Hi. Please assist me with the collective set of multiple choice questions 26 - 29 and question 30. Please provide explanations if possible. I have 2 attached labelled notes as well as all the Tax Reference Tables provided to us (although not sure whether all would apply as these questions are based on Micro Businesses). This questions are based on and in context of the South African Tax System. Company Tax Rate is 28%. VAT Rate is 15%. Thank you.

218 APPENDICES APPENDIX D QUICK REFERENCE TABLE INCOME TAX - REBATES FOR INDIVIDUALS 2021 2020 Income Tax - Rebates for individuals 2019 R14 958 R14 220 Primary - s 6(2)(a) - under age of 65 R14 067 R8 199 R7 794 Secondary - s 6(2)(b) - age 65 and older R7 713 Tertiary - s 6(2)(c) - age 75 and older R2 736 R2 601 R2 574 Income Tax threshold- - individuals 2021 2020 2019 Below 65 years of age R83 100 R79 000 R78 150 Age 65 and older R128 650 R122 300 R121 000 Age 75 and older R143 800 R136 750 R135 300 Interest exemption- (local)- individuals 2021 2020 2019 Below 65 years of age R23 800 R23 800 R23 800 Age 65 and older R34 500 R34 500 R34 500 2. MEDICAL CREDIT REBATE - INDIVIDUALS 2021 2020 2019 Taxpayer only R319 R310 R310 Taxpayer and one dependant R638 R620 R620 Per additional dependant R215 R20 R209 3. CAPITAL GAINS TAX - INDIVIDUALS 2021 2020 2019 Primary residence exclusion for individuals R2 000 000 R2 000 000 R2 000 000 This reduces the capital gain or capital loss Primary residence exclusion for individuals R2 000 000 R2 000 000 R2 000 000 No capital gain is taken into account if the proceeds do not exceed this amount Annual exclusion for individuals & special trusts Annual exclusion in the year of death R40 000 R40 000 R 40 000 R300 000 R300 000 R300 000 Disposal of small business if over 55 R1 800 000 R1 800 000 R1 800 000 Capital gains tax inclusion rates for individuals Inclusion rate 40% Effective rate 40% 40% 0- 18,00% 0 - 18,00% 0 - 18,00%8.3.12 TAX PAYMENTS - MICRO BUSINESS A micro business is not subject to the provisional tax requirements in the 4" Schedule. Paragraph 1 1 of the 6" Schedule sets out that the micro business must pay tax twice a year (interim payments), i.e. . Within the first six months (by 31 August) it must estimate its taxable turnover for the year and pay tax on half of its taxable turnover. The estimate cannot be less than the taxable turnover for the previous year unless, on application, the Commissioner approves a lower estimate. By the end of the year (by 28 or 29 February) it must estimate its taxable turnover again, calculate the tax, and pay this tax (less the amount already paid at the end of the first six months of the tax year). Interest is payable on late payments at the prescribed rate. If the year-end estimate is less than 80% of the actual taxable turnover for the year when it is finally determined, an 'additional tax' of 20% of the shortfall in tax is payable. The Commissioner has the power to waive all or part of this additional tax if he is satisfied that the estimate was not deliberately or negligently understated, and was seriously made based on the information available to the taxpayer. Example - Additional tax Co F is registered as a micro business. Its taxable turnover for the year is R625 000. It paid interim tax on an estimated turnover of R350 000 for the year. Its additional tax is therefore as follows: 80% of R625 000 = R500 000 Tax on R500 000 = R1 650 Tax on R350 000 = (150) Shortfall R1 500 Additional tax: R1 500 x 20% = R300 Where the micro business does not make an estimate, or the Commissioner is not satisfied with its estimate, he can estimate the taxable turnover and issue an assessment for the tax due, in which case the 20% penalty may not be raised. 8.3.13 CONNECTED PERSONS - MICRO BUSINESS If a connected person carries on business activities that should properly be regarded as part of the activities of the micro business, and that one of the main reasons for the connected person carrying on the business Micro Business Partactivities is so that the micro business does not exceed the turnover limit, then the turnover of the connected person must be included in the turnover of the micro business (paragraph 13 of the 6" Schedule). Example - Connected persons Mrs S carries on a business of selling flowers. Her turnover for the year is R800 000. The S Family Trust (of which Mrs S is a beneficiary) also sells flowers in the same area. An independent person works for the trust, but the trust's profits will eventually be paid to Mrs S or her immediate family. The trust's turnover for the year is R400 000. Mrs S and the Trust are connected persons because she is a beneficiary of the trust. The trust was year. formed and carries on part of the business so that Mrs S does not have a turnover of more than R1 million for the As the conditions set out in paragraph 13 are met, the turnovers must be added together. As the qualifying turnover is R1,2 million, Mrs S must deregister as a micro business per paragraph 10. 8.3.14 RECORD KEEPING - MICRO BUSINESS Paragraph 14 states that a registered micro business must retain a record of- (a) amounts received by that registered micro business during a year of assessment; ( b ) dividends declared by that registered micro business during a year of assessment; (c) each asset of that registered micro business as at the end of a year of assessment with a cost price of more than R10 000; and (d) each liability of that registered micro business as at the end of a year of assessment that exceeded R10 000. 8.4 EXEMPT INCOME - MICRO BUSINESS Section 10(1)(z]) exempts from tax any amount received or accrued to or in favour of a 'registered micro business', from carrying on a business in the Republic of South Africa. This is necessary in order to prevent double taxation, because the turnover is taxed. If a natural person is registered as a micro business, the following amounts are not exempt under this section because they are not included in the taxable turnover of the micro business: Investment income Remuneration as defined in the Fourth Schedule (salaries, wages, etc.) 8.5 DIVIDENDS TAX - MICRO BUSINESS A shareholder in a registered micro business which is a company or close corporation is exempt from the Dividends Tax to the extent that the aggregate amount of dividends paid by that registered micro business to Its shareholders during the year of assessment in which that dividend is paid, does not exceed R200 000 - section 64F(h). 8.6 CAPITAL GAINS TAX - MICRO BUSINESS Paragraph 57A of the 8th Schedule states that a registered micro business will not be subject to capital gains tax, and may not deduct any capital loss which arises on the disposal of any asset if it is part of the micro business. Capital assets are only treated as part of the micro business if used mainly for business purposes. Note that this paragraph must be read with paragraph 3 of the 6" Schedule that states if the receipts from the such assets exceeds R1,5 million over a period of three years or less, the person does not qualify to be s a micro business when this limit is exceeded. When a sale of a capital asset pushes the business over the R1,5 million threshold the gain is still free of capital gains tax, because it is only in the next month that the business is deregistered as a micro business (per paragraph 10(2) of the 6th Schedule). Micro Business Part 2APPENDIX A TAX TABLES AND RATES 1 . RATES OF NORMAL TAX PAYABLE BY NATURAL PERSONS, DECEASED ESTATES INSOLVENT ESTATES, AND SPECIAL TRUSTS IN RESPECT OF THE YEARS OF ASSESSMENT COMMENCING ON 1 MARCH 2020. Taxable income excluding retirement Rates of tax fund lump sum benefits 18% of taxable income Does not exceed R205 900.. Exceeds R205 900 but does not exceed R37 062 plus 26% of the amount by which the R321 600 taxable income exceeds R205 900 Exceeds R321 600 but does not exceed R67 144 plus 31% of the amount by which the R445 100 taxable income exceeds R321 600 Exceeds R445 100 but does not exceed R 105 429 plus 36% of the amount by which the R584 200 taxable income exceeds R445 