VAT Questions 2022 includes all the vat questions for Bel 300 PDF

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Download VAT Questions 2022 includes all the vat questions for Bel 300 PDF

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Index of Questions: Number Name 1 Mr A. Rupert

2

Steinway Limited

3 4

Base Line Forever Furniture

5

Speedy Instruction

6

Travel Line

7

Prop Holding

8 9 10

Green Fingers Andries Bekker Lucky Luke

11 12

Novelty Gifts Quick Fit

13 14

IT Always PLC Construction

15

Green Innovation

16

Mr Billionaire

17

Mondy Monster

Principle Registration: Commercial + residential accommodation Imports + exports (goods + services) Calculation Entertainment Export of goods acquired as second hand Registration: commercial accommodation Various VAT concepts: Commercial accommodation > 28 days Various VAT concepts: Fringe benefit Indemnity payment Various VAT concepts: Residential + commercial accommodation Second hand immovable property Various VAT concepts Various VAT concepts Second hand immovable property Indirect export Import + export of services Various VAT concepts Various VAT concepts: Commercial accommodation > 28 days Entertainment Various VAT concepts: Second hand goods Instalment credit agreement Various VAT concepts: Registration Commercial + residential accommodation Connected persons 1

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After Lecture Lecture 4

Marks 6

Lecture 3

20

Lecture 6 Lecture 4

10 18

Lecture 4

21

Lecture 5

10

Lecture 7

20

Lecture 7 Lecture 6 Lecture 7

20 12 6

Lecture 3 Lecture 3

11 10

Lecture 6 Lecture 6

5 16

Lecture 7

12

Lecture 4

23

Lecture 7

10

18 19

Foundation

Direct export of goods acquired second hand Various VAT concepts

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2 

Lecture 3

10

Lecture 7

23

VAT QUESTIONS 1 – 19

(2022)

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QUESTION 1 (CEV 1: 2009 adjusted)

(6 marks; 9 minutes)

Mr. A. Rupert is a businessman from Gauteng. Mr. Rupert decided to expand his current business activities, in order to reduce his risk exposure during the prevailing world-wide economic crisis. Mr. Rupert therefore bought a small holding (plot) just outside of Vanderbijlpark on 1 March 2021. The small holding consists of: ● ● ● ●

A guest house for holidaymakers visiting the Vaal River Five residential units for permanent tenants A crèche for the children of permanent residents as well as holidaymakers, and A medium sized general dealership.

For the purposes of your discussion you may assume that all amounts exclude VAT. Income for the 12-month period ending 28 February 2022 was as follows: R ● Rental income earned from visitors staying in the guest house for periods of ≤ 28 days ● Rental income earned from visitors staying in the guest house for periods of > 28 days ● Rental income earned from permanent tenants ● Crèche – fees earned ● Value of supplies by general dealership

600 000 89 000 250 000 70 000 300 000 1 309 000

Mr. Rupert is unsure whether he is obliged to register as a VAT vendor and approached you to advise him on this matter. REQUIRED: Discuss whether Mr. Rupert is required to register his activities on the small holding for VAT purposes in terms of the Value Added Tax Act for the period ending 28 February 2022. Support your conclusion with relevant calculations. (6)

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3 

QUESTION 2 (CEV 4: 2012 adjusted)

(20 marks; 30 minutes)

STEINWAY LIMITED (Steinway) is a company with a financial year end of 30 June. Steinway manufactures musical instruments and specialises in the production of grand pianos. The factory and head office of Steinway are located in Johannesburg. Steinway makes 100% taxable supplies. For purposes of this question all amounts include VAT (where applicable). You may assume that Steinway is a Category C vendor and is in possession of all the necessary valid VAT invoices (where applicable) in respect of goods and services received and supplied. Unless otherwise specified or not applicable, all transactions have been entered into with registered VAT vendors. April is generally not a month with high sales volumes, but it is the best time to purchase all the resources necessary at very good prices. Steinway incurred the following costs during April 2022: ● The special black and white wood used to make the keys of each piano was imported from Kenya Steinway paid the supplier R1 320 000 for this specialised wood and R60 000 was paid as customs duty. The South African Customs determined the value of the wood to be R1 250 000. ● The wood used to make the remainder of each piano was imported from Botswana at a customs value of R5 000 000. ● The brass pedals and leg pieces were purchased from a company in the Limpopo Province at a cost of R76 000. These items were sent to the factory at a cost of R13 000 via rail transport. Because the procurement manager of Steinway has to choose only the finest quality pedals and leg pieces, he visited the supplier himself. The manager also travelled to Limpopo by train and the cost of his train ticket was R2 300. ● An auditor was brought in from Europe to audit the financial statements here in South Africa. The company plans to export some of their pianos and different legislation requirements therefore have to be met. The audit fee invoiced by the auditor was R448 000. The open market value of the audit service is R380 000. ● Other expenses which appeared on the April 2022 bank statement were: o Interest of R20 000 and bank fees of R6 000 o Electricity account of R267 000 o Diesel for the delivery truck of R38 000.

