Question 1 10 Marks – 18 minutes
Answer the following, either ‘True’ or ‘False’, indicate your answer in your answer book.
a) The definition of “Gross Income” includes receipts or accruals of a capital nature.
b) A casual betting winning by a professional gambler is of a capital nature.
c) Inheritance is of a capital nature.
d) Income received is taxable even if it is for future services to be rendered or goods to be delivered.
e) The real source for rent on immovable properties is determined by the place where the business is located.
Question 2 25 Marks – 45minutes
a) Name any five taxation acts in Namibia? (5)
b) Ms. Beukes (a Namibian resident) received remuneration of N$85 000 and a housing benefit of N$6 000 from her employer for the year ended 28/2/2017. How much of her income is exempted? (2)
c) Ms. Farrow (a Namibian resident) having worked his last 5 years of employment in Namibia, has received during the tax year an annual pension of N$ 95,000. This was from an American company situated in the Silicon Valley, for whom she had worked for 25 years in total. Indicate whether the above pension received is taxable and if so, how much? (3)
d) A German company signs a deed of sale in Namibia for the delivery of German manufactured goods in Canada. Explain whether the sales income is taxable in Namibia?
(2)
e) Mr. Hamutenya (a Namibian resident) has a taxable income of N$350,000. Hamutenya has in total paid N$ 55,000 ‘Pay-as-You-Earn (PAYE) to the receiver of revenue in the current year of assessment. Calculate his Tax Liability? (5)
f) Name and explain Adam Smith’s four canons of taxation? (8)
Question 3 15 Marks 27 minutes
Monica Weyulu had the following income for the year of assessment ending 28 February 2017:
N$
Salary 10 000
Director’s Fee 2 000
Interest from First National Bank 1 000
Interest from Bank in the US 4 000
Dividends 2 000
Legacy 100 000
Gift 20 000
Profit on sale of house 10 000
Share Premium receipt 5 000
Subsidy on soil erosion 3 000
Annuity from insurance company 1 000
Lump sum from employer 50 000
Profit from business branch in South Africa 10 000
Sale of shares held as:
Investment 8 000
Trading Stock 6 000
Required:
Calculate the gross income of Monica Weyulu for the year of assessment ending at 28 February 2017.
Question 4 25 MARKS – 45 minutes
Mr James is a sales manager at Shoe City Corporation. The following information is the income and expenditure for the year ended 2021:
Income: N$
Salary 100,000
Director’s fee 4,000
Profit from business 20,000
Farming profit 15,000
Profit on sale of house 100,000
Profit on sale of shares held as investment 10,000
Legacy received 20,000
Gift from mother 10,000
Prize from employer for making most sales 2,000
Uniform allowance 4, 000
Expenses:
Pension contribution 15, 000
RAF contribution 20, 000
Education policy premiums 2, 000
Donation to university 2, 000
Medical aid premiums 4, 000
Medical aid expenses 2, 000
Insurance premiums 1, 000
Required:
Calculate the taxable income for Mr. James for the year ended 2021.
Question 5 15 Marks 27 minutes
a) Name five requirements of a valid tax invoice (5)
b) Explain the difference between customs duty and excise duty (4)
c) Indicate whether the following transactions are standard-rated, zero-rated or exempt transactions for VAT purposes: (6)
i. Purchase of fuel
ii. Receive interest on an investment
iii. Letting of commercial property iv. University tuition fees
v. Construction of a building used for residential purpose
vi. Supply of public transport service
Question 6 10 Marks – 18 minutes
Donald enterprise cc a registered company submitted the following transaction to you to determine their VAT payable for the two month period ended 31 April 2017:
• Sale of goods at N$2,185,000 for cash
• Sale of goods valued at N$1,207,400 on credit
• Sale of gods valued at N$805,000 to international clients and exported it directly
• Received payments from debtors which were already accounted for N$360,000 • Purchased goods locally at N$1,955,000 on credit
Required:
Calculate the VAT to be charged on the above transactions.
Appendix A:
Individual tax rate table
Income Bracket Tax calculation
• N$ 0 – N$ 50,000 = NIL (No tax)
• N$ 50,001 – N$ 100,000 = 18 % of amount above N$ 50,000
• N$ 100,001 – N$ 300,000 = N$ 9,000 + 25% of amount above N$ 100,000
• N$ 300,001 – N$ 500,000 = N$ 59,000 + 28% of amount above N$ 300,000
• N$ 500,001 – N$ 800,000 = N$ 115,000 + 30% of amount above N$500,000
• N$ 800,001 – N$ 1,5 mill. = N$ 205,000 + 32% of amount above N$ 800,000
• Above N$ 1,5 million = N$ 429,000 + 37% of amount above N$ 1,5 mill.
ASSIGNMENT 2
Question 1 20 Marks 36 minutes
a) Explain the difference between Direct and Indirect taxes? (4)
b) Discuss the formula for calculation of taxable income? (4)
c) What are transfer duties? (2)
d) Name and explain the three tax rate structures? (6)
e) Give two examples of transaction that will be subject to stamp duty? (4)
Question 2 10 Marks – 18 minutes
Local Music Limited is a wholesaler of music equipment. The company provides inventory to various music stores across Namibia. The company is registered as a VAT vendor. You may assume that all other parties are registered VAT vendors, unless stated otherwise.
The following transactions occurred during March 2017:
1. Inventory was purchased from the manufacturer, Roland Limited, for N$1,725,000 on credit.
2. Sold music equipment amounting to N$3,655,850. This amount includes sales of N$180,570 made to persons who are not VAT vendors.
