Question 1

Zingisa (Pty) Ltd (Zingisa) is a South African resident company that manufactures and sells wide range of shoes both local and international market. The companys head office is in Empangeni Town, KwaZulu-Natal, where the manufacturing also takes place. Zingisa also owns property which consists of a bed-and-breakfast (B&B) which it lets out to guests as well as flat which it lets out to the tenants. Malusi Zingisa is the founder and CEO of the company. Zingisa is a registered Category value-added tax (VAT) vendor on invoice basis making 72% taxable supplies. South African Revenue Services (SARS) Commissioner has accepted a turnover-based method of apportionment to arrive at an acceptable input tax ration of 72%, when applicable. Zingisa concludes transactions with registered VAT vendors unless otherwise states, Zingisa is in possession of valid tax invoiceS. Zingisa is in process of finalising companys VAT return for the two-month VAT period ending on 30 June 2023. The following amount relates to receipts and payment for two-month VAT period ending 30 June 2023. All amounts include VAT unless otherwise specified or context indicates otherwise.

NOTE. R RECEIPTS. Local sales 1 507 650 Export sales 327 750 Indemnity payment 2 241224 on tradingstock

2. On 1 May 2023, Malusi Zingisa, instructed one of employee who works at warehouse to arrange for burglary and steal trading stock. Employee had to keep these goods at the safe place and return them back after ten days. Malusi explained to employee that this would assist in claiming reimbursement through the insurance company. According to Malusi Zingisa this arrangement would inject cash to the business. Malusi Zingisa explained that he will file a burglary case at the nearest police station to receive a case number. The case number received will be used when filing a claim with insurance company. Malusi Zingisa advice employee to cover his face and wear gloves on his hand because the police might want to take fingerprints or video footage for their forensic investigation. On 15 June 2023, Zingisa (Pty) Ltd received R 241 224 as pay out from insurance company.

Discuss in terms of the VAT Act, VAT consequences on the insurance pay out received by Zingisa (Pty) Ltd on 15 June 2023. Please refer to note 2 above and refer to section 8(8)