TAXC 272 2ND JUNE ASSESSMENT 2025 - 3 JUNE 2025

Moderator disclosure
Question and description Question mark Available marks Time Calculation marks Theory marks
Question 1(A) - Gross income court case - (SU 4) 10 11 20.0 10
Question 1(B) - GDF court case - (SU 6) 15 16.5 30.0 15
Questiion 1(C) - Ethics 5 5 10.0 5
Question 2 - Value Added Tax (SU 2) 20 22 40.0 15 5
Question 3 - Integrated tax calculation (SU 4 - 10) 50 51 100.0 50 -

100 105 200.0 65 35

11.5 Additional marks
Compisition ratio 65% 35%
TAXC 272 - June Exam 2025
Suggested solution - Q1a 10 Marks

Marks

STEP 1: IDENTIFY THE ISSUE IN TERMS OF THE GROSS INCOME DEFINITION

Received by. Given

STEP 2: COURT CASE DECISIONS/INCOME TAX ACT REQUIREMENTS

Earlier of accrued or received by will be included in taxable income 1

Geldenhuys v CIR 1
Received by the taxpayer on his own behalf and for his own benefit. 1

MP Finance Group CC v CSARS: 1

Illegal receipts are gross income if amount is received by TP if intended for his own benefit. 1

CIR v Delagoa Bay Cigarette co Ltd: 1

Illegal receipts would also constitute gross income. The legality of income is irrelevant to the question of the liability of that
income for tax purposes. 1

STEP 3: APPLICATION OF ABOVE TO THE INFORMATION IN THE QUESTION

Vilakazi received the illegal income for the company’s benefit (profitability). Vilakazi received the money for their own benefit. (Geldenhuys) 1

Vilakazi operated an illegal scheme (distribution of drugs), whether the business carried on by the taxpayer is legal or not is not material for determining
whether the amount should be subject to tax. (MP Finance / Delagoa Bay) 1

STEP 4: CONCLUSION
The R1 500 000 will be included in Gross Income for year ended 31 December 2025 as the money was received by 1
Vilakazi and used for their own benefit.

marks: 10

Communication skills – Steps are followed, logical argument in application and conclusion 1
Total marks available: 11
Maximum: 10
TAXC 272 - June Exam 2025
Suggested solution - Q1b
Total Marks 15.0
Marks
STEP 1: IDENTIFY THE ISSUE

Whether the R255 000 was incurred in the production of income. Given

STEP 2: COURT CASE DECISIONS/INCOME TAX ACT REQUIREMENTS

For an amount to be deducted as a general deduction, it must comply with s11(a) (0.5) and s23(g) (0.5) of the Income Tax Act.
1.0

In terms of s102 of the Tax Administration Act (0.5) the burden of proof that an amount is deductible rests with Vilakazi (the
taxpayer) (1) 1.5

Port Elizabeth Electric Tramway Co Ltd v CIR 1.0

Expenditure incurred must originate from operating a business operation with the goal to earn an income.
OR
1.0
The expenditure incurred must in other words have a close connection with the business’s income-earning operations (necessary
concomitant).

Joffe & Co (Pty) Ltd v CIR 1.0

The expenditure or the act leading to the expenditure as has to be a “necessary concomitant” of the business operation to be in the
production of income. 1.0

STEP 3: APPLICATION OF ABOVE TO THE INFORMATION IN THE QUESTION

Vilakazi is in the business of selling lollipops as income. For Vilakazi to be able to sell lollipops, they entered into a distribution contract
between Vilakazi and the logistics company. 1.0

The distribution of goods is a close concomitant of trade and the goal of the expense is to earn an income , that was the case as
revenue increased. 1.0
Due to the nature of the transaction, there is an inherent risk of error (shipping to the wrong address). 1.0

The principle of Port Elizabeth Electric Tramway suggests that expenses that arise from the usual operations of the business, even if
resulting from an error or negligence, should still be considered deductible. 1.0

