Corporate Profits Unless otherwise specified, only the following rules for taxation of corporate profits will be relevant, other taxes can be ignored: Accounting rules on recognition and measurement are followed for tax purposes. All expenses other than depreciation, amortisation, entertaining, taxes paid to other public bodies and donations to political parties are tax deductible. Tax depreciation is deductible as follows: O 50% of additions to property, plant, and equipment in the accounting period in which they are recorded; o 25% per year of the written-down value (i.e. cost minus previous allowances) in subsequent accounting periods except that in which the asset is disposed of; o No tax depreciation is allowed on land. The corporate tax on profits is at a rate of 28%. No indexation is allowable on the sale of land. Tax losses can be carried forward to offset against future taxable profits from the same business. Value Added Tax Country X has a VAT system which allows entities to reclaim input tax paid. In country X the VAT rates are: Zero rated 0% Standard rated 15% Exempt goods 0% Question 1 Gym Equipment (Pty) Ltd (GEPL) sells gym equipment. It is a registered value added tax (VAT) vendor and e-files its VAT returns. The following information is relevant for the VAT period ended 30 November 2019. All amounts are stated inclusive of VAT where applicable. (i) Gym equipment sales amounted to R8,000,000. However, two treadmills were returned by a gym due to faulty screens. These treadmills had been sold by GEPL for R16,000 in total. GEPL issued the necessary credit notes. (ii) Joe's Gym purchased new weight equipment on credit for R70,000 in October 2018. Despite every effort by GEPL to collect the amount owing from Joe's Gym, no payment was received. Legal costs of R10,000 were incurred by GEPL to try to recover this debt. (ii) GEPL imported inventory from the United States. The inventory cost R300,000 which was also accepted as the customs value. (iv) GEPL acquired some second-hand equipment. Equipment worth R100,000 was acquired as part of the purchase by GEPL of a gym business as a going concern (the equipment being considered the substantive assets of the business). Other second-hand gym equipment at a cost of R150,000 was acquired from non-VAT vendors and a further R150,000 of second-hand equipment was acquired from VAT vendors. (v) A motor car was purchased for the managing director at a cost of R350,000 and a flatbed truck was purchased for deliveries at a cost of R550,000. (vi) Salaries and wages paid amounted to R1,450,000. (vii) Office rental paid for November and December amounted to R200,000 in total. Required: (a) Calculate the VAT payable by Gym Equipment (Pty) Ltd for November 2019. Note: You should format your answers in two columns labelled 'Input VAT' and 'Output VAT and indicate by the use of a zero (0) any amounts for which VAT is not chargeable or not reclaimable. (18 marks) (b) State the date(s) for submission of the November 2019 VAT return and payment of the VAT due. Explain the consequences of late payment and late submission of the November 2019 VAT return. (2 marks) (20 marks) Corporate Profits Unless otherwise specified, only the following rules for taxation of corporate profits will be relevant, other taxes can be ignored: Accounting rules on recognition and measurement are followed for tax purposes. All expenses other than depreciation, amortisation, entertaining, taxes paid to other public bodies and donations to political parties are tax deductible. Tax depreciation is deductible as follows: O 50% of additions to property, plant, and equipment in the accounting period in which they are recorded; o 25% per year of the written-down value (i.e. cost minus previous allowances) in subsequent accounting periods except that in which the asset is disposed of; o No tax depreciation is allowed on land. The corporate tax on profits is at a rate of 28%. No indexation is allowable on the sale of land. Tax losses can be carried forward to offset against future taxable profits from the same business. Value Added Tax Country X has a VAT system which allows entities to reclaim input tax paid. In country X the VAT rates are: Zero rated 0% Standard rated 15% Exempt goods 0% Question 1 Gym Equipment (Pty) Ltd (GEPL) sells gym equipment. It is a registered value added tax (VAT) vendor and e-files its VAT returns. The following information is relevant for the VAT period ended 30 November 2019. All amounts are stated inclusive of VAT where applicable. (i) Gym equipment sales amounted to R8,000,000. However, two treadmills were returned by a gym due to faulty screens. These treadmills had been sold by GEPL for R16,000 in total. GEPL issued the necessary credit notes. (ii) Joe's Gym purchased new weight equipment on credit for R70,000 in October 2018. Despite every effort by GEPL to collect the amount owing from Joe's Gym, no payment was received. Legal costs of R10,000 were incurred by GEPL to try to recover this debt. (ii) GEPL imported inventory from the United States. The inventory cost R300,000 which was also accepted as the customs value. (iv) GEPL acquired some second-hand equipment. Equipment worth R100,000 was acquired as part of the purchase by GEPL of a gym business as a going concern (the equipment being considered the substantive assets of the business). Other second-hand gym equipment at a cost of R150,000 was acquired from non-VAT vendors and a further R150,000 of second-hand equipment was acquired from VAT vendors. (v) A motor car was purchased for the managing director at a cost of R350,000 and a flatbed truck was purchased for deliveries at a cost of R550,000. (vi) Salaries and wages paid amounted to R1,450,000. (vii) Office rental paid for November and December amounted to R200,000 in total. Required: (a) Calculate the VAT payable by Gym Equipment (Pty) Ltd for November 2019. Note: You should format your answers in two columns labelled 'Input VAT' and 'Output VAT and indicate by the use of a zero (0) any amounts for which VAT is not chargeable or not reclaimable. (18 marks) (b) State the date(s) for submission of the November 2019 VAT return and payment of the VAT due. Explain the consequences of late payment and late submission of the November 2019 VAT return. (2 marks) (20 marks)