100 Exceeds R584 200 but does not exceed R155 505 plus 39% of the amount by which the R744 800 taxable income exceeds R584 200 Exceeds R744 800 but does not exceed R218 139 plus 41% of the amount by which the R1 577 300 taxable income exceeds R744 800 Exceeding R1 577 300...... R559 464 plus 45% of the amount by which the taxable income exceeds R1 577 300 Note that this table does not apply to retirement fund lump sum benefits arising on retirement or death, retirement fund lump sum withdrawal benefits, or severance benefits. These benefits have their own table. The income tax table must be used together with the natural persons' tax rebates - Primary rebate - all individuals R14 958 Secondary rebate - individuals over 65 R8 199 Tertiary rebate - individuals over 75 R2 736 RATES OF TAX FOR ORDINARY COMPANIES (OTHER THAN SMALL BUSINESS CORPORATIONS AND MICRO BUSINESSES) 28% RATES OF TAX FOR REGISTERED MICRO BUSINESSES The rate of tax referred to in section 48 of the Income Tax Act to be levied in respect of the taxable turnover of a person that is a registered micro business as defined in paragraph 1 of the Sixth Schedule to the Income Tax Act, 1962, in respect of any year of assessment ending during the period of 12 months ending on 28 February 2021 is set out in the table below: Taxable turnover Not exceeding R335 000 Rate of tax Exceeding R335 000 but not 0 per cent of taxable turnover exceeding R500 000 I per cent of amount by which taxable turnover exceeds R335 000 Exceeding R500 000 but not exceeding R750 000 R1 650 plus 2 per cent of amount by which taxable Exceeding R750 000 turnover exceeds R500 000 R6 650 plus 3 per cent of amount by which taxable turnover exceeds R750 000215 4. RATES OF TAX FOR SMALL BUSINESS CORPORATIONS The rate of tax referred to in section 5(2) of the Income Tax Act to be levied in respect of the taxable income of a company which qualifies as a small business corporation as defined in section 12E of the Income Tax Act, 1962, in respect of any year of assessment ending during the period of 12 months ending on 31 March 2021 is set out in the table below: Taxable income Not exceeding R83 100 Rate of tax Exceeding R83 100 but not 0 per cent of taxable income exceeding R365 000 7% of taxable income as exceeds R83 100 Exceeding R365 000 but not exceeding R550 000 R19 733 plus 21% of the amount by which taxable income exceeds R365 000 Exceeding R550 000 R58 583 plus 28% of the amount by which taxable income exceeds R550 000 5. TRAVEL ALLOWANCE Travel allowance for years of assessment commencing on or after 1 March 2020 Cost Scale - Fixed Where the value of the vehicle - Fuel Maintenance Cost Cost Cost R c/km Does not exceed R95 000 /km 31 332 105,8 37,4 Exceeds R95 000 but does not exceed R190 000 55 894 118, 1 46.8 Exceeds R 190 000 but does not exceed R285 000 80 539 128,3 51,6 Exceeds R285 000 but does not exceed R380 000 102 211 38,0 56.4 Exceeds R380 000 but does not exceed R475 000 123 955 147,7 66,2 Exceeds R475 000 but does not exceed R570 000 146 753 169.4 77,8 Exceeds R570 000 but does not exceed R665 000 169 552 175,1 96,6 Exceeds R665 000 169 552 175,1 96,6 Simplified method Where- (a) the provisions of section 8(1)(b)(iii) are applicable in respect of the recipient of an allowance or advance; and b) no other compensation in the form of a further allowance or reimbursement is payable by the employer to that recipient, the rate per kilometre is, at the option of the recipient, equal to 398 cents per kilometre. Note that employees' tax is based on 80% or 20% of the travel allowance, depending on circumstances 6. EMPLOYER-OWNED MOTOR VEHICLES The tax is based on the value of the private use of the vehicle each month and is withheld as part of employees' tax. - Vehicle not subject to a maintenance plan Value of private use per month = 3,5% x determined value (the determined value includes VAT, but excludes finance charges) - Vehicle subject to a maintenance plan (as defined) Value of private use per month = 3,25% x determined value (the