The error made by the logistics company should be viewed as part of the normal operational process for Vilakazi’s trade, making the
reshipping costs potentially deductible. 1.0
The expenditure or the act leading to the expenditure as has to be a “necessary concomitant” of the business operation to be in the
production of income. 1.0

STEP 4: CONCLUSION

The R255 000 spent on logistical services was incurred in the production of income and would be deductible in terms s11(a). 1.0
However, section 23 (o) prohibits the deduction of expenditure in respect of unlawful activities 1.0
Therefore R255 000 spent on logistical services was incurred in the production of income, BUT PROHIBITED by Section 23(o) and
would therefor not be deductible. 1.0

Available 15.5
Communication skills – logical argument - conclusion stated clearly 1.0
Max 15.0
Total Marks 15.0
TAXC 272 - June Exam 2025
Suggested solution - Q1c
Based on the assumption that he/she is the CEO of Vilakazi:
Discuss the CEO's personal ethical considerations what he/she should have considered before started trading in illicit transactions.
Marks
(f)
SAICA Competency Framework: I1 - Personal ethics refers to a personal value system applied by an individual to
decision-making, conduct and interaction between the self and others.
Learning outcome: I1 - (a) Act honestly and demonstrate personal integrity, accountability and trustworthiness including while interacting with others.

The following could be considered from a personal ethics perspective:

Will I act in an honest manner by not disclosing the illicit transactions?

By not disclosing the known illicit transactions, you will be seen as an accomplice to the offences committed by
Vilakazi and will be seen as an act of dishonesty, because the public/shareholders will lose trust in the company work you perform. 1.0 Consider honesty + application

Will I demonstrate personal integrity by not disclosing the knowledge of the illicit transactions?
Acting with integrity means considering how your actions will affect yourself and others and to lead by example. 1.0 Consider integrity + application
Although the illicit trading will improve profit, it should not harm others (the public)

How will my personal accountability by not disclosing the knowledge of the illicit transactions?
If it becomes public knowledge/publicly disclosed that you knew of the illicit transactions carried out by Vilakazi, you could be Consider accountability +
held accountable by my professional body for acting dishonestly and could be held accountable via a disciplinary 1.0 application
hearing by SAICA for bringing the profession and/or my employer into disrepute.

How will my trustworthiness be compromised by not disclosing the knowledge of the illicit transactions performed by Vilakazi?
If it becomes public knowledge/publicly disclosed that you did not disclose the knowledge of the illicit transactions, you could lose 1.0 Consider trustworthiness +
application
trustworthiness amongst your shareholders and the public. You will be perceived as someone that is unable to be trusted to act in an ethical manner.

Communication & layout 1.0

Sub-total: 5
TAXC 272 - June Exam 2025 MARKS
Suggested solution - Q2a
Description Reason R

once off x 15%

Note to markers: Deduct once off mark for not using the correct formula = amount * 15%.
*Markers should utilise bolded statements as guidelines for allocating marks for reasons.
*If the reason is incorrect, do not award the mark for calculation.

Output tax
Printing income - Local non vendor Local = Standard rate supply 1 40,000 x 15% 6,000
Printing income schools Swaziland Export = Zero rate supply 1 45,000 x 0% -
Income Randburg Police Station 1 165,000 - -
The invoice was issued on 1 March and the
payment made on 1 April. The supply will only be
account at for in the next period as both the
invoice and receipt date fall outside the
current VAT period.
Rental income Residential accommodation = Exempt supply
9,000
1 - -
Dividends received Not a supply of goods/services 1 100,000 - -
Cryptocurrency income Financial service = Exempt supply 1 150,000 - -
6,000

Input tax
Purchase of material non vendors 1 10,000 -
No input vat, not a vendor, no tax invoice
Purchase of material vendors For making taxable supplies 1 60,000 x 15% 9,000
Salaries and wages Employee - excluded from def of enterprise 1 200,000 - -
Cleaning expenses For making taxable supplies 5750 x 2 x 15/115 1500
Purchase polo sedan Motor car as defined - input tax denied 1 250,000 - -
Purchase microwave & kettle Entertainment = input tax denied 1 15,000 - -
Transport of employees Passenger transport by rail or road = Exempt
1 4,000 - -
supply

10,500

Output tax 6,000

Less: Input tax -10,500
Amount receivable -4,500

Note to marker: Principle mark for stating amount refundable or payable.

