Summary TAX May Solution paper 1

SOLUTION TO QUESTION 1 May/June 2017
Part A Paper 1
Delicious Bakery
VAT Payable/refundable 28 February 2017 (2 month period)

VAT Output
White bread sales - 2 242 643 x 15% 336 396
Brown bread sales - 1 207 577 x 0% - zero rated -
Scones sales - 2 155 000 x 15% 323 250
Rental income - 800 x 36 x 15% x 60% 2 592
Right of use fringe benefit
(((467 800 x100/115x 0.6%)-R85) x 15/115 x 1) 307
662 546

VAT Input
Credit noted - 150 x 15/115 20
Purchase of second hand goods, Claim only upon payment
(300 000 x 15/115) 39 130
Salaries - not carrying on an enterprise - therefore no VAT -
Fuel - zero rated -
Electricity - 6 455 x 15% 968
Purchase price - 34 500 x 15/115 4 500
Instalments - no VAT as claimed up front on purchase price -
Total Vat output 44 618
Vat payable (Vat output less Vat input) 617 927

Part b
Export sales
Dr Debtors/Bank 450 000
Cr Sales 450 000
Cr VAT zero rated (indirect export) -
The sale is a direct export sale and there-fore a zero-rated supply. Therefore no VAT is levied on the sale


Sale of asset purchased second hand from non-vendor
Dr Debtors/Bank 51 750
Cr Sales 45 000
Cr Output VAT (45 000 x 15%) 6 750
Export sale of second-hand goods where the notional input tax was claimed by the SA vendor, is not a zero-rated
supply. The VAT charge to the recipient is equal to the notional input tax claimed.


Sale of goods in South Africa to a Tourist
Dr Debtors/Bank 11 500
Cr Sales 10 000
Cr Output VAT - standard rated as service is in RSA 1 500
Normal cash sale to a client even though he is a tourist, therefore VAT at 15% is levied. It is the tourist’s
responsibility to claim back the VAT when he leaves the country.