MANGOSUTHU UNIVERSITY OF

TECHNOLOGY

FACULTY OF MANAGEMENT SCIENCES

DEPARTMENT OF ACCOUNTING & LAW

TAXATION II
2021

COURSE OUTLINE

TAXATION OF BUSINESS ACTIVITIES

PROGRAMMES : Diploma in Accounting – 3 Years (ACODIP)

Diploma in Accounting – 4 Years (ACOECP)
Diploma in Cost and Management Accounting
(CIMADIP)

COURSE CODE : TAXA 300 / TAXT 300 / TXTN 300

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INTRODUCTION AND WELCOME

Welcome to Taxation II!

We are delighted to welcoming you to TAXA 300 / TAXT 300 / TXTN 300. We hope
that you will find this course interesting and informative. This course is about the taxation
of Business Activities. Taxation II will continue building on the knowledge and skills that
you gained in Taxation I, taxation of Individuals, so understanding of the material
covered in earlier modules is of utmost importance.

The course outline will show you what is expected of you during this course. A course
outline promotes self-study on the part of the student.

The task of a lecturer at a tertiary institution is to make knowledge available and not
primarily to impart knowledge. It is your responsibility to acquire the knowledge and
make it your own.

The lecturer will explain the principles of the subject as well as the practical application
thereof in the class. The detail of the work is your responsibility by self-study of the
prescribed books and supplementary sources in the library. You must therefore think and
learn independently with the necessary self-discipline.

Taxation is not a subject where you can just memorise facts and figures to reproduce in
the assessment. It is a subject where you need to develop an understanding of concepts so
that you can use them to solve various types of problems.

In order to make sure that you understand and can apply these techniques you will have
to do a lot of exercises. Thus make sure that as each lecture and week pass you attempt as
many examples and exercises as possible.

In so doing, you will very quickly detect where you have problems of understanding, so
that you can sort them out at the earliest possible opportunity. If you do detect any
problems feel free to discuss them with the lecturer.

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LECTURERS AND CONTACT DETAILS

Name of Lecturer Mr Rivaaj Kalidin

Telephone 031 819 9404
Email [email protected]
Consultation times Strictly by appointments made via email, there
will be no walk ins!
Office number location PARKHOME OFFICES

Name of Lecturer MR Bonginkosi K. Zwane

Telephone 031 907 7147
Email [email protected]
Consultation times Strictly by appointment no walk ins!
Office number location AC 117 / NW 222

Head of Department Dr K Ramsarghey

Telephone 031 907 7315
Email [email protected]
Consultation times By appointment only
Office number location AC 135 / NW 224

Secretary: Department of Accounting Ms N. Siyaya

Telephone 031 907 7391
Email [email protected]
Consultation times 09:00 – 15:00
Office number AC 115 / NW 223

CONSULTATION WITH THE COURSE LECTURERS

Students are encouraged to add their cellphone numbers to the Taxation II WhatsApp
Group Chat. Students are encouraged to make an appointment for consultation to advance
their learning. Ideally, the after-lecturing times could be used for consultations. Since
consultation times are very limited, and students might have to attend other lectures
immediately after a lecture has ended, students are urged to take advantage of the tutorial
group arrangement to discuss pertinent matters relating to the course.

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GRIEVANCE PROCEDURES

Should a student have a valid complaint concerning the course or any other related issues,
the following grievance procedures will need to be followed:

 First, approach your class representative, if the matter is not resolved;

 Second, together with your class representative, approach the course lecturer, if the
matter is not resolved;

 Third, together with your class representative, approach the Head of Department
(Accounting), if the matter is still not resolved;

 Fourth, together with your class representative, approach the Dean of Faculty of
Management Sciences.

Failure to follow these procedures may result in long delays before such a complaint is
resolved.

4
AIM OF THIS COURSE

The aim of this course is to provide students with a sound knowledge of the South
African Income Tax Act and Value-Added Tax Act as it pertains to business activities.
To provide students with an integrated knowledge of the relevant sections of these Acts.

