TAX3701 | ASSIGNMENT 1 | SEMESTER 2 2023| CODE: 701239 | ANSWERS
WITH EXPLANATIONS FOR EACH ANSWER!
TAX3701
Taxation of Business Activities
TAX3701 | ASSIGNMENT 1 | SEMESTER 2 2023| CODE: 701239 |
ANSWERS WITH EXPLANATIONS!
,Question 1
Siyavuya (Pty) Ltd is a South African resident company that provides
electronic gadgets repair services. The company provides its employees with
free lunch meals on a daily basis. The total value of meals provided during
January and February 2023 amounts to R8,900 (excluding VAT).
What is the input tax on the value of the free lunch meals provided to
employees during the two months period ended 28 February 2023?
a. R1 335
b. Rnil - denied supply
c. Rnil - exempt supply
d. Rnil - zero rated supply
Answer B: Rnil - denied supply.
Explanation: According to South African VAT laws, employers cannot claim input tax
credits for the provision of meals or refreshments to employees, hence the input tax
on these meals is Rnil.
Question 2: How may turnover tax be calculated?
a. Gross dividends received by virtue of shares held in another company
b. Proceeds received from suppliers in respect of returned goods
c. South African receipts that are revenue in nature
d. Half of the profits made from the disposal of fixed assets
Answer C: South African receipts that are revenue in nature.
Explanation: Turnover tax in South Africa is calculated based on the total amount of
a company's revenue receipts, simplifying the tax process especially for small
businesses.
Question 3: Just-in-time (Pty) Ltd (‘JIT’) is a South African resident company
that operates in the manufacturing industry. The company produces luxurious
office desks for distribution to clients in and around South Africa. JIT is
registered as a category B vendor for Value-Added Tax (VAT) purposes and is
making 75% taxable supplies. All amounts exclude VAT unless stated
otherwise.
The following information relates to JIT’s transactions for the two-months
period ended 30 April 2023:
, On 20 March 2023, JIT imported 15 improved quality office desks from a
renowned supplier situated in Germany. The cost
price of the office desks was R10 800 per office desk and the value for
customs duty purposes was R10 500 per office desk.
Non-refundable import surcharges of R1 250 were charged on the transaction.
The date reflected on the Customs Billing of
Entry is 8 April 2023.
The VAT payable/refundable to JIT for the two-months period ended 30 April
2023 is:
For Just-in-time (Pty) Ltd, what is the VAT payable/refundable for the two-
months period ended 30 April 2023?
a. R22 761 payable
b. R26 174 refundable
c. R23 813 refundable
d. R26 850 payable
Answer C: R23,813 refundable.
Explanation: This amount is calculated by determining the VAT on the imported
office desks and factoring in the percentage of taxable supplies (75%) made by the
company. VAT paid by a company on its purchases can be claimed back as
refundable.
Question 4: Various court cases have tested the practical application of the
principles of s11(a), the general deduction formula. Which one of the following
is one of the most notable court cases?
a. Caltex Oil (SA) Ltd V SIR 37 SATC 1) v (actually incurred)
b. Port Elizabeth Electric Tramway Co Ltd v CIR 8 SATC 13 (in the production of
income)
c. Joffe & Co (Pty) Ltd v CIR 13 SATC 354 (expenditure and losses)
d. All stated court cases
Answer B and C: Port Elizabeth Electric Tramway Co Ltd v CIR and Joffe & Co (Pty)
Ltd v CIR.
Explanation: These cases have established precedents for the interpretation of the
principles of the general deduction formula under Section 11(a) of the Income Tax
Act in South Africa.
WITH EXPLANATIONS FOR EACH ANSWER!
TAX3701
Taxation of Business Activities
TAX3701 | ASSIGNMENT 1 | SEMESTER 2 2023| CODE: 701239 |
ANSWERS WITH EXPLANATIONS!
,Question 1
Siyavuya (Pty) Ltd is a South African resident company that provides
electronic gadgets repair services. The company provides its employees with
free lunch meals on a daily basis. The total value of meals provided during
January and February 2023 amounts to R8,900 (excluding VAT).
What is the input tax on the value of the free lunch meals provided to
employees during the two months period ended 28 February 2023?
a. R1 335
b. Rnil - denied supply
c. Rnil - exempt supply
d. Rnil - zero rated supply
Answer B: Rnil - denied supply.
Explanation: According to South African VAT laws, employers cannot claim input tax
credits for the provision of meals or refreshments to employees, hence the input tax
on these meals is Rnil.
Question 2: How may turnover tax be calculated?
a. Gross dividends received by virtue of shares held in another company
b. Proceeds received from suppliers in respect of returned goods
c. South African receipts that are revenue in nature
d. Half of the profits made from the disposal of fixed assets
Answer C: South African receipts that are revenue in nature.
Explanation: Turnover tax in South Africa is calculated based on the total amount of
a company's revenue receipts, simplifying the tax process especially for small
businesses.
Question 3: Just-in-time (Pty) Ltd (‘JIT’) is a South African resident company
that operates in the manufacturing industry. The company produces luxurious
office desks for distribution to clients in and around South Africa. JIT is
registered as a category B vendor for Value-Added Tax (VAT) purposes and is
making 75% taxable supplies. All amounts exclude VAT unless stated
otherwise.
The following information relates to JIT’s transactions for the two-months
period ended 30 April 2023:
, On 20 March 2023, JIT imported 15 improved quality office desks from a
renowned supplier situated in Germany. The cost
price of the office desks was R10 800 per office desk and the value for
customs duty purposes was R10 500 per office desk.
Non-refundable import surcharges of R1 250 were charged on the transaction.
The date reflected on the Customs Billing of
Entry is 8 April 2023.
The VAT payable/refundable to JIT for the two-months period ended 30 April
2023 is:
For Just-in-time (Pty) Ltd, what is the VAT payable/refundable for the two-
months period ended 30 April 2023?
a. R22 761 payable
b. R26 174 refundable
c. R23 813 refundable
d. R26 850 payable
Answer C: R23,813 refundable.
Explanation: This amount is calculated by determining the VAT on the imported
office desks and factoring in the percentage of taxable supplies (75%) made by the
company. VAT paid by a company on its purchases can be claimed back as
refundable.
Question 4: Various court cases have tested the practical application of the
principles of s11(a), the general deduction formula. Which one of the following
is one of the most notable court cases?
a. Caltex Oil (SA) Ltd V SIR 37 SATC 1) v (actually incurred)
b. Port Elizabeth Electric Tramway Co Ltd v CIR 8 SATC 13 (in the production of
income)
c. Joffe & Co (Pty) Ltd v CIR 13 SATC 354 (expenditure and losses)
d. All stated court cases
Answer B and C: Port Elizabeth Electric Tramway Co Ltd v CIR and Joffe & Co (Pty)
Ltd v CIR.
Explanation: These cases have established precedents for the interpretation of the
principles of the general deduction formula under Section 11(a) of the Income Tax
Act in South Africa.