4 

Steinway had the following receipts during April 2022: ● One grand piano was sold to a European resident. The selling price of R600 000 was paid immediately and the piano was shipped to Europe by Steinway. ● Steinway also delivers a separate service to its clients for tuning the new pianos at the clients’ premises. An employee of Steinway was sent to Europe to tune the grand piano (see above). Payment of R23 000 was received for the supply of the service. Steinway incurred R8 000 for the employee’s plane ticket to Europe. ● Two of the smaller model pianos were sold to a wine estate in Stellenbosch at a price of R250 000 each. ● An American film star purchased a piano over the phone for his holiday home in the Kruger National Park. Steinway invoiced an amount of $100 000. On the date of the invoice the rand equivalent was R1 300 000. REQUIRED: PART A Explain briefly what it means to be a Category C vendor and when SARS will register an enterprise as a Category C vendor. (2) PART B Calculate the amount of VAT payable/receivable to SARS in respect of April 2022. Show all nil effects and give brief reasons only for nil effects. Also state, where applicable, what form as well as by when the form should be submitted and payment made to SARS. (18)

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QUESTION 3 (YT 2 2011 adjusted)

(10 Marks; 15 Minutes)

Base Line (Pty) Ltd (“Base Line”) purchased 700 cans of Coke at a cost of R3 192 (VAT inclusive) to be used as follows: ● 500 cans at the year-end function. The first 300 cans will be given to employees free of charge. The remaining 200 cans will be sold to employees at a reduced price of R4 per can. ● 100 cans to be consumed at the company’s team building weekend in the Pilansberg Game Reserve. ● 100 cans will be sold in the company’s vending machine at R9.50 a can (a market related price). None of the above constituted a fringe benefit (as defined in the 7th Schedule) to the employees of Base Line. REQUIRED: Discuss, supported with calculations, the VAT consequences of the above transactions. (10) [Source: Graded Questions 2010 (adapted)]

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6 

QUESTION 4 (YT 2: 2012 adjusted)

(18 marks; 27 minutes)

This question consists of TWO separate parts. Answer both parts. PART A

(11 marks; 17 minutes)

Forever Furniture (Pty) Ltd (“FF”) is a VAT vendor that specialises in sourcing specific exclusive styles of furniture for high profile customers throughout Africa. FF makes 100% taxable supplies and the company is a category A VAT vendor. All amounts exclude VAT, unless stated otherwise. The following information was provided to you: 1.

On 2 May 2022, FF purchased used antique furniture for R300 000 from a deceased estate (a resident non-vendor). 50% of the purchase price was paid on 2 May 2022 and the remaining 50% on 2 June 2022. On 10 June 2022 some of this furniture (which was acquired for R200 000) was sold for a rand equivalent of R500 000 and directly exported to a customer in Kenya. A tax invoice was issued to the Kenyan client on 10 June 2022 and payment was received from the client during August 2022. (8)

2.

Harvey Norman (a South African resident) is the senior furniture buyer in the company. On 30 April 2022 he relocated to India for a period of 6 months in order to source Indian furniture. On 15 April 2022 FF paid his business class air ticket of R23 000 as well as flight insurance of R600. On the same day FF also paid R6 500 for Harvey’s personal belongings to be shipped to India by using SAA Cargo. (3)

REQUIRED: Briefly discuss, supported with calculations, the VAT implications for Forever Furniture (Pty) Ltd (including the time and value of the supply) of both transactions. You can assume that all documentation as required by the VAT Act has been obtained. (11) 

7 

PART B

(7 marks; 10 minutes)