At the end of this course, the student will have been equipped with the requisite skills that
are necessary to compute a corporation’s (all forms) normal income tax liability and
advice on tax advantages.

The course will also take into consideration all corporations operating in the Republic
whether or not are incorporated in the Republic.

Prerequisite/s
Taxation I (TAXA 200) or (TAXT 200) or (TXTN 200)
Co-requisite/s
None
Learning outcomes
On completion of this subject students should be able to determine the income tax and
value-added tax liability or refund due to/from the Commissioner.

2.6 Critical cross fields outcomes

 Be a member of a team.
 Organise and manage themselves.
 Gather, analyse data and evaluate information for problem solving.
 Communicate effectively both orally and written.
 Use information communication technologies (ICT) in changing their worlds and
the society at large.
 Above all be able to demonstrate critical thinking and problem-solving, creativity,
collaboration and communication.

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2.7 Learning and teaching strategies
Teaching and learning strategy
Lectures will be conducted on each of the components of the course structure. The use of
the prescribed textbook and the recommended reading material will form an integral part
of your studies. Tutorial and assignments will be assigned to students on a weekly basis.
Students are urged to complete and appropriately present their assignments/tutorials by
the relevant due dates.

Group work, presentations, case studies and role plays will also be used to demonstrate
understanding of a particular topic. Students are encouraged to learn and draw
meaningful conclusions from lecture activities. Students will be expected to undertake a
lot of self-study and most of the notional hours will be on self-study. Students must learn
and are encouraged to learn independently. It is imperative that students starts reading as
soon as the lectures start as per learning plan.

Study methods

Students are advised to attend all lectures, take personal responsibility for their learning,
as they individually study from the prescribed study material and attend and participate in
the weekly tutorial classes. An attendance register will be kept. All weekly questions
should be attempted. You will be given credit only if at least 80% of the work was
attempted.

2.8 Prescribed materials

1. A Student’s Approach to Income Tax: Business Activities, 2021, Venter et al,

LexisNexis, Durban. 2021.

2. Graded questions on Income Tax in South Africa, 2020, Mitchell & Mitchell,
Thirty-Fifth Edition. LexisNexis, Durban. 2020.
 NB: Do not purchase any earlier edition, since the Act and questions
change each year.
 It is important that you get the prescribed textbooks as early as possible.

DO NOT MAKE PHOTOCOPIES! IT IS AGAINST THE LAW TO

DO SO!

Recommended literature/readings

Note on South African Income Tax, 2020/21, Phillip Haupt, H & H, Cape Town. 2020.

SAICA Legislation Handbook 2020/2021 LexisNexis, Durban, 2020/21 (Income Tax Act
No 58 of 1962 (as amended), Estates Duty Act 66 of 1965 and (Value-Added Tax Act No
89 of 1991).

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2.9 Composition of learning units
Week(s) Learning Units/Topic Learning Unit Objectives Learning Unit Outcomes
1-2 Learning Unit 1: The objectives of this learning unit are to: After having completed this learning unit
Taxable income of business Students must be able to demonstrate an you as the learner should be able to:
enterprises integrated knowledge of the framework used  Discuss and apply the requirements
to calculate a person’s taxable income and of the gross income definition in a
tax liability for a year of assessment. practical situation.
 Discuss and apply the requirements
of the general deduction formula in a
practical situation.
 Calculate the taxable income for
different enterprise forms (different
taxpayers) in accordance with
current tax legislation.

3-4 Learning Unit 2: The objectives of this learning unit are to: After having completed this learning unit
Specific deductions and Students must be able to demonstrate a you as the learner should be able to:

7
 allowances coherent and critical understanding of the  Calculate the taxable income of a
income tax deductions and allowances that company by starting with the accounting
business entities can claim in terms of net profit or loss.
current income tax legislation and the ability  Calculate the normal income tax
to apply this knowledge to practice. liability for different companies
correctly.
 Calculate/discuss the expenses and
deductions as contained in the Income
Tax Act with reference to relevant
legislation.
5-6 Learning Unit 3: The objectives of this learning unit are to: After having completed this learning unit
Expenditure & allowances Students must be able to demonstrate a you as the learner should be able to:
relating to capital assets coherent and critical understanding of the  Identify the different types of assets and
income tax deductions and allowances that calculate the allowances applicable to
business entities can claim in terms of each by applying the rules with
current income tax legislation and the ability reference to relevant legislation.
to apply this knowledge to practice.  Discuss and apply the rules pertaining to
depreciable assets and allowances with
reference to relevant legislation.
 Calculate the recoupment or section
11(o) scrapping allowance when an

8
 asset is disposed of, as well as the
deferment available on recoupment, if
applicable, correctly.
7-9 Learning Unit 4: The objectives of this learning unit are to: After having completed this learning unit
Value-Added Tax Students must be able to analyse the you as the learner should be able to:
applicable Value-Added Tax rules and apply  Discuss the application of the value-
it to transactions added tax system in South Africa with
reference to the VAT act.
 Identify goods and services correctly as
standard-rated, zero-rated or exempt
supplies.
 Apply the different VAT rules correctly
in different situations.
 Calculate the VAT payable
by/refundable to a vendor correctly in a
practical situation.
 Discuss the impact of VAT on business
income tax calculations with reference
to relevant legislation and case law.

10-12 Learning Unit 5: The objectives of this learning unit are to: After having completed this learning unit

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Capital Gains Tax you as the learner should be able to:
Students must be able to analyse the  Determine the capital gains tax payable
disposal or deemed disposal of an asset and by applying the relevant rules.
apply solutions in a practical situation for  Determine the capital gains and losses
capital gains tax purposes. on the disposal of assets using the
proceeds and the base cost of the
relevant asset disposed of.
 Calculate the taxable capital gains for a
year of assessment.
 Calculate the capital gains tax
accurately on assets acquired before
valuation date (1 October 2001) and
disposed thereafter.
 Identify the capital gains and losses in a
practical situation which are to be
disregarded.
Learning Unit 6: The objectives of this learning unit are to: After having completed this learning unit
Partnerships Students must be able to demonstrate an you as the learner should be able to:
 Understand the legal requirements
integrated knowledge of the framework used
for a partnership to be recognised as
to calculate a partnership’s and a partner’s such
 Identify and apply the normal tax
taxable income and tax liability for a year of
implications that are unique to

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 assessment. partners

Learning Unit 7: The objectives of this learning unit are to: After having completed this learning unit
Taxation of companies & close Students must be able to demonstrate an you as the learner should be able to:
Corporations integrated knowledge of the framework used  Identify a company for tax purposes
to calculate a company’s taxable income and  Calculate the taxable income of a
tax liability for a year of assessment. company and apply the correct tax
rate in order to determine the tax
liability
 Determine the tax implications of a
conversion from close corporation to
a company
 Classify companies as public or
private for tax purposes
 Determine the tax effect of this
classification on a company
Learning Unit 8: The objectives of this learning unit are to: After having completed this learning unit
Turnover Tax Students must be able to analyse the you as the learner should be able to
applicable Turnover Tax system and apply it explain:
to determine a person’s tax liability.  What the turnover tax regime is
 When and at what rate the turnover

11
 tax will be levied
 When a person can register as a
micro business
 Meaning of the term ‘qualifying
turnover’
 Meaning of the term ‘taxable
turnover’
 When a person must or can
deregister as a micro business
 The transitional arrangements
applicable to the turnover tax system
Learning Unit 9: The objectives of this learning unit are to: After having completed this learning unit
Tax avoidance and evasion Students must be able to demonstrate an you as the learner should be able to:
understanding of tax evasion and tax  Explain the difference between tax
avoidance and its implications for the tax evasion and tax avoidance
payer.  Demonstrate an in-depth knowledge
of anti-avoidance provisions
contained in this unit in practical
cases.
Learning Unit 10: The objectives of this learning unit are to: After having completed this learning unit

