessment. No additional Annexures are available! (12)
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PARTB
(10 MARKS)
Mrs. Nur Khozan is a qualified auditor and is employed by BOONamibia, Windhoek office. BOO
advocates for secondment of staff to transfer skills as one of their global aims and it was
decided to send Mrs. Nur Khozan to the BOOoffice in Oakland, California, USAduring the 2023
year of assessment where she has worked for 3 months on various audits. During her stay in the
USA, she decided to invest her extra savings and buy an annuity contract. The contract was
signed on 01 May 2022 at an investment firm in Oakland, USA.Upon her return to Windhoek,
she started receiving her first monthly annuity from 01 July 2022.
Mrs Nur Khozan received her salary throughout the 2023 year of assessment. She also earned
an extra monthly allowance of U$D 1000 paid to her by the BOOOakland office, for the period
of her stay in the USA, being from 01 March 2022 to 30 May 2022.
REQUIRED:
Discuss the real source and deemed source rules that are relevant to Mrs. Nur Khozan and
conclude where her income will be taxable for the 2023 year of assessment.
(10)
QUESTION 2
(13 MARKS)
Lazy Accounting Student (Pty) Ltd is a small and medium sized company that sells financial
calculators and other stationery to students across the country and who's year end is the last
day of February.
The following financial data is available:
For the 2023 year of assessment the estimated taxable income for the first six
months is N$500 000.
Estimated taxable income for the second six months of the year is N$250 000.
The actual income for the year was N$1000 000.
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REQUIRED:
a) Calculate the first provisional tax payment for LazyAccounting student (Pty) Ltd for the
2023 year of assessment and provide the date on which this payment is due.
(4)
b) Calculate the second provisional tax payment for LazyAccounting student (Pty) Ltd for the
2023 year of assessment and provide the date on which this payment is due to the receiver. (3)
c) Calculate the final tax payment (top up payment) for LazyAccounting student (Pty) Ltd for
the 2023 year of assessment and provide the date on which this payment is due.
(3)
d) Discuss with calculations whether the top up payment is within an acceptable range as
required by the Receiver of Revenue.
(3)
QUESTION 3
(10 MARKS)
Ab & Aby are twin brothers and partners in an engineering business, providing engineering
consulting services to clients across Namibia. They are both residents of Namibia.
They share profits in the ratio 30:70 respectively. An extract of the statement of profit or loss
for the year ending 28 February 2023 reveals the following:
INCOME
Engineering consulting fees
Dividends from FNB Namibia
Credit losses recovered
NOTES
3
N$
500 000
25 000
10,000
EXPENSES
Partners salaries: Ab
: Aby
Interest on capital accounts paid: Ab
: Aby
Insurance premiums
Credit losses
Donation to charity (certificate obtained)
Depreciation
Profit for the year
200 000
160 000
18 000
12 000
1
so000
2
20,000
5 000
5
25 000
45 000
NOTES
1. The insurance premiums paid are on the joint lives of the partners.
2. Included in the N$20,000 for bad debts is N$ 10 000 which was a loan to an employee,
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who is unable to pay it back.
3. During the 2023 year of assessment, the partners recovered N$10,000 from Sesillia, a
client. In the 2022 year of assessment the partners had rendered services to Sesillia.
Sesillia experienced financial difficulties when she fell sick and lost income for which she
was not insured for, therefore the partners decided to write off her debt.
4. Aby received interest of N$50,000 on a savings account held at Standard Bank Namibia.
5. The entity acquired new computers for their office from Incredible Connection on 28
February 2022 for N$125 000. The computers were valued to last for 5 years from the
purchase date.
REQUIRED:
Calculate the gross income for each partner for the year of assessment ending 28 February
2023. Commence your answer with the net profit.
(10)
QUESTION 4
(55 MARKS)
Wheel & Tyre (Pty) Ltd, (W& T), with a December year-end has started operations in 2011.
Wheel & Tyre is a registered manufacturer that has a manufacturing site in Brakwater, as well
as a Head Office in Southern Industrial Windhoek.
The following extract of the Income Statement has been provided to you:
Item
Further note
Gross profit for tax purposes
Operating Expenses- excluding manufacturing staff related Note 1
expenses
Manufacturing Staff related expenses:
• Wages paid
• Approved Training incurred
• Contributions to Pension fund
Dividend Income
N$ 540 000
N$ 34 100
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.