3. Received interest on a fixed deposit of N$20,000 from FNB.
4. The monthly lease payment for the company’s premises amounted to N$28,750 and was paid by cheque.
5. Paid a monthly salary of Mark Hidipo, the company’s general manager of N$18,000.
6. A new computer system was purchased for N$51,750 in cash from Incredible Computers.
7. Purchased inventory from Travis Drums, a specialist manufacturer of drums, for N$31,000 on credit. Travis Drums is not registered for VAT.
Required:
Calculate the VAT due/creditable to Local Music Limited for the month of March 2017. (10)
Question 3 18 Marks – 32 minutes
Mr. Peters is a fully paid up member of a Building Society and owns 20 000 shares. He receives a dividend of 95 cents per share from the building Society and he has paid interest of N$6 000 on a loan he specifically acquired to purchase the said shares. In addition he received N$300 000 from a provident fund on retirement.
Required:
a) Are building society dividends exempt from tax? Explain how it is taxed. (3)
b) Calculate the value of the dividend to be paid to Mr. Peters from the Building Society. (2)
c) What is Mr. Peter’s income tax payable for the year of assessment in which the above transaction took place? (13)
Question 4 17 Marks – 31 minutes
Okahandja Constructions CC is registered company that provides N$2 500 housing benefits to each of its three employees in terms of an approved housing scheme. The employees remuneration for the year ended 28/02/2017 is as follows:
John (Builder) N$14 500
Michelle (Builder) N$29 000
Beukes (Office Administrator) N$175 000
In addition, the employees are provided with a yearly uniform based on their job description. Builders are provided with overalls and safety boots (valued at N$700) to wear as part of their employment condition and administrators are given an allowance of N$500 to buy suitable office wear.
Required:
Calculate the Taxable Income for the following employees:
a) Michelle (10)
b) Beukes (7)
Question 5 35 Marks – 63 minutes
Xerox Printing (Pty) Ltd (‘Xerox’) is a local manufacturer and supplier of printers and faxes. Its year-end is 31 December 2016. Xerox has started its operations in January 2010 and has since inception grown considerably.
During the current year, Xerox has made sales of N$13,800,000 and total purchases of N$9,800,000. The closing stock amounted to N$350,000 and the opening stock only N$100,000. Running operating expenditure in the production of trade was N$3,080,000 of which N$2,000,000 related to salaries for the manufacturing team as well as support staff and management of the company.
Xerox has leased two properties, one which is used for its manufacturing activities in Okahandja and the other for its head office in Windhoek. During the current year of assessment Xerox has built its own offices in the central business district of Windhoek. The date of completion of the building was 31 July 2016 costing Xerox N$3,300,000. Xerox was only able to move into the building on 01 September 2016. The monthly lease rental of its prior head office was N$16,500. Assume that the prior rental contract ended 31 August 2016.
The manufacturing building was leased as from 01 June 2010. The lease term is 20 years. As part of the lease agreement, a lease premium of N$20,000 was payable upon inception of the lease as well as monthly rentals of N$15,000. The lease contract also stipulated that the lessee needs to make improvements to the value of N$750,000. The actual improvements cost only N$550,000 which was completed 02 January 2012.
As the manufacturing site is outside of Windhoek, Xerox provides temporary housing for management who need to do periodic site visits to the manufacturing site. Thus Xerox has as from June 2010 also constructed housing for the management of the company close to the manufacturing site. The ownership of the properties all belong to Xerox and the total cost of construction to three houses was N$1,350,000 in total.
During the year Xerox had created a provision for bad debts of N$120,000 (During 2016, N$80,000) based on the historic experience of defaulting debtors. Of the debtors, N$100,000 went bad in the current year of assessment.
Xerox took out a ‘Key-man Policy’ on Francois van der Walt, the chief operations officer, a resident of the Netherlands on February 2011, paying a monthly premium of N$4,500.
As part of their business activities, Xerox had the following asset transactions:
1. Manufacturing machinery acquired in March 2012 at a cost of N$1,200,000
2. Motor Vehicle no. 1 was acquired in April 2012 at a cost of N$350,000.
• Motor vehicle no. 1 was sold during the current year at a selling price of N$100,000.
3. Motor Vehicle no. 2 was acquired on 01 July 2015 at a cost of N$450,000.
• During the current year of assessment, the motor vehicle no. 2 was taken out of use to donate it to a former employee of the company as a gift for his long-service. The market value at the date of donation was N$200,000.
4. Motor Vehicle no. 3 was acquired in April 2016 at a cost of N$550,000.
5. Furniture and Fittings acquired in August of 2015 at a cost of N$60,000.
YOU ARE REQUIRED TO:
Calculate the taxable profit of Xerox (Pty) Ltd for its year ended 31 December 2016.
Appendix A:
Individual tax rate table
Income Bracket Tax calculation
• N$ 0 – N$ 50,000 = NIL (No tax)
• N$ 50,001 – N$ 100,000 = 18 % of amount above N$ 50,000
• N$ 100,001 – N$ 300,000 = N$ 9,000 + 25% of amount above N$ 100,000
• N$ 300,001 – N$ 500,000 = N$ 59,000 + 28% of amount above N$ 300,000
• N$ 500,001 – N$ 800,000 = N$ 115,000 + 30% of amount above N$500,000
• N$ 800,001 – N$ 1,5 mill. = N$ 205,000 + 32% of amount above N$ 800,000
• Above N$ 1,5 million = N$ 429,000 + 37% of amount above N$ 1,5 mill.