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Administrative Procedures Students must be able to demonstrate an you as the learner should be able to:
understanding of the administrative  Explain the registration processes
procedures and its implications for the tax and submission of returns
payer.  Demonstrate knowledge of
assessment processes
 Explain and calculate the penalties
and additional taxes
 Show an awareness of the dispute
resolution process.

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2.10 Assessment strategies

Strategy

The assessments will include both long and short questions, written and in multiple-
choice-formats, use case study format of a model of an individual’s or sole trader’s
financial situation or information. A good amount of calculations would probe you
numeracy competency and theory-type questions aimed at ensuring that candidates have
mastered the relevant fundamentals and core principles and knowledge of topics as
covered in the prescribed study textbooks, lecture and tutorial class discussions.

A typical question could require to discuss the applicability of relevant sections of the
Income Tax Act, to compute taxation effects of various matters and to journalise the
taxation consequences of transactions and events.

The format of assessment questions is deliberately varied. It will be very risky to

memorise format of questions as the assessors would independently and sporadically
conceive the format of assessment questions.

Over the years, many students paid a heavy price due to a poor attitude. These students
poorly attended lectures and unfortunately failed the main exam and only a few passed
the supplementary exam. It will be very risky to adopt a complacent or a lax attitude to
attending lectures. You need to be regular (more than 80% of attendance) at taxation II
lectures.

In taxation II, you determine your success! Your lecturers are here to facilitate your
learning at a higher standard cognisant of the realities of the ever challenging externally
further learning and working environments.

1. Remarking of assessments:

Students will be given a week coinciding with a Friday of the week after the
assessment scripts were first handed out to students, to return their assessment scripts
for remarking. No further extension will be granted.

2. Rule of at least 80% attendance of classes (both lectures and tutorials):

Taxation II subject will enforce the attendance at lectures and tutorials. Kindly refer
to rule G21 in the General Regulations for Students, 2021.

Kindly provide leave of absence when missing lectures.

Where a student has failed to satisfy the 80% attendance requirement, the student will
be considered as under prepared to write the next assessment and the student shall
prepare to write the aegrotat test after Test 3, instead.

14
 This rules aims at encouraging students to remain focused on their studies as it has
been understood that poor class attendance leads to disastrous academic performance.

Philosophy

To prepare independently and technically progressive accounting students who are able to
apply their acquired academic knowledge to various scenarios, and to successfully
articulate into higher qualifications.

Instruments

End-of-topic spot tests (including group assignments) and three test series are scheduled
during the year and a three-hour final examination.

Aegrotat test

The aegrotat test will be written after test 3 has been written only if you have missed any
of the other 3 assessments and have provided satisfactory supporting documentation.

Details of the aegrotat test will be communicated during lectures. The onus is on affected
students to follow communications during lectures on the aegrotat test.

The scope of the aegrotat test will be the entire syllabus covered in Taxation II.

Additionally, the provision for spot tests could be used as a backup!

Please note that there will be NO MAKEUP TEST!

Test Dates (Provisional):

Test 1 series
Date: 30 March - 3 April 2021 Time: 09.00 am – 16:00 pm Venue: Dr. Seme Hall

Test 2 series:
Date: 15 - 19 June 2021 Time: 09:00 am – 16:00 pm Venue: Dr. Seme Hall

Test 3 series:
Date: 24 - 28 August 2021 Time: 09:00 am – 16:00 pm Venue: Dr. Seme Hall

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Duly performed (DP) and pass requirement

DURING THE TESTS, YOU HAVE THE RESPONSIBILITY TO ENSURE THAT

YOUR ANSWER BOOK IS COLLECTED BY AN AUTHORISED PERSON.

