TAX3761 JAN –
SOLUTIONS
QUESTION 1: LUXURY
SOFAS (PTY) LTD
a) Tax Implications for
Transactions (2025 Year of
Assessment)
Transaction 1: Construction of
Apartments
Aspect Tax Implication Calculation Amount (R)
Supervisor: 4 × R4,500 × 4
72,000
months
Rental Income Taxable as ordinary income.
Non‑supervisor: 10 ×
30,000
R3,000 × 1 month
Total Rental Income 102,000
Supervisor: R1,720,000 ×
28,667
Deductible on cost of 5% × 4/12
Wear & Tear buildings (5% p.a.,
Non‑supervisor:
apportioned). 13,750
R3,300,000 × 5% × 1/12
Total Wear & Tear -42,417
Net Rental Income Included in taxable income. 59,583
, Residential letting is an
exempt supply; input tax on
construction costs is not
VAT – –
claimable. Fraudulent claim
(fake commercial building
plan) constitutes tax evasion.
Transaction 2: Interest‑free Loan to
Shareholder
Aspect Tax Implication Calculation Amount (R)
Section 64E: interest
R1,500,000 × 8% (official
Deemed Dividend foregone is deemed a 120,000
rate)
dividend.
Withheld by company at 20%
Dividends Tax R120,000 × 20% 24,000
(shareholder is individual).
Transaction 3: Consultation Fee to
Foreign Company
Aspect Tax Implication Calculation Amount (R)
Deductible expense incurred GBP15,000 × R21.50 (spot
Service Fee 322,500
in production of income. rate)
Section 35A not applicable
because services were
Withholding Tax – –
rendered outside South
Africa (no physical presence).
b) Provisional Tax Payments
SOLUTIONS
QUESTION 1: LUXURY
SOFAS (PTY) LTD
a) Tax Implications for
Transactions (2025 Year of
Assessment)
Transaction 1: Construction of
Apartments
Aspect Tax Implication Calculation Amount (R)
Supervisor: 4 × R4,500 × 4
72,000
months
Rental Income Taxable as ordinary income.
Non‑supervisor: 10 ×
30,000
R3,000 × 1 month
Total Rental Income 102,000
Supervisor: R1,720,000 ×
28,667
Deductible on cost of 5% × 4/12
Wear & Tear buildings (5% p.a.,
Non‑supervisor:
apportioned). 13,750
R3,300,000 × 5% × 1/12
Total Wear & Tear -42,417
Net Rental Income Included in taxable income. 59,583
, Residential letting is an
exempt supply; input tax on
construction costs is not
VAT – –
claimable. Fraudulent claim
(fake commercial building
plan) constitutes tax evasion.
Transaction 2: Interest‑free Loan to
Shareholder
Aspect Tax Implication Calculation Amount (R)
Section 64E: interest
R1,500,000 × 8% (official
Deemed Dividend foregone is deemed a 120,000
rate)
dividend.
Withheld by company at 20%
Dividends Tax R120,000 × 20% 24,000
(shareholder is individual).
Transaction 3: Consultation Fee to
Foreign Company
Aspect Tax Implication Calculation Amount (R)
Deductible expense incurred GBP15,000 × R21.50 (spot
Service Fee 322,500
in production of income. rate)
Section 35A not applicable
because services were
Withholding Tax – –
rendered outside South
Africa (no physical presence).
b) Provisional Tax Payments
