Assessment 2 Solution - F fffggg ghhhhhh. Yhhj ssdd gggg wwwe. Fffff zxxc. Dddd yhjjj sssssss ddfff PDF

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Assessment 2 Question 1 Part A Transaction

Working

Reference

R4 000 000 x 15 /115

Section 7(1)(a)

1

Sales to South African customers

2

Goods set aside and paid for R15 000 x 15 /115 Time of supply is earlier of invoice or payment of any consideration. Sales to export customers Zero-rated Purchases (local sales) R1 200 000 x 15 /115

3 4 5 6 7

8 9 10 11 12 13 14

Purchases (export sales) Salaries and wages paid Rent paid (commercial building) Vat is levied as the factory building is considered to be a commercial building Payment of staff membership fees Purchase of new machine Bad debts - considered to be irrecoverable debt Silver Star's bus tickets Car hire charges Fuel Bakkie purchased. Not a motor car as defined in section 1 of the VAT Act, input tax not denied Deemed output tax on fringe benefit

15

16

Section 11(1)(a)(i) Section 17(1)

1 957 0 156 522

R750 000 x 15 /115 Employment not an enterprise. Therefore no VAT R120 000 x 15 /115

Section 17(1) Section 1 - Defintion of Enterprise Section 17(1)

Input tax prohibited R60 000 x 15 /115

Section 17(2)(b) Section 17(1)

0 7 826

Section 22(1) Section 12(g) Section 17(2)(c) Section 11(1)(h)

522 0 0 0

15

R4 000 x /115 Exempt supply Input tax prohibited Zero-rated R180 000 x 15 /115 R180 000 x

100

/115 x 0.6% x

Section 17(1) 15

/115

Second-hand spares from non VAT vendor. Deemed input tax deduction in terms of (b) of definition of 'input tax'. R2 500 x 15 /115 Limited to the tax fraction applied to the lesser consideration or market value No output tax as motor car destroyed beyond Insurance proceeds: motor vehicle: economic repair.

Section 1 - Input tax Definition, (b)

23 478 122

326

Proviso to Section 8(8)

R13 000 x 15 /115

17

Inventory donated: s18(1): Use open market value - s 10(7)

R1 500 X 15 /115

Section 18(1) and Section 10(7)

18

New laptop

R10 800 x 15 /115

Section 17(1)

Laptop given to employee - Fringe Benefit Interest Received Bank Charges

R10 800 x 100 /115 x 15 /115 Exempt supply R3 500 X 15 /115

Section 18(3) Section 12(a) Section 17(1)

Lunch with potential client Input prohibited - supply of entertainment This entertainment was also not incurred while he was obliged to be away for a night from his usual place of residence and from his usual workplace, by reason of duties of his office

97 826 0 15 652

Section 18(3)

Insurance proceeds on merchandise

20

521 739

Section 9(1)

16

19

Output Tax

Input Tax

0

Section 8(8)

Section 17(2)(a)

1 696 196 1 409 1 143 0 457 0

Section 17(2)(a) proviso (ii)

304 017 Net output tax payable for April 2020

526 853 222 835

Part B Carla David Right of use of Motor Vehicle The right of use of this motor vehicle represents a fringe benefit in terms of the special inclusion paragraph (i) of the Gross Income definition per section 1 of the ITA. This fringe benefit will calculated in terms of paragraph 7(4)(a)(i) of the Seventh Schedule, based on 3.5% of the determined value of the vehicle, for each month Carla David is entitled to use the vehicle for private purposes. Thereafter the fringe benefit value will be reduced by: business use percentage reduction, in accordance with paragraph 7(7) of the Seventh Schedule as well as for the fuel costs that Carla David bears, in terms of paragraph 7(8)(b) of the Seventh Schedule. The fringe benefit to be included will be calculated as follows: R 250 000

Determined Value: Para 7 of the Seventh Schedule Factor is 3.5%: Para 7(4)(a)(i) of the Seventh Schedule

3.5%

Monthly value (3.5% of determined value): R250 000 X 3.5% Number of months Inclusion in gross income Less reduction for business kilometres travelled under para 7(7) of the Seventh schedule Business Kilometres = 10 000KM (40 000 KM-30 000 KM) R105 000 X 10 000/40 000

Less fuel expenditure in terms of Para 7(8)(b) of the Seventh Schedule: (R20 000 X 30000/40000) Inclusion into taxable income

8 750 12 105 000

-

26 250 78 750

-

15 000

63 750

On assessment and under the provisions of paragraph 7(8)(a)(iii), Carla David's inclusion in gross income of R78 750, is further reduced by R15 000 (R20 000 X 30 000/40 000). It follows then that R63 750 is included in her taxable income Television Set The acquisition of the Television set at no consideration by Carla David, represents a fringe benefit in terms of the special inclusion paragraph (i) of the Gross Income definition per section 1 of the ITA.

This fringe benefit will calculated in terms of paragraph 5(2) of the Seventh Schedule. As this Television Set, was acquired specifically by the employer to dispose of to the employee, the fringe benefit will be the cost thereof to the employer. Carla David, will therefore have a taxable benefit of R17 000, which will be included in her gross income and taxable income. Carla David will not be entitled to the R5 000 long service award reduction in terms of paragraph 5(2)(b) in the determining the value of the fringe benefit as her years of service (7 years), falls below the period of service required under the definition of a long service in paragraph 5(4) of the Seventh Schedule. Long service is defined as an initial unbroken period of service not less than 15 years....