THE COURSE LECTURERS DO NOT ACCEPT RESPONSIBILITY FOR ANY

UNACCOUNTED FOR ANSWER BOOKS.

Year mark calculation

Course mark

It is compulsory that students write all 3 tests.

A student must obtain at least 40% overall course mark (see the table below). Weekly
Tutorials are to be prepared individually and discussed in classes.

Attending and participating in weekly tutorials are compulsory in order to qualify to write
the weekly spot tests. The attendance registers will be circulated as enforcement measure.

The table below shows how your final course mark (CM) will be computed:

Contribution

Course mark 40%

Examination 60%
Final mark 100%

Working students who are unable to comply with the weekly tutorials and spot tests
requirements are required to discuss the matter with the subject lecturer. Proof of
employment will be required.

Final pass

To obtain a final pass, a student must obtain a sub-minimum of 40% in the examination
and a 50% overall final mark.

To qualify for a supplementary examination, a student must obtain a minimum of 40%

final mark.

Aegrotat or special exams are managed by the Examinations Department. Should you
need to apply for either exam, you must go directly to the Examinations Department, and
not to your lecturers.

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2.11 Class rules

Attendance of classes

Students are required to attend classes regularly. No disruption will be tolerated.

Submitting assignments

Every group assignment will consists of group members. Only the lecturer has the
discretion to allocate a group assignment of fewer or more.

Assignment deadlines and submission venues or contacts must be adhered to, otherwise a
submission will be forfeited.

Late submission penalties

None, as late submissions are not allowed.

Absenteeism when assessments are administered

An email should be sent to the course lecturer on the day of the assessment. Thereafter, a
valid proof should be submitted to the course coordinator by no later than 48 hours after
the assessment.

Usage of cell phones/tablets during lectures

Cellphones and tablets should be silenced during classes.

Plagiarism
Students need to comply with the university’s policy on plagiarism.

17
2.12 General information

You are on your way to becoming a professional person and you are required to observe
the following:

 Attendance at all lectures is compulsory. If you fail to attend a lecture the onus rests
on you to make up work you have missed yourself.
 Failure to attend 80% of your lectures will result in you not writing your final
exam.
 The onus is on the student to sign the register/sign-in in the biometric system
every day for every lecture attended.
 Be on time for the lectures.
 No unnecessary talking during lectures, but participation in discussions and active
involvement in group projects are necessary.
 Keep your course work up to date.
 Submit assignments and tutorials on or before the deadline date.
 Do not copy other student’s work or directly from references. Individual
assignments have to be your own work. Plagiarism and copying of your fellow
students’ work will not be tolerated. If any assignments are found to have
violated these requirements, all the assignments involved will be allocated a zero
mark.
 Assignments must be handed to the lecturer directly. Should not be pushed under the
door, delivered by somebody else, etc. if any of these actions take place the
assignments will be ignored.
 Do not seek or provide assistance during tests from your fellow students.
 No cell phones will be allowed in tests, so remember to bring a calculator along when
you are writing a test.
 Test mark corrections can only be done during the two weeks following the date
on which the test script was handed back to you.
 Also read the student rulebook and the departmental handbook.

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2.13 Weekly lecture, study plan and tutorial questions

Week Date Topic Chapter reference

L1 Introduction and set-ups Chapter 1
L2 Specific deductions and allowances Chapter 4