You have received the following e-mails from clients requesting you to assist them: E-mail 1 To: You From: The accountant at Tukkies Stay (Pty) Ltd Date: 5 February 2022 Subject: Value Added Tax - Registration I am the accountant of Tukkies Stay (Pty) Ltd, a newly formed company that owns a combination of townhouses and bed-and-breakfasts in the Hatfield area. The townhouses are let as residential accommodation to students on a monthly basis while they are studying. The rooms in the bed-and-breakfasts are let at a tariff per night to travellers. At this stage I am not sure what the yearly turnover will be, but I know that I will not meet the compulsory registration requirement of R1 000 000. I am unsure if the company can register voluntarily as a vendor. Please guide me with enough information to assist me in knowing if and when I can register Tukkies Stay (Pty) Ltd voluntarily for VAT. (5) E-mail 2 To: You From: Inexperienced person Date: 7 February 2022 Subject: Input Tax I am unsure why there will never be an input tax claim available to me (a registered vendor making 100% taxable supplies) when I import a service into South Africa. Please explain to me why this is so. (2) REQUIRED: Answer both e-mails. 

(7) 

8 

QUESTION 5.1 (CEV 1: 2013 adjusted)

(21 marks; 31 minutes)

Speedy Instruction (Pty) Ltd (“Speedy Instruction”) is a Category B VAT vendor which operates from their premises in Centurion. They are a private institution which offers training for the production and building of a ‘Swoosh’ car which is a replica racing car. They are not a school, university, technikon, college or any other public higher educational institution. They also provide accommodation in their guest house for delegates who are attending one of their training courses. As part of their business they also sell their completed ‘Swoosh’ cars to various markets. You can assume that all amounts include VAT (where applicable or unless stated otherwise). All transactions have been entered into with vendors (where applicable) and all the necessary documentation and invoices have been obtained. The following transactions relate to the tax period ending on 28 February 2022:

INCOME: Training fees charged Fees charged by guest house Sale of ‘Swoosh’ cars in South Africa

Note

Amount R

1 2

730 400 289 028 652 422

Sale and delivery of ‘Swoosh’ cars in Europe Interest on current bank account EXPENSES: Car parts purchased in South Africa Car parts purchased from America (rand value) Car parts purchased from Botswana (rand value) Salaries

825 250 13 252

3 4

77 795 415 000 240 000 480 000

Notes: 1. The training fees charged are made up as follows: ● Training offered at Centurion premises to South African residents ● Training offered at Centurion premises to German residents ● Training offered in Switzerland by one of Speedy Instruction’s employees

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9 

R273 600 R136 800 R320 000 R730 400

2. The fees charged by the guest house are made up as follows: ● Accommodation for various delegates attending short courses (longest stay per person was 7 nights). This amount includes VAT. ● Accommodation for German delegates who attended an advanced course (each delegate stayed in the guest house for 35 nights). This amount excludes VAT.

R64 068 R224 960

R289 028 3. The car parts purchased from America were released for home consumption on 31 January 2022. Customs duty of R42 500 was paid and the customs duty value was established as R480 000. 4. The car parts purchased from Botswana were delivered at Speedy Instruction’s premises on 15 February 2022. The customs duty value was established as R250 000. REQUIRED: (a) Calculate the VAT payable by or due to Speedy Instruction (Pty) Ltd for the tax period ending 28 February 2022. Give reasons to support any nil effects. Show all calculations clearly and round off to the nearest rand. (16) (b) Indicate which form Speedy Instruction (Pty) Ltd will need to complete for their calculation made in part (a) and by what date they need to submit it. (3) (c) What will the implication be if Speedy Instruction (Pty) Ltd makes a late payment? (2)

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10 

QUESTION 5.2

(6 marks; 9 minutes)

PropRes (Pty) Ltd is a category B VAT vendor. The company specialises in interior décor designing of properties. The company also owns a number of designer flats around the world which are rented out to tenants for residential purposes. During the January/February 2022 tax period the company had to pay an architect in Germany R85 000 to re-design two of the flats. The one flat is situated in Cape Town, and the other in Dublin, Ireland. The architect spent an equal amount of time on designing each flat. The open market value of this service is R77 000 (excluding VAT). REQUIRED: Discuss the VAT implications for PropRes (Pty) Ltd, if any, of the payment made to the architect.

