COLLEGE OF ACCOUNTING SCIENCES

DEPARTMENT OF TAXATION

TEST 1: 22 APRIL 2024

TAX3761

TAXATION OF BUSINESS ACTIVITIES AND INDIVIDUALS

(40 marks)

2 hours (including 15 minutes download and 30 minutes upload time)

THIS PAPER CONSISTS OF SIX (6) PAGES

IMPORTANT INSTRUCTIONS:

Assumptions:
1. All amounts exclude Value-Added Tax (VAT) unless specifically stated otherwise.
2. All persons mentioned are residents of the Republic of South Africa unless stated otherwise.
3. SARS = South African Revenue Service.
4. All transactions are conducted with registered VAT vendors, unless specifically stated otherwise.
5. Valid tax invoices and required documentation are obtained for all transactions.

The answering of this paper:

1. This is a closed-book test.
2. This paper consists of one (1) question with three (3) parts, i.e., A, B and C.
3. All questions and sub-sections must be answered.
4. Each sub-section must be commenced on a new (separate) page.
5. All workings, where applicable, must be shown. Where an amount is subject to a limitation,
clearly indicate the application of the limitation. Where any item does not form part of gross income,
is exempt from tax, not allowable as a deduction or does not have VAT implications, this must
specifically be indicated, and a short reason should be provided.
6. All amounts must be rounded to the nearest Rand.

Honesty Declaration:

By submitting my solution to the test, I declare that:

• I know what plagiarism is, that plagiarism is wrong and that disciplinary steps can be taken against
me if I am found guilty of plagiarism.
• This solution, submitted by myself, is my own work.
• I have not assisted any other student in any manner, and I have not had the assistance of any other
person, in completing this test.
• I will not assist any other student in any manner, and I will not obtain the assistance of any other per-
son, in completing this test.
• I know that if I am found to be in violation of this declaration, I will receive 0% for this test.
Please note: You do not have to sign the declaration. By submitting your solution, you automatically declare
that you adhere to all the above with regards to this specific assessment.
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Test 1

The Invigilator

• Please note The Invigilator App / IRIS will not be not used during Test 1 for TAX3761.

Access and Submission instructions:

The test paper will remain available throughout the session.

Commence the submission (uploading) of your script as soon as you have completed the
assessment, do not wait for the session to conclude.

Suggestion: Start uploading your answer file at 12:30 am (90 minutes after the start of the test
session) at the latest, to allow enough time for any delays in the process.

Your submission will be date stamped and only submissions received up to 13:00 will be marked.

You MUST submit your answers in one pdf file. The file name of your pdf document must be in the
following format: Student number, underscore, TAX3761, underscore, 01. For example:
33445566_TAX3761_01.

Please remember to complete the Honesty Declaration (Part of the file submission process
below).

Follow these steps to access your test question paper:

• Go to cas.myexams.unisa.ac.za. (Do not go to myexams.unisa.ac.za, you will not find the

test paper there).
• On the cas.myexams.unisa.ac.za portal, choose TAX3761-24-Y to open the assessment portal.
• Under the applicable module you will find a TAB to access your paper – Test 1.

Follow these steps to submit your answer script:

• Open the folder TAX3761-24-Y on the cas.myexams.unisa.ac.za platform.

• You will do your submission in the same Test 1 folder from which you downloaded your Test –
you will find a grey button to Submit at the bottom of the page.
• Click on the Add Submission button.
Students who cannot access the cas.myexams.unisa.ac.za platform for the test question
paper or to upload their answer scripts should use the following link -
https://tinyurl.com/TESTJANJUN24.
• Please note that this option must only be used if you struggle to upload your script on
cas.myexams.unisa.ac.za
• You must provide proof in the form of a screenshot and a timestamp if you encountered
any problems. Your screenshot must clearly show that you tried to submit via the
cas.myexams.unisa.ac.za platform or the alternative link BEFORE 13:00
• The cas.myexams.unisa.ac.za portal AND the link closes promptly at 13:00.
• Note the file requirements such as:
o File size limit.
o Make sure all your ALL your pages are converted into a single PDF document for
uploading (Make sure the file is not read-only or password protected).
• Check the acknowledgment checkbox (“The submission is my own work”) and upload your
answer script and then click on the Save changes button.
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Test 1

• Review your submission information regarding the status and click on your submission file link to
check if it is correct.
• If you need to resubmit a file, you can click on the Edit Submission button. Note: You will need
to delete any existing files.
• Make a screen copy for your records.

Additional instructions:

1. Students must upload their answer scripts in a single PDF file on the cas.myexams.unisa.ac.za
platform (answer scripts must not be password protected or uploaded as “read-only” files).
2. NO e-mailed scripts will be accepted.
3. Students are advised to preview submissions (answer scripts) to ensure legibility and that the
correct answer script file has been uploaded.
4. Students are permitted to resubmit their answer scripts should their initial submission be unsa-
tisfactory.
5. Incorrect file format and uncollated answer scripts will not be considered.
6. A mark awarded for an incomplete submission will be the student’s final mark. No opportunity for
resubmission will be granted.
7. A mark awarded for illegible scanned submission will be the student’s final mark. No opportunity
for resubmission will be granted.
8. Only the last file uploaded and submitted will be marked.
9. Submissions will only be accepted from registered student accounts.
10. Students must complete the online declaration of their work when submitting. Students suspected
of dishonest conduct during the tests will be subjected to disciplinary processes. Students may
not communicate with other students or request assistance from other students during tests. Pla-
giarism is a violation of academic integrity, and students who do plagiarise or copy verbatim from
published work will be in violation of the Policy on Academic Integrity and the Student Disciplinary
Code and may be referred to a disciplinary hearing. Unisa has zero tolerance for plagiarism and/or
any other forms of academic dishonesty.
11. Students are provided 30 minutes to submit their answer scripts after the official test time. In other
words, from 12:30 to 13:00. Submissions made after the official cut-off time (13:00) will be
rejected and will not be marked.
12. Queries that are beyond Unisa’s control include the following:
a. Personal network or service provider issues.
b. Load shedding/limited space on personal computer.
c. Crashed computer.
d. Using work on computers that block access to the cas.myexams.unisa.ac.za site (work
firewall challenges).
e. Unlicensed software (e.g., license expires during exams).

Only communication received from your myLife account will be considered.

 4 TAX3761
Test 1

QUESTION 1

PART A (16 marks, 30 minutes)

Tuppy Plastic (Pty) Ltd (‘Tuppy’) is a company that manufactures Tupperware. The financial year ends on
the last day of March.

The company is a registered Value-Added Tax (VAT) vendor, on the invoice basis, and has a two-month
tax period, making 100% taxable supplies.

The following information regarding the December 2023 to January 2024 VAT period has been provided
to you by the tax manager, Ms Michelle Prinsloo. All amounts are inclusive of VAT, where applicable,
unless specifically indicated otherwise.

1. Tuppy sold a machine that was used in its manufacturing process to Mr. Ayob, the majority
shareholder, for R85 000. Mr. Ayob is not a registered VAT vendor. The company originally acquired
the manufacturing machine for R220 000 on 1 October 2022. Assume that on 31 December 2023,
the tax value was R120 000, and the open-market value was assessed at R95 000. (Reference to
the Value-Added Tax Act).

2. A previously used factory building costing R4 200 000 was purchased from a non-vendor. The
purchase price and transfer duty of R450 000 was paid on 31 January 2024 when transfer took place
into Tuppy’s name.

3. On 1 December 2023, a new motorcar was acquired for R650 000. The use of the motorcar was
immediately assigned to Tuppy's marketing manager. The purchase of the motorcar was facilitated
through an instalment credit agreement. This agreement required an upfront deposit of R30 000 due
on 1 January 2024, followed by 72 monthly instalments of R10 500.

4. On 31 December 2023, equipment with a selling price of R230 000 (excluding VAT) was sold to a
customer in Zimbabwe. The equipment was consigned and delivered by Tuppy to the customer’s
factory in Zimbabwe. (Reference to the Value-Added Tax Act).