Tutorials 1: to be announced at lectures

L3 Specific deductions and allowances Chapter 4

Tutorials 2: to be announced at lectures

L4 Expenditure and allowances relating to Chapter 5
capital assets

Tutorials 3: to be announced at lectures

L5 Expenditure and allowances relating to Chapter 5
capital assets

Tutorials 4: to be announced at lectures

L6 Expenditure and allowances relating to Chapter 5
capital assets

Tutorials 5: to be announced at lectures

L7 Taxable income of business enterprises Chapter 3

Tutorials 6: to be announced at lectures

T1 Assessment 1 TBA
L8 Taxable income of business enterprises Chapter 3

Tutorials 7: to be announced at lectures

L9 Value-Added Tax Chapter 2

Tutorials 8: to be announced at lectures

L10 Value-Added Tax Chapter 2

Tutorials 9: to be announced at lectures

L11 Value-Added Tax Chapter 2

Tutorials 10: to be announced at lectures

L12 Value-Added Tax Chapter 2

Tutorials 11: to be announced at lectures

L13 Value-Added Tax Chapter 2

Tutorials 12: to be announced at lectures

L14 Capital Gains Tax Chapter 6

Tutorials 13: to be announced at lectures

L15 Capital Gains Tax Chapter 6
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 Tutorials 14: to be announced at lectures
L16 Capital Gains Tax Chapter 6

Tutorials 15: to be announced at lectures

T2 Assessment 2 Chapter 2 & 6
L17 Capital Gains Tax Chapter 6

Tutorials 16: to be announced at lectures

L18 Partnership Chapter 7

Tutorials 17: to be announced at lectures

L19 Partnership Chapter 7

Tutorials 18: to be announced at lectures

L20 Taxation of companies and close Chapter 8
corporations

Tutorials 19: to be announced at lectures

L21 Taxation of companies and close Chapter 8
corporations

Tutorials 20: to be announced at lectures

L22
T3 Assessment 3 TBA
L23
L24
L25 Turnover Tax Chapter 9

Tutorials 24: to be announced at lectures

L26 Turnover Tax Chapter 9

Tutorials 25: to be announced at lectures

L27 Tax Avoidance and Evasion Chapters 10

Tutorials 26: to be announced at lectures

L28 Tax Avoidance and Evasion Chapters 12

Tutorials 27: to be announced at lectures

L29 REVISION & PREP!!! ALL
EX Final Examination All chapters

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 TAXATION II TUTORIAL QUESTIONS
GRADED QUESTIONS ON INCOME TAX IN SOUTH AFRICA 2020

TOPIC QUESTION NUMBER

1. SPECIFIC DEDUCTIONS AND ALLOWANCES 20.1
20.5
20.6
20.7
20.9
20.11
20.12
7.4
7.5
7.6
7.7
7.8
7.9
7.10
7.11
7.12
7.13
7.14
7.15
7.22
7.24
7.26
7.27
7.28
7.29
7.30
7.33
7.34
7.35
7.36
7.39
2. EXPENDITURE AND ALLOWANCES RELATING TO CAPITAL ASSETS 8.1
8.2
8.3
8.4
8.5
8.6
8.8
8.9
8.11
8.12
8.13
8.14
8.15
8.17

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 8.19
8.23
3. TAXABLE INCOME OF BUSINESS ENTERPRISES 4.14
4.15
4.19
12.1
12.2
12.3
12.4
7.16
4. VALUE-ADDED TAX 29.1
29.2
29.3
29.4
29.5
29.6
29.7
29.8
29.9
29.10
29.11
29.12
29.13
29.14
29.15
29.17
29.18
29.19
29.20
5. CAPITAL GAINS TAX 20.14
20.8
7.32
8.18
8.22
8.24
29.16
18.4
18.6
18.7
18.9
18.8
18.10
18.13
18.14
18.20
18.21
18.22
18.23
18.26

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 18.27
18.29
6. PARTNERSHIP 7.39
12.6
12.5
12.8
12.9
12.10
12.11
12.12
7. TAXATION OF COMPANIES AND CLOSE CORPORATIONS 14.5
14.6
14.7
14.8
14.9
14.10
14.11
14.12
14.14
14.15
14.16
14.17

9. TURNOVER TAX Question as per class

notes

10. TAX AVOIDANCE AND EVASION 23.1

23.2
23.3
23.4
23.5
23.6
23.7
23.8

Update by Mr R Kalidin & Mr B.K Zwane

23