determined value includes VAT, but excludes finance charges) This value can be reduced (on assessment) where the employee keeps accurate records of distances travelled for business purposes. Where the employee - (aa) bears the cost of all fuel used for the purposes of the private use of the vehicle (including travelling between the employee's place of residence and his place of employment), theWEAR AND TEAR ALLOWANCE APPENDIX C Binding General Ruling No. 7 (issue 3), issued on 24 March 2020, sets out the section 1 1(e) write-off periods acceptable to SARS (see discussion in Chapter 5) for any asset brought into use on or after 24 March 2020. Where an asset is used for part of a year, the allowance in that year must be reduced to the amount which bears to the total for the year, the same ratio as the part of the year bears to a full year. Asset Proposed write-off period (in years) Cellular telephones Computers Main frame / servers (see note) Personal Computer software (main frames) Purchased Self-developed Computer software (personal computers) Delivery vehicles Furniture and fittings Laboratory research equipment Motors Motorcycles Office equipment - electronic W A V a a a VI UI VI W A A VI O A N U W Office equipment - mechanical Passenger cars Photocopying equipment Photographic equipment Refrigeration equipment Shop fittings Telephone equipment Television and advertising films Trucks (heavy duty) Trucks (other) Note: The rates presented above are for a sample of assets only. For a full list of countries refer to Binding General Ruling No. 7.APPENDIX D QUICK REFERENCE TABLE 1. INCOME TAX - REBATES FOR INDIVIDUALS 2021 2020 Income Tax - Rebates for individuals 2019 R14 958 R14 220 Primary - s 6(2)(a) - under age of 65 R14 067 R8 199 R7 794 Secondary - s 6(2)(b) - age 65 and older R7 713 Tertiary - s 6(2)(c) - age 75 and older R2 736 R2 601 R2 574 Income Tax threshold- - individuals 2021 2020 2019 Below 65 years of age R83 100 R79 000 R78 150 Age 65 and older R128 650 R122 300 R121 000 Age 75 and older R143 800 R136 750 R135 300 Interest exemption- (local)- individuals 2021 2020 2019 Below 65 years of age R23 800 R23 800 R23 800 Age 65 and older R34 500 R34 500 R34 500 MEDICAL CREDIT REBATE - INDIVIDUALS 2021 2020 2019 Taxpayer only R319 R310 R310 Taxpayer and one dependant R638 R620 R620 Per additional dependant R215 R209 R209 CAPITAL GAINS TAX - INDIVIDUALS 2021 2020 2019 Primary residence exclusion for individuals R2 000 000 R2 000 000 R2 000 000 This reduces the capital gain or capital loss Primary residence exclusion for individuals R2 000 000 R2 000 000 R2 000 000 No capital gain is taken into account if the proceeds do not exceed this amount Annual exclusion for individuals & special trusts Annual exclusion in the year of death R40 000 R40 000 R40 000 Disposal of small business if over 55 R300 000 R300 000 R300 000 R1 800 000 R1 800 000 R1 800 000 Capital gains tax inclusion rates for individuals Inclusion rate 40% Effective rate 40% 40% 0 - 18,00% 0 - 18,00% 0 - 18,00%INTEREST RATES APPENDIX E There are three main categories for interest rates charged in terms of the legislation administered by SARS, i.e.- interest charged by SARS on outstanding taxes, duties and levies and payable by SARS to a taxpayer in respect of refunds of tax on successful appeals and certain delayed refunds (the 'prescribed rate') 1/03/2019 - 31/10/2019 10,25% 1/1 1/2019 - 30/04/2020 10,00% 01/05/2020 - 30/06/2020 9.75% 01/07/2020 -31/08/2020 7.75% 01/09/2020 - 31/10/2020 7,25% 01/11/2020 - 7,00% interest payable on credit amounts (overpayment of provisional tax) in terms of section 89quat(4) of the Income Tax Act, 1962 refunds (the 'prescribed rate' minus 400 basis points, or 4%) 1/03/2019 - 31/10/2019 6,25% 1/1 1/2019 - 30/04/2020 6,00% 01/05/2020 - 30/06/2020 5,75% 01/07/2020 - 31/08/2020 3,75% 01/09/2020 - 31/10/2020 3,25% 01/1 1/2020 - 3,00% interest applicable to a loan denominated in the currency of the Republic, as described in paragraph (a) of the definition of 'official rate of interest' in paragraph 1 of the Seventh Schedule to the Income Tax Act, 1962 - i.e. interest on a loan given as a fringe benefit and interest on a loan given by way of a share (i.e. a deemed dividend). The 'official rate of interest' is the repo rate plus 100 basis points (i.e. 1%). 