5. On 15 December 2023 the company experienced a robbery at its premises resulting in the theft of a
delivery vehicle valued at R175 000. The insurance company compensated them with a cash
reimbursement of R150 000 (excluding VAT).

REQUIRED: MARKS

Discuss the VAT consequences of the above-mentioned transactions for Tuppy Plastic
(Pty) Ltd for the two-month VAT period ending January 2024. 14

Note:
• Support your discussion answers with calculations.
• Support the transactions indicated in brackets with references to the relevant
sections of the Value-Added Tax Act No. 89 of 1991. Provide only the main section
reference, the subsections are not required – For example - Section 10 is sufficient,
2
Section 10(13) is not required.
• You can ignore the time of supply.
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Test 1

PART B (10 marks, 19 minutes)

The following information relates to the February to March 2024 VAT period of Tuppy Plastic (Pty) Ltd. All
amounts are inclusive of VAT, where applicable, unless specifically indicated otherwise.

PART B (continued)

1. Tuppy sold 150 boxes of Tupperware to All Stores Ltd, one of its local customers situated in Limpopo.
The selling price of a box of Tupperware includes five different types of Tupperware and each box
is sold for R350.

2. On 1 March 2024, R12 000 per month was paid for a two-bedroom flat. The flat is provided free of
charge to Cindy Nkomo, the secretary of the tax manager, for her personal use.

3. On 20 March 2024, Tuppy purchased large quantities of raw material from Plastic Galore and was
billed for the purchase at the end of each month. Tuppy settles the full amount due within 30 days
after billing. The amounts Tuppy settled for February and March 2024 were R120 000 and R95 000
respectively (both amounts exclude VAT).

4. After experiencing several break-ins and thefts from its warehouse, the company enhanced security
measures by engaging a security company. Security guards now patrol the premises each evening.
The total cost for this service over the two-months amounted to R8 000.

5. On 1 March 2024, Tuppy paid R16 000 to a local service station for the fuel used by the delivery
vehicles throughout the two-month tax period.

REQUIRED: MARKS

Prepare the necessary journal entries to record the above transactions in Tuppy Plastic (Pty)
Ltd’s journal for the two-month tax period ending on 31 March 2024. Each journal entry
must indicate the Value-Added Tax consequences that arise out of the transaction. 10

Note:
• Reference to the relevant legislation (i.e., section numbers) are not required.
• Journal narrations are not required.
• Provide brief reasons where a transaction does not give rise to any VAT
consequences.

PART C (14 marks, 26 minutes)

Ms. Nelisiwe Chaba, CEO of Tuppy, engages extensively with independent contractors to facilitate the
sale of Tupperware products. Given the nature of the business and the significant portion of Tuppy’s
income derived through these contractors, entertainment expenses represent a substantial portion of the
company’s expenditure. Ms. Chaba frequently treats them to business lunches amongst others, with
entertainment expenses totalling R45 000 for the 2024 year of assessment, broken down as follows:

Lunches R35 000

Paddle tennis club subscriptions R6 000

Ms Chaba’s personal clothing expenses (Not taxed in her hands) R4 000

Total R45 000

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Test 1

PART C (continued)

The paddle tennis club subscription fees are part of the contractor’s remuneration package. These lunches
and club subscriptions fees, have served as incentives for many contractors, leading to numerous
significant deals.

REQUIRED: MARKS

Write a memo to Ms Nelisiwe Chaba discussing whether the entertainment expenses will
be deductible by Tuppy Plastic (Pty) Ltd during its 2024 year of assessment in terms of the
general deduction formula read with section 23 of the Income Tax Act (Act 58 of 1962). 9

Note:
• Use the format below for the communication, layout, and presentation marks 2
• Refer to relevant case law where applicable 2
• Support the transactions with references to the relevant sections of the Income Tax
1
Act No. 58 of 1962, indicated in brackets for the applicable transaction.

MEMORANDUM

To: TAX3761 Student

From: Michelle Prinsloo
Date: 22 April 2024

Re: Deductibility of entertainment expenses.

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