QUESTION 1.

3 SUGGESTED SOLUTION
Page 1 of 2 pages

Part 2 Marks

Talyor Holdings Ltd

 It renders only exempt supplies (financial services) 1

 Therefore it cannot register as a vendor and no input tax deductions will be available. 1

Taylor Housing (Pty) Ltd

 It makes taxable supplies (rental of commercial properties (manufacturing and administration buildings) and 1
fees for building maintenance). Output tax would be accounted for in respect of these transactions at the
standard rate: 1

 It also makes exempt supplies (residential accommodation supplied to employees). 1

 The nominal rentals could result in a taxable fringe benefit but no deemed output tax need be accounted for
in terms of section 18(3) of the Value-Added Tax Act as the supply is an exempt supply. 2
 Where goods and services acquired for maintenance can be related wholly to the making of taxable supplies, 1
the full amount of VAT paid on acquisition may be claimed as an input tax deduction.

 Where the acquisition of goods and services relates wholly to exempt supplies none of the VAT paid may be
claimed as an input tax deduction. 1

 Apportionment is required where goods and services are acquired partly for making taxable supplies and
partly for exempt supplies. 1

 The default method of apportionment is the turnover method. 1

 No apportionment is required if the taxable use or consumption is determined to be 95% or more of the
intended use. 1

Taylor Management Services (Pty) Ltd

 The fees charged to the subsidiaries is a vatable transaction and output tax would need to be accounted for in
the tax period when the services were rendered (see time of supply rule for connected persons). 2

 The fees charged to Taylor Holdings and Taylor Housing must be at open market value (see section 10(4)). 1

 Services rendered to the Windhoek branch of Taylor Manufacturing are considered to be enterprise activity
(see section 8(9)) but may represent a zero-rated supply (see section 11(2)(o)). 2

Taylor Marketing (Pty) Ltd

 The local sales will attract output tax at 15%. 1

 The export sales (Namibia/Europe) will be zero-rated supplies. 1

 Input tax deductions may be claimed in respect of goods and services acquired to be able to make these
taxable supplies. 1
19
Max 15
QUESTION 1.3 SUGGESTED SOLUTION
Page 2 of 2 pages

Part 3

The Windhoek branch (production plant) is situated outside the Republic and not part of the Republic VAT
system. 1

The branch can be separately identified and has an independent system of accounting. Thus its enterprise
activities are deemed to be carried on by a person separate from the vendor. 1

The branch will be subject to the Namibian VAT tax system. 1

The supplies from this branch to Taylor Marketing (Pty) Ltd will thus constitute the import of goods from a
customs union country. VAT will thus be payable on the import at 15% of the amount of the value which would 1
have been used from customs duty purposes had the goods been subject to customs duty. The VAT paid on 1
importation will then be claimed as an input tax deduction. 1
7
Max 5