11 

QUESTION 6 (CEV 4: 2013 adjusted)

(10 marks; 15 minutes)

Travel Line (Pty) Limited, a transport contractor, derives its income from the transport of goods (by truck) and the transport of fare paying passengers (by bus) in South Africa. Since it makes both taxable and exempt supplies for VAT purposes, the Commissioner has agreed to an output basis of apportionment to arrive at an acceptable input tax ratio of 75%. An analysis of its income and expenditure for its two-month tax period ending 31 December 2022 is set out below. Unless otherwise stated, all amounts are inclusive of VAT when applicable: Income Fares from transporting goods Fares from transporting passengers Interest levied on overdue accounts Indemnity payment (note 1)

R 798 000 R 285 000 R 10 431 R 15 960

Expenditure Bad debts (note 2) Bank charges Computer (note 1 and 3) Depreciation (note 3) Insurance premiums (note 4) Maintenance (note 5) Salaries Employees’ subsistence (note 6) Petrol

R 23 940 R 1 368 R 20 520 R 11 180 R 17 328 R 19 950 R 376 200 R 2 508 R 120 840

Notes: 1. The indemnity payment of R15 960 was paid for a notebook computer (a portable computer) that was owned by Travel Line (Pty) Limited and stolen from its premises in September 2022. On receipt of the indemnity payment in December 2022, a new notebook computer was purchased by Travel Line (Pty) Limited (see note 3 below). 2. The bad debt written off of R23 940 all relates to debtors from transporting goods. 3. Depreciation is charged on the following two assets owned by Travel Line (Pty) Limited: ● A motor car that is used by its managing director. It was purchased in January 2022 for R262 200 (R230 000 plus VAT of R32 200). The managing director has had the sole use of this motor car for the entire tax period. The deduction of input tax with purchase was denied. ● A new notebook computer was purchased in December 2022 for R20 520 (R18 000 plus VAT of R2 520) to replace the notebook computer that was stolen (see note 1). 12 

The notebook computer is used by employees in the accounting department to process the financial information of travel Line (Pty) Limited. No depreciation has been provided in this two-month tax period for the trucks and busses owned by Travel Line (Pty) Limited since they have been depreciated in full. 4. Insurance premiums were incurred for the motor car used by the managing director, the notebook computer, the trucks and the busses operated by Travel Line (Pty) Limited. The insurance premiums on the motor car used by the managing director was R 1 596. 5. Maintenance cost were incurred for the trucks and busses operated by Travel Line (Pty) Limited. 6. Employees’ subsistence includes tea, coffee, sugar, milk and biscuits purchased and provided to employees during working hours. REQUIRED: Calculate the net amount of VAT due to, or from, the Commissioner for Travel Line (Pty) Limited’s two-month tax period ended 31 December 2022. Provide reasons for nil effects. Round off all amounts to nearest Rand. (10) (Graded Question-amended)

13 

QUESTION 7 (YT 1: 2013 adjusted)

(20 marks; 30 minutes)

You are a clerk at Prop Holding (Pty) Ltd (‘Prop Holding’), a property investment company with a December year end. The company earns rental income from the letting of both commercial (office blocks and factories) and residential properties (town houses). The letting of the residential properties does NOT constitute “commercial accommodation” as defined in the VAT Act. Prop Holding is registered for VAT on the invoice basis and has proved to the satisfaction of SARS that 74% of its activities relate to taxable supplies and 26% to exempt supplies. You have been asked to do a VAT calculation for the company’s two-month tax period ending on 31 January 2022 based on the following extract from the accounting system operated by Prop Holding. (Assume that all amounts include VAT where applicable, unless stated otherwise. You may also assume that Prop Holding has issued and received the necessary tax invoices for all the transactions mentioned below and where applicable, has obtained all the necessary documentation in terms of the VAT Act. Furthermore, you can assume that all transactions were entered into with vendors, unless stated otherwise.) Income Commercial rentals Residential rentals Interest levied on overdue commercial rentals Insurance settlement (note 1) Expenditure Purchase of two town houses to be let (note 2) Bank charges Audit fees Salaries and wages Vehicle purchased (note 3) Maintenance (note 4) Petrol for vehicle Interest incurred on mortgage bonds in respect of commercial and residential properties Office equipment rentals (note 5) Bad debts (note 6) Travelling expenses (note 7) Purchase of factory building to be let (note 8)

R 849 300 159 600 7 410 136 800

468 500 1 254 14 250 66 120 210 500 50 616 12 830 85 500 10 244 16 188 37 312 158 870

Notes: 1. The insurance settlement of...