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Note 2
Excluded in the Dividend income above are the following:
1. N$ 12 000 worth of dividends paid out by Namibian Breweries, 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 W& Tis a shareholder and holds
25% of the issued share capital of a listed brewing company. The market value of one
ticket at the time of granting the gift was N$ 15 000.
The following additional costs/items have not been taken into account above:
Head Office
W& T'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 2022. The contract had a total lease term of 10 years. The offices were
vacated in the last week of July 2022. The contract required W& Tto pay a monthly rental of N$
20 000 per month, as well as a lease premium of N$ 10 000 and a lease deposit of N$ 20 000.
The deposit was only returned to W& Ton 30 October 2022.
W& T 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 W& T 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 W& T 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
W& T have historically operated their entire manufacturing process from a building situated in
the northern industrial area of Windhoek. This building was completed 02 May 2016 at a total
cost of N$ 420 500. As W& T has expanded their operation, W& T decided in 2019 to construct
another manufacturing site which will be used to manufacture solely the rubber compound
used in the manufacturing of tyres. The building was completed in June 2022 at a cost of N$ 3
100 500 and brought into use on 01 September 2022.
In order to finance the construction of the new manufacturing site, W& T entered into a loan
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with Bank of America. The initial loan value was$ 600 000 obtained on January 2020, at which
time the spot rate was N$15/$. The repayment term specified that the loan is repayable on 31
December every year over a period of three years at an annual interest rate of 12%,
compounded annually. You can assume that each year's annual payment amounts to$ 249 809.
The interest paid during the current year of assessment amounted to$ 26 765.
The relevant spot and average rates are given as follows:
01/01/2020
31/12/2020
Average exchange rate for 31/12/2020
31/12/2021
Average exchange rate for 31/12/2021
31/12/2022
Average exchange rate for 31/12/2022
N$ /$
15.00
15.50
15.25
16.00
15.50
19.00
18.00
Patent
W& T makes use of two registered patents that were developed and registered by German
manufacturers. W& T 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
2015, 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 rubber compound. In order to have obtained
the right of use, W& Thad to spend N$ 78 500, for which the right of use was granted for five
years on 01 March 2022.
Consultancy
As W& Tis growing considerably, it has contracted a consultancy firm established in South Africa
on how to improve efficiency in the manufacturing process so asto increase capacity usageand
decrease spoilage. The consultancy firm is a team of three specialists that frequently fly in to
Windhoek to provide their services. The past year W& T has paid the following to the
consultancy firm
• Flight & accommodation expenses
• Invoiced fee for their services rendered
• Entertainment expenses, as the team was taken out to Dinner
N$
22100
55 700
3 600
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Fixed Asset Movement
During the year, W&T's directors decided to give one of their delivery vehicles as a farewell
present to one of their former managers who has worked for the company since inception. This
vehicle was purchased on 01 July 2020 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 2022.
Another vehicle was involved in a car accident on 01 May 2022, which was purchased on 05
June 2019 at a cost of N$ 250 000. The insurance cover for the vehicle paid out N$ 100 000 on
01 August 2022. After repairing the vehicle, the W& T decided to sell the vehicle at a selling
price of N$100 000 on 01 December 2022. The insurance premiums amounted to N$1500 per
month, of which the insurance cover ended on 30 November 2022.
The existing fixed assets, excluding those mentioned above are as follows:
Date of purchase
Description
Total Cost - N$
01 April 2015
Miscellaneous Machinery
1000 000
01 December 2015
Manufacturing Equipment
1450 000
30 June 2021
01 November 2022
Vehicle No. 3
Furniture & Fittings
350 000
420 500
REQUIRED:
Calculate the taxable profit of Wheel & Tyre (Pty) Ltd for the year of assessment ending 31
December 2022.
(55)
END OF EXAMINATION PAPER
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TAX TABLE
TAXABLE INCOME (N$)
0 - 50 000
50 001-100 000
100 000 - 300 000
300 001 - 500 000
500 001 - 800 000
800 001-1500 000
Above 1 500 000
INDIVIDUAL INCOME TAX
RATES OF TAX FROM YEARS OF ASSESSMENT ENDING 2022/
2023 (N$)
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
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