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583 (583) ––––––– 4.314 (8.000) 5.000 x 1/36 Retail shop purchased Insurance premiums Less than R50. 8.150 (177.000) (6. Paper F6 (ZAF) Taxation (South Africa) December 2008 Answers and Marking Scheme Marks 1 Oman (Pty) Limited (a) Taxable income and tax payable – year ended 29 February 2008 Net profit before tax 1.000 – 140.000 x 20% x 5/12 Cost 2006 – 50% 2007 – 30% 2008 – 20% x 5/12 1 1 Tax value Insurance proceeds S.179) 2 1 1 1/ 2 1/ 2 11/2 1/ 2 140.000 ––––––– 30.000 (40.000 4.314 –––––––––– 41.8(4)(a) recoupment No capital gain as sold for less than cost New motorcycle Taxable income Tax payable 43.667 1 1 1/ 2 9.521 –––––––––– Nil 25.300 6.000 x 50% (51.333 40.521 –––––––––– 1 ––– 22 ––– (b) STC payable on dividend declared Accounting net profit Taxation as calculated above Dividend declared (half) Less dividends received STC payable at 10% R 1. Deduct: dividends received – exempt 2.821 1 177. R80.000) – (6.000) (6.000) –––––––––– 823.150 – – 10.521) –––––––––– 854.000 x 5% R R 1.000) x 10% (823.700 (40.000) –––––––––– 1.931 1 1/ 2 1/ 2 1 1 ––– 4 ––– 13 .000 x 5% 15. 5.000 (750) 41. 3.000 (300.000/ 19·5 (155.000) x 29% 2 1 1/ 2 102.Fundamentals Level – Skills Module.667) 80.150 (8.000) –––––––––– 419.500) (32. 1 1 1/ 2 6.667) ––––––– 9. (8.000 paid in advance Lease payments no adjustment Add back buildings expense Lease improvements Additional improvements Motor cycle Add back book value Depreciation Deduct insurance proceeds in income Wear and tear Recoupment Wear and tear R950.000 x 2 1/ 2 1 1/ 2 1/ 2 4.000 x 100% Leased machine Add back depreciation Lease payments Less VAT 21.200) (7.000) (47.629 –––––––––– 427.032.000 – 43.032.000) = 15.8(4)m Bad debts: Trade debt correctly accounted for Loan debt add back as never included in income New machine 95.024. 7.000 (95.700 151. Debt written back correctly accounted for s.521 – 300.000) (24.

e.060) ––––––– 190 x 12 1.060 (12.000 625 40.500 1 (530 + 530) 2.280 (34.000) ––––––– 3.000 15.000) ––––––––– 458. In this instance by 31 March 2008.405 – fringe benefit – additional expenses – own contributions 1. in this case the year ended 28 February 2006.000 (500) ––––––– 1.000 – 1/ 2 1 228.675) ––––––––– 448. Strictly.11(h)).000 1 1/ 2 1/ 2 1 2.070 x 2·28% x 12 Long service award Painting 6.405 2 Retirement annuity Limited to the greater of R3.000 x (11% – 6%) x 3/12 R50.400 6.no deduction or taxable benefit Use of motor car 260.605) ––––––– 1/ 2 1/ 2 Therefore.840 x 100/114 Less: limit Cheque Low interest loan R80.000 x 100/114 2.e. the Commissioner may grant relief on account of the fact that the improvements do not benefit the lessor immediately (s.000 (18. the whole of this amount is taxable in the year of assessment in which the right accrued or is received i.000) ––––––– 2 1 1 1/ 2 1. The lessor must include the value of the improvements required in terms of the lease agreement i.250 (1.000 x (10% – 6%) x 6/12 to 1 September 2007 R80.405 21.730 ––––––––– 1 ––– 18 ––– 14 .000 x (11% – 6%) x 3/12 Bonus – services rendered Trading stock At market value at 1 January 2008 Less: paid by Mary Medical fund Fringe benefit Less: allowed R R 350.Marks (c) The STC is payable by not later than the last day of the month following the month in which the dividend cycle ends.000 1.280 30. 2 ––– (d) 1 1 ––– 2 ––– 30 ––– 2 Mary Brown (a) Taxable income – year ended 29 February 2008 Cash salary Provident fund contribution .600 1.000 in his gross income. however. full amount paid allowed Taxable income from employment Interest Less: exemption Dividends exempt Medical expenditure Expenses 1 1 1/ 2 1/ 2 1/ 2 1/ 2 Less: Taxable income (12.000 (5.750 R15% x (470.000) = R18.000 10.000 ––––––– 47. R140.070 2·28% 62.5% – 0·22% 228.405 2.500 – 0 R1.280 ––––––––– 470.250 x 12 71/2% x 461.405 – 350.000 – ––––––––– 461.

