QUESTION 1 a) You purchase a retirement annuity with XYZ insurers. The annuity contract is set up to pay an annuity of N$500 per month from age of 55. The total annuity to be paid out in future will be a sum of N$150 000. The contract required that you to make an initial capital investment of N$30 000.

Several years pass and you turn 55 in 2020. The annuity starts to pay out. At the end of the 2020 tax year, the amounts received from the annuity contract should be specifically included in gross income and are therefore subject to tax. The capital element of the annuity should be excluded before calculating your tax liability.

Required: Calculate the capital element of XYZ insurers (5 marks)

b) ABC limited purchase a vehicle for N$480 000 (VAT exclusion) on 23 March 2021. Its financial year end is June 2021. Calculate the capital allowance that can be claimed? (5 marks)

c) Company x originally erected a building for N$500 000 in year 1. The cost of the land was N$100 000. Company x used the building for 4 years and the sold it to Company Y for N$1000 000 (N$800 000 for the building and N$200 000 for the land. No manufacturing status is available for company Y. Required: Calculate the Building allowance claimable by Company ( 5 marks)

d) ABC limited purchase a newly erected building on 1 may 2003 for N$1000 000 (N$200000 for the land and N$800000 for the building) the building is sold on 1 June 2017 for N$2000 000 (N$400 000) for the land and N$1600 000 for the Building) the market value on the date of disposal is N$1900 000. Required: Calculate the recoupment (10 marks)

QUESTION 2

Tangeni is earning a salary and other income. His other income includes rental income, interest income and divided income. His salary is structured as follows:

1 March 2020 to 28 February 2021 $

Earnings 812 000

Basic salary 500 000

Housing allowance (note 1) 240 000

Vehicle allowance (note 2) 60 000

Entertainment (note 3 12000

Company contribution: 120 972

Pension fund (note 4) 60 000

Medical aid (note 5) 60 000

Social Security 972

Deduction: -415 572

Social security -972

Employee contribution toward pension fund (note 4) -42 500

Bond repayment (note 1) -200 000

PAYE -172 100 NET pay 396 428

Note

1. Tangeni received a housing allowance of $240 000 for the year but his actual bond repayments for the year were only $200 000.

2. Tangeni structured his vehicle allowance to be 75% taxable and 25% non-taxable.

3. Tangeni received an entertainment allowance of $12000 for the year.

4. Tangeni contributed $42500 toward the pension fund. His employer also contributed $60 000 toward the pension fund.

5. The company contributes towards the medical aid fund. Required:

a) Calculate Tangeni PAYE ( 10 marks)

b) Tangeni incurred the following expenses for business purposes:

a. $25 000 vehicle -related expenses: his total vehicle expenses were $40 000 of which $ 25 000 relate to his business kilometers.

b. $5000 (entrainment related expenses

c. Tangeni received dividend of $20 000 and interest income of $10 000 from a Namibia Unit trust.

d. He also receives rental income of $60 000 for the year and incurred $ 25 000 of related rental expenses

e. He did not pay any provisional taxes on his other income.

Required: Calculate Final taxable income in completing Tangeni annual tax returns (15 marks) END