Do not award principle mark for wrong format/headings e.g. swap the heading between output and input)

Sub 12.00 Sub

Total
Max
Time
MARKS

-1

1P

4.00

16.00
15.00
30.00
TAXC 272 - June Exam 2025
Suggested solution - Q2b

VAT - Ca
TAXC 272 - June Exam 2025
Suggested solution - Q2b

VAT registration

VAT ACT REQUIREMENTS

Any person becomes liable to register at the beginning of the month where the total value of taxable supplies from a
written contratual contract is anticipated to exceed R1 000 000 in the period of twelve months.
Application
Kenistro total value of taxable supplies for the preceeding period of 12 months from carrying on or furtherance of an
enterprise is R900 000.
Kenistro has a written contratual obligation to provide printing services to the department of Small and Medium enterprises

for the period of five years at an annual total value of taxable supplies of R850 000.
It appears from the above that the total value of Kenistro's taxable supplies will exceed a million as from 1 March 2025

due to the taxable supplies of R900 000 and the contractual taxable supplies of R850 000.
The Commissioner does not make reference to the financial year end i.e. 28 February 2025. The Commissioner can

invetsigate any consecutive period of 12 months in determining the registration liability of a person
Conclusion
As the total value of taxable supplies, R1 750 000 will exceed R1 000 000 from 1 March 2025, Keniostro is liable to
register for VAT.

Total
Max
Time
Marks

1.0

1.0

1.0

1.0

1.0

1.0

6.0
5.0
10.0
 Total Marks 50

Marks Marks
Description Sec No Reason Amount
GROSS INCOME
1 Sales - Local s1 GI def 0.5 Complies with Gross Income def 6,145,000 0.5
1 Sales - International s1 GI def Complies with Gross Income def - World wide Income (WWI) 1,810,000 0.5
Note to markers: Award full mark (1 mark) for the calculation when the student have combined the two amounts. =R7 955 000
3 Dividends s1 par (k) 0.5 Special inclusion - local dividends 125,000 0.5
3 Dividends s1 par (k) Special inclusion - foreign dividends World wide Income (WWI) 270,000 0.5
6 Recoupment s8(4)(a) 1.0 Add: Recoupment: 300,000 0.5 P
par (n)
Refer to calculation in cell E61
6.1 Sale of stand 1115 s1 GI def Intention to sell at a profit - not capital in nature 2,500,000 0.5
Note to markers: Award full mark (1 mark) for the calculation when the student have combined the two amounts. =R2 500 000 - R925 000 = R1 550 000
2 Closing stock s22(1) 0.5 Closing stock included in taxable income 3,200,000 1.0

EXEMPT INCOME
3 Local dividends received s10(1)(k) 0.5 Fully exempt (125,000) 0.5
3 Dividends received - Foreign s10B(3) 0.5 Ratio exemption applicable to foreign dividends - less than 10% shareholding and voting rights: R270 000 x 7/27 (70,000) 1.0

