After you completed your SAICA articles and your CA qualification, you decided to specialise in taxation. You recently took up a job at a tax consulting firm and two of your clients are ACS Marketing and CDE Industries. The directors are unsure about a few VAT matters and have asked for your assistance.

Matter $1$

ACS Marketing is a South Africa resident company and has a February financial year end. ACS Marketing renders $80\%$ taxable supplies. They acquired an income$-$producing company, called Market IT$,$ during the $2022$ year of assessment for R$1890000,$ as a going concern. Market IT made $92\%$ taxable supplies and the selling price is attributable to the respective assets as follows:

Assets Note Amount $($R$)$

Manufacturing assets $1985000$

Delivery vehicle $2410500$

Trading stock $3494500$

Selling price $($including VAT$)1890000$

Notes:

$1.$ ACS Marketing is going to utilise the manufacturing assets in making $100\%$ taxable supplies.

$2.$ ACS Marketing$$s directors decided to grant the right of use of the delivery vehicle to a marketing manager from $1$ January $2022.$ It is estimated that the delivery vehicle will therefore only be applied in making $70\%$ taxable supplies.

ACS Marketing also bears the full cost of repairs and maintenance of this delivery vehicle which amounted to R$9650($including VAT$)$ for the period $1$ January $2022$ to $28$ February $2022.$

$3.$ ACS Marketing is going to apply the trading stock in making $85\%$ taxable supplies.

Matter $2$

Dividend declared:

ACS Marketing declared a total cash dividend of R$200000$ on $30$ October $2021$ to all shareholders registered on $15$ November $2021.$

The dividend was paid to shareholders on $20$ December $2021.$

ACS Marketing$$s shareholding were as follows on $15$ November $2021$:

Person Declaration required by section $64$F submitted? Share$-$

holding

Chantel Prince $($resident$)$ No $66\%$

Ultimate Limited $($resident company$)$ Yes $15\%$

XYZ Advertising LLC $($non$-$resident company$)$ No $15\%$

Kim Adams $($refer detail below$)$ Yes $4\%$

Kim Adams is Chantel$$s cousin. Kim emigrated from the RSA five years ago and is now a resident of Australia. The double tax agreement between the RSA and Australia states that the RSA may tax a dividend paid to an Australian resident at $5\%.$

Transfer of shareholding:

ACS Marketing also transferred their shareholding in Time $($Pty$)$ Ltd to XYZ Advertising LLC on $1$ June $2021.$ ACS Marketing acquired an interest of $2500$ shares in Time $($Pty$)$ Ltd $($a resident company$)$ at a cost of R$70$ per share on $1$ March $2019.$ This represents a $5\%$ interest in the issued share capital of Time $($Pty$)$ Ltd$.$ ACS Marketing transferred the entire shareholding to XYZ Advertising LLC on $1$ June $2021$ at no consideration as part of a corporate restructuring initiative. The market value of a share in Time $($Pty$)$ Ltd amounted to R$50$ per share on $1$ June $2021.$

XYZ Advertising LLC is an American company and not a resident of the RSA. The double tax agreement between South Africa and the United States of America allows for a $10\%$ withholding tax rate in respect of dividends.

$$

Matter $3$

CDE Industries is a South African resident company with a February financial year end. On $1$ April $2021,$ CDE Industries declared and paid a dividend of R$15$ per share to its shareholders. The company has $150000$ issued shares, and its shareholders are as follow:

$$ CDE Constructions $($Pty$)$ Ltd a resident company that holds $35000$ shares.

$$ The Life Scheme, a pension fund which holds $55000$ shares.

$$ Prime Co$,$ a company that is a resident in the UK and they have $30000$ shares. $($The double$-$tax agreement between South Africa and the UK provides that $5\%$ dividends tax may be levied in respect of this dividend.$)$

$$ The remaining $30000$ shares are held by natural persons who are all South African residents.

Required:

$1\mathrm{.}1$ With reference to Matter $1,$ discuss, with reasons and supporting calculations, the VAT implications for ACS Marketing for January $2022$ February $2022.$

$(15$ marks$)$

$1\mathrm{.}2$ With reference to Matter $2,$ calculate the dividend tax implications in respect of all the given transactions. Indicate the person liable for such dividends tax as well as the date by which such liability will have to be paid.

$(10$ marks$)$

$1\mathrm{.}3$ With reference to Matter $3,$ calculate and discuss the amount that CDE Industries $($Pty$)$ Ltd will pay to the company$$s shareholders. In the case where dividend tax is not payable, provide a reason.