100. 1 1/ 2 1 1 1/ 2 15 .642 (7.405 –––––––– 139.000 2. Primary residence Base cost – Time apportioned base cost 950.000 (2.000) ––––––––––– 300.740) –––––––– 122.200.111) ––––––––––– Nil ––––––––––– 3 1/ 2 1/ 2 1/ 2 1 1 1 300.838.405 12.000 (350.000 + [3.000) ––––––––––– 1/ 2 1/ 2 1 1/ 2 1/ 2 1/ 2 4. 2 ––– 25 ––– 3 Len Reed (a) Capital gains – year ended 29 February 2008 1.000 x 20% – Market value on 1 October 2001 Proceeds Less: base cost Use TABC as the highest base cost Less: primary residence exclusion limited to Capital gain 2.902 (131.000 3.740) –––––––– 131.287 (7.000 470. Yacht Not a personal use asset as it is greater than 10 metres Proceeds Less: base cost Capital loss Loss to be disregarded in terms of paragraph 15 of the Eighth Schedule 3.500.000 ––––––––––– R 20/ 20 + 7] 2.889) ––––––––––– 661.838.000 (200.000 – 160.645) –––––––– 1/ 2 1/ 2 1/ 2 1/ 2 ––– 2 ––– (d) Mary could request Twosun Limited to take her retirement annuity fund contributions into account on a monthly basis.500.000 (80.Marks (b) Employee’s tax paid Taxable income Add back: Retirement annuity Tax payable Less: rebate R 458.000 – 950. Furniture Personal use asset Therefore the loss of R40.000) ––––––––––– (50.000 ––––––––––– 1.000 x – 20% of proceeds R3.547 –––––––– 1/ 2 1 1 1/ 2 ––– 3 ––– (c) Mary’s overpaid tax Taxable income Tax payable Less: rebate Normal tax payable Less: employee’s tax deducted at source Tax overpaid R 130.000) ––––––––––– 40.000 (900.111 (661.547) –––––––– (8.889 700.500.000) is disregarded Donations of gold coins – excluded from the definition of currency Deemed proceeds (market value) Less: base cost Capital gain 5. Gain taxable on shares on emigration Deemed proceeds (market value) Less: base cost Capital gain 120.

000 x 14/114 1 9.000 x 14/114 VAT input limited to the extent of the purchase price paid Delivery truck Deemed VAT input limited to the lesser of consideration and market value R80.11(cA). 2. i.000) ––––––––– 325. i.825 1 4.000 for the new fire screen will not be deductible as repairs. (4) The patent acquired is of a capital nature but is allowed to be written off at 5% per year.23(o).404 40.11(e) allowance on the screen will not be permitted as it is not a movable asset.000 – ––––––––– 340. R6. The remuneration amount of R50.Marks 6.088/ 2 67.000 (92. 1 11/2 1 1 1 11/2 1 1 2 1/ 2 2 11/2 ––– 15 ––– 5 Ebony Limited (a) VAT inputs and outputs R 1.11(d). Holiday house: consequences of emigration No deemed disposal on emigration as it is immovable property situated in South Africa.000 will be deductible as the pipes and wiring were damaged. The deductibility of the compensation depends on whether the risk of such a mishap (falling rocks) was so closely related to the income earning activities of Entebe as to be incurred in the production of income.228 1 16 . (3) The tax value of R1.000 will be deductible as it is incurred in the production of income as it is customary for Entebe to make such payments [Provider’s case]. The R12.000 (R100. But they are only deductible if they are repairs of something previously in disrepair. 1. [PE Tramways case].000/3). as it is an improvement.000/2) or over the period of three years.e. Therefore the R40. Land R500. (5) The legal expenses will be deductible if the compensation payment is deductible.088 135.000 (15.000 x 25% 4 (1) Fines are not deductible – prohibited in terms of the Income Tax Act s.000 135.000 58. 2 ––– 17 ––– R 340. A s. The amount to be written off each year is therefore R33. R50.000.100. (6) In terms of s. It seems this is the case and therefore both amounts would be deductible.000 x 14/114 Sale of machine to a connected person VAT output cannot be on less than the market value R10.000) 1 1/ 2 ––– 3 ––– 20 ––– R233.500 will be allowed as a deduction in terms of s.000 x VAT input limited to transfer duty paid 14/ 114 61. 3.333 (R100.11(o). (2) Repairs are deductible in terms of s.e. the restraint payment can be written off over the lesser of the period of the restraint.544 1/ 2 1 1/ 2 Building purchased R1.250 1/ 2 1/ 2 1/ 2 (b) Taxable capital gains Capital gains Capital loss – disregarded Aggregate capital gains Less: annual exclusion Less: loss brought forward Taxable capital gains (40.000 + 300. The registration costs can be written off in full.000) ––––––––– 233.

Use of truck by employee VAT input on truck purchase R268.000 consideration when the goods were transferred in October 2007. Therefore.912 32.Marks 5. there would be no VAT consequences for Ebony Limited in December 2007 when the branch sold the goods. Sale of goods by branch Output VAT R200.000 x 14/114 14/ 114 100/ 114 Nil 4.000 x 0% R40.000 x VAT output on fringe benefit R268.000 x x 0·6% x 14/ 114 x1 ––– 8 ––– (b) The 0% VAT rate would have applied to the R140.912 173 1/ 2 1/ 2 1/ 2 11/2 6. 1 1 ––– 2 ––– 10 ––– 17 .