INCOME 14,155,000

Less: Deductions
2 Purchases s11(a) 0.5 Complies with general deduction formula (5,100,000) 0.5
6 Purchase - stand 1115 s11(a) Complies with general deduction formula (925,000) 0.5
2 Opening stock s22(2) 0.5 Deducted from taxable income (2,400,000) 0.5
4 Salaries and wages s11(a) Complies with general deduction formula (2,510,000) 0.5
4 Annuity s11(m) 0.5 Annuity paid to former employee - retired due to age (210,000) 0.5
4 Restraint of trade payment s11(cA) 0.5 Natural person - special deduction Lesser (0.5) of: R90 000 /5 = R18 000 (0.5) or R90 000 / 3 = R30 000 (0.5) 1.5 (18,000) 0.5 P
Capital allowance (Wear and tear allowance)
5 Billboard s11(e) Capital allowance (Wear and tear allowance) on billboard (R720 000/5*1/12) (12,000) 1.0
6 Manufacturing machine A s12 C 0.5 Capital allowance (Wear and tear allowance) on machine A (R375 000 * 20%) (75,000) 0.5 P
6 Manufacturing machine B s12 C Capital allowance (Wear and tear allowance) on machine (R750 000 * 40%) (300,000) 1.0
6 Delivery Vehicle s11(e) 0.5 Capital allowance (Wear and tear allowance) on delivery vehicle (R280 000/4*9/12) (52,500) 1.0
6 Computer s11(e) Capital allowance - less than R7 000 - fully deductible (5,200) 1.0
7 Rental expense s11(a) Complies with general deduction formula (139,500) 1.0
7 Lease premium s11(f) 0.5 Lease premium - R120 000/10 x 9/12 (9,000) 1.0
7 Repairs and maintenance s11(d) 0.5 Special deduction - repairs and maintenance (30,000) 0.5

8 Patent and Intellectual Property expenses s11(gC) 0.5 This is used by the taxpayer in the production of his or her income and exceeds R5000 therefore allowance is 5% of cost. (R300 000*5%), not apportioned. (15,000) 1.0
8 Registration of trademark s11(gB) 0.5 Fully deductible (120,000) 1.0
9 Bad debts s11(a) Cash stolen by manager - not deemed inevitable concomitant 0.00 1.0
9 Bad debts S11(i) 0.5 Trade debtors written off - previously included in GI (190,000) 0.5
Legal costs s11(c) 0.5 Collection expenses for trade debtors - incurred in ordinary operations; not capital; sales incl in GI (22,000) 0.5
10 Insurance paid s11(a) 0.5 Insurance - Complies with general deduction formula (R150 000 5/12) (62,500) 1.0
10 Insurance paid s23H 0.5 Insurance - prepaid expense less than R100 000 (R150 000 x 7/12) (87,500) 1.0
Other operating expenses s11(a) Complies with general deduction formula (200,000) 0.5

6 Disposal of factory machine s26A 0.5 Capital gain included at 80% 25,000 20,000 1.0 P

Step 1: Calculate capital allowances :

Year 1 : Cost price : = R375 000
Year 1: Dec 2023: R375 000*40% = R150 000 (1) 1.0
Year 2: Dec 2024: R375 000*20% = R75 000 (1) 1.0
Year 3: Dec 2025: R375 000*20% = R75 000 (1) 1.0
Note to markers: Award 3 marks if the student has combined all the amounts of 12(C) to get R300 000

Step 2: Calculate Tax value

Cost less tax value : R375 000 - R300 000 = R75 000 0.5 P

Step 3: Calculate recoupment

Proceeds (R400 000) (0.5) limited to cost less Tax value: R375 000 - R75 000 = R300 000 (1P) 1.5 P

Step 4 : Calculate CGT

Proceeds 400,000 0.5
Less: Recoupment (300,000) 1.0 P
Adjusted proceeds 100,000

Original Cost 375,000 0.5

Less: Capital allowances (300,000) 1.0 P
Base cost 75,000

Taxable income before Assessed Loss 1,691,800

11 Less: Assessed loss s20 0.5 -1,353,440 0.5 P
Assessed Losses carried forward: R1 440 000 limited to the higher of: 0.5
 80% of taxable income = R1 691 800 x 80% = R1 353 440 or 1.0 P
R1 000 000 0.5
Taxable income before donation 338,360
Donation to PBO s18A 0.5 Actual R40 000 limited to: R33 836 -33,836 0.5
Registered PBO and valid receipt, therefore deductible 0.5 B
Ltd to 10% of taxable income before deduction 338 360 x 10% = R33 836 1.0

Taxable income 304,524 0.5 P

Communication skills - Layout and Presentation 1.0

Marker comment: The question must be presented in an orderly fashion with clear columns and done neatly and logically. Do not award mark if Sec 20 and Sec 18A was not in correct order.

12.0 1.5 37.0

Available marks: 50.5
Maximum: 50.0
Time 100.0