1/12/2018 - 31/07/2019 7,75% 1/08/2019 - 31/01/2020 7,50% 01/02/2020 - 31/03/2020 7,25% 01/04/2020 - 30/04/2020 5,25% 01/05/2020 - 31/05/2020 5,25% 01/06/2020 - 31/07/2020 4,75% 01/08/2020 - 4,50% PRIME OVERDRAFT RATES APPENDIX F PRIME OVERDRAFT RATE OF SOUTH AFRICAN BANKS Date Rate Date Rate Rate Date 29/03/2018 10,00% 23/1 1/2018 0,25% 19/07/2019 10,00% 17/01/2020 20/03/2020 7,75% 9,75% 8,75% 15/04/2020 22/05/2020 7,25% 24/07/2020 7,00%QUESTION 22 Which one of the following are disqualified from registering as a micro business? (1) Sole traders (2) Companies (3) Trusts (4) Close corporations QUESTION 23 Which one of the following would be included in the calculation of qualifying turnover in deter- mining whether a business qualifies to register as a micro business? (1) Total receipts from sales of trading stock. (2) Total debtors at the date of registration. Total receipts from the sale of the factory building used for the business. (4) Total receipts from certain Government grants and Government scrapping payments. QUESTION 24 Which one of the following statements does not apply to trusts? (1) A trust is a separate legal entity and therefore a separate taxpayer. (2) A trust is taxed at a fixed rate of 45%. (3) Profits earned can be held in the trust or distributed to beneficiaries. (4) The distribution amount depends on the beneficiaries of the trust. QUESTION 25 What is the method used by SARS to collect tax due to them from salaried taxpayers? (1) Capital gains tax (2) Employees tax (3) Turnover tax (4) Dividends tax The following information relates to questions 26 to 29 (round off all your calculations to the nearest rand): Lucky Bread CC is a start-up company established by two sisters. It started trading on 1 July 2020 and have a year of assessment ending on 28 February 2021. The sisters make bread and crackers which are suitable for diabetics and sell them at various food markets in the Gauteng region over weekends. They recently started selling their products in a well-known supermarket.Additional information: R Total receipts for the period 540 000 Capital receipts (from the sale of equipment - not included in total receipts) 28 000 Taxable turnover 554 000 Taxable income 275 300 QUESTION 26 Lucky Bread CC would like to determine if it qualifies as a micro business. What is the qualifying turnover limit for Lucky Bread CC for the 2021 year of assessment? (1) R1 000 000 (2) R554 000 (3) R540 000 (4 R666 667 QUESTION 27 Assume Lucky Bread CC qualifies as a micro business. What would its tax liability be for the 2021 year of assessment? (1) R1 652 (2) R77 084 (3) Rnil (4) R2 730 QUESTION 28 Assume Lucky Bread CC does not qualify as a micro business. Which one of the following state- ments would cause it not to qualify as a small business corporation? (1) If the year of assessment does not end on 28/29 February. (2) If the CC's gross income for the year of assessment exceeds R20 million. (3) If all the shareholders of the CC are natural persons. (4) If one of the members of the CC holds a permitted shareholding in a listed company.QUESTION 29 Assume Lucky Bread CC does not qualify as a small business corporation. What would its tax liability be for the year of assessment ending 2021? R14 116 (2) R77 084 (3) R151 200 R155 120 QUESTION 30 The following information relates to a company with a 31 March year-end. 2019 assessment received on 20 January 2020, reflecting assessed taxable income of R760 000. 2020 assessment received on 21 September 2020, reflecting assessed taxable income of R650 000. Which one of the following amounts must be used as the 'basic amount in order to determine the first provisional tax payment for the 2021 year of assessment? (1) R650 000 (2) R760 000 (3) R881 600 (4) R820 800