Wezandla Manufacturing (Pty) Ltd (Wezandla) is a company resident in South Africa in the business of making carpets and rugs from local materials. It is not a small business corporation. The following information is relevant for tax purposes for the year ended 28 February 2019:
1. Wezandla had the following income and expenses during the 2019 tax year:
- Sales R 5 422 315
- Interest income R 214 250
- Dividends received (1 March 2018) R 86 740
- Cost of sales (R 2 680 230)
- Salaries and wages (R 718 554)
- Communications (R 64 220)
- Audit fees (R 54 890)
- Computer expenses (R 32 840)
- Rental (R 159 600)
- Motor vehicle expenses (excluding wear and tear) (R 78 618)
- Fine for overloading delivery vehicle (R 1 750)
- Insurance on life of director (R 42 650)
- Donations to Public Benefit Organisations (R 154 740)2. On 1 March 2015 Wezandla entered into a five year lease for a new factory premises. In terms of the lease agreement, Wezandla was required to make improvements to the property limited to a cost of R325 000. Wezandla completed these renovations on 1 September 2018 at a cost of R 341 635.3. Wezandla had a list of doubtful debts of R 42 300 and a bad debt write off of R 8 741 for the year. SARS had allowed a S11(j) allowance of R 8 649 in the previous tax year.
4. Wezandla purchased computer software at a cost of R 46 200 on 1 August 2018. SARS accepts a write off period of three years on computer software.
5. Wezandla sold a vehicle, which it had purchased on 1 March 2017 for an amount of R 178 500, for an amount of R 75 000 on 30 November 2018. SARS accepts a write off period of five years for motor vehicles.
6. Wezandla purchased used weaving looms, to be used in the process of manufacture, on 1 June 2015. The looms cost R 282 400. Wezandla also incurred moving costs of R6 750, transporting these weaving looms to its factory on 1 July 2015.
7. On 30 April Wezandla purchased part of a new factory from a property developer for an amount of R 1 534 000.
8. Wezandla made the following provisional tax payments during the 2019 tax year:
31 August 2018 R 108 940
28 February 2019 R 345 200
9. The sole shareholder of Wezandla, Mr. Baloyi, owed the company an amount of R 150 000 as at 28 February 2019, this amount has been outstanding since 1 October 2018. No interest is charged on this loan. Assume that the official rate of interest is 7.5%.
10. Wezandla declared and paid a dividend of R350 000 on 31 August 2018 to its sole shareholder, Mr. Baloyi.
Q.3.1 Calculate the tax liability/refund owing of Wezandla Manufacturing (Pty) Ltd for the year ended 28 February 2019. (30)
- Round off all workings to the nearest Rand.
- Ignore VAT.Q.3.2 Calculate the dividends withholding tax paid by Wezandla on dividends and deemed dividends paid during the year ended 28 February 2019. (4)
Q.3.3 Calculate the net dividend paid to Mr Baloyi. (1)
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