TAX 2601 EXAM PACK 2023

QUESTION 1 (25 marks, 30 minutes)
GoSolar (Pty) Ltd (GoSolar) is a South African company that manufactures solar panels for commercial
and residential use, in an industrial area of Johannesburg. The company’s year of assessment ends on
31 March 2021. It is not a small business corporation as defined in the Income Tax Act.
Since the company’s accountant is unfamiliar with tax matters, they have requested your assistance to
calculate the tax liability of the company. The company has provided you with a list of items relating to
the current year of assessment, which must be used to do your calculation for taxation purposes.
Each item and the information per the notes must be addressed:
Income Note R
Sales 1 21 779 000
Lease premium & rental 2 ?
Expenses
Capital allowances on assets 3 ?
Dividend 4 350 000
Doubtful debts & prior year allowance 5 332 000
Penalties and interest (late payment of skills development levy) 23 777
Provisional tax payment 6 2 679 000
Salaries 7 7 000 000
Rented office equipment 8 800 000
Notes:
1. Sales
Included in sales, is an amount of R2 000 000 received on 31 March 2021 from a new customer
of GoSolar for residential solar panels purchased on the same date. GoSolar was only able to
deliver these solar panels on 2 April 2021.
2. Lease premium & rental
On 1 June 2020, GoSolar purchased a piece of vacant land for R350 000 in Johannesburg and
constructed a two-floor office block on the land. The construction cost R1 400 000 and soon after
its completion the company entered into a lease agreement with a tenant for the rental of the
entire office block. The agreement was signed on 1 February 2021 between the parties. The
agreement stipulates a lease premium of R110 000 must be paid once-off, once the agreement
is signed. Monthly rental of R20 000 was paid at the beginning of February 2021 and March 2021
to GoSolar. The tenant paid the lease premium on 1 April 2021.
3. Capital allowances on assets
Below are the details of the assets:
Asset Cost
R
Relevant information
1. Factory building 4 000 000 A newly built building that was purchased
from a developer and brought into use on
1 November 2019.
The factory building is in an Urban Development Zone.
2. New two-floor office block
(refer to note 2 above):
- Land
- Construction
350 000
1 400 000
Land purchased and building erected by
GoSolar. Construction completed on 16
January 2021, brought into use on 1
February 2021.
(Not in an Urban development zone)
QUESTION 1 (continued)
Asset Cost
R
Relevant information
3. Manufacturing machine:
AAA
1 700 000 Purchased new and brought into use on
1 July 2020
4. Manufacturing machine:
BBB
900 000 Purchased second hand and brought into
use on 30 April 2019 and then sold on
1 August 2020 for R200 000.
5. Delivery vehicle 1 380 000 Purchased new and brought into use on
1 May 2010.
6. Heavy duty truck 1 800 000 Purchased 6 May 2020 and brought into use
on 1 July 2020.
Note: Where applicable, Binding General Ruling (BGR) no.7 makes provision for the following
write-off periods:
Delivery vehicle: 4 years
Heavy duty truck: 5 years
4. Dividend declared
A dividend of R350 000 was declared on 28 March 2021 and paid out on 10 April 2021 to the
GoSolar shareholders.
5. Doubtful debts
The total list of doubtful debts (all older than 60 days but less than 120 days) amounted to R278
000 at the end of 31 March 2021. A doubtful debt allowance of R54 000 was claimed for tax
purposes in the 2020 company tax return. The company does not apply IFRS9.
6. Provisional tax payment
GoSolar made a first provisional tax payment of R2 679 000 for the 31 March 2021 year of assessment on 20 September 2020.
7. Salaries
The salaries expense is R6 300 000 for the year of assessment. Contributions of R700 000 was
paid by GoSolar to a pension fund for its employees. (This amount is excluded from the salaries
expense.)
8. Rented office equipment
All the office equipment was rented from a service provider. The total cost amounted to R800 000
for the year.
REQUIRED: MARKS
1. Calculate the income tax liability of GoSolar (Pty) Ltd for the year of assessment
ending 31 March 2021. 24
Note: Address each item and amount and provide a brief reason if you consider
any amount not taxable/not deductible for tax purposes (hint: “not deductible” is not
a reason). You may ignore any capital gains tax (CGT) effect and assume that the
company has elected the Section 11(o) scrapping allowance, where applicable.
2. Calculate the amount that the shareholders of GoSolar will receive (combined) in
respect of the dividend declared?
1
QUESTION 2 (25 marks, 30 minutes)
Shisanyama Catering Equipment Supplies