The purpose of the Trial Exam Paper is to
assist you in your preparation for the ICB
Final Exam. Please note that this is a ‘mock’
exam and not an actual assessment. It is
also by no means exhaustive or prescriptive,
and the ICB may present alternative
assessment questions. The Trial Exam
Paper is an assessment preparation tool and
should not replace your studying the content
and outcomes.
Income Tax returns Your final ICB exam will consist of 3
sections. Section A will be Multiple choice
questions. Section B will be compulsory long
Trial Exam questions. Section C will comprise of 2
questions; you will have a choice to answer
1 of the 2 questions. The below mark
Question paper allocations are merely illustrative and may
differ from your final assessment. It will be
3 ½ hours long, and consist of 180 marks.
SECTION A: SHORT QUESTIONS - COMPULSORY
QUESTION 1: 20 MULTIPLE CHOICE QUESTIONS 40 MARKS
SECTION B: ALL QUESTIONS ARE COMPULSORY
QUESTION 1: SHORT THEORY QUESTIONS 40 MARKS
QUESTION 2: TAXATION OF A COMPANY 50 MARKS
SECTION C: CHOOSE 1 OF 2 QUESTIONS
QUESTION 1: TAXATION OF A SALARIED EMPLOYEE 50 MARKS
QUESTION 2: ESTATE DUTY AND DONATIONS TAX 50 MARKS
Section A: Short questions – Compulsory
QUESTION 1 MULTIPLE CHOICE QUESTIONS
1.1. The following is an example of a revenue receipt:
A Donations
B Inheritances
C Gifts
D Interest
1.2. In order for an amount to be included in a non-resident taxpayer’s gross income it must be:
A Of a capital nature
B From a South African source
C Received in cash
D Received in the current tax year
1.3. Where a taxpayer disposes of an asset costing R 10 000 on which a wear and tear allowance of
R 4 000 has been claimed, for an amount of R 7 000, the S8(4)(a) recoupment to be included in the
taxpayer’s gross income is:
A R 1 000
B R 7 000
C R 3 000
D R 4 000
1.4. The following amounts are not exempt from income tax in terms of the Act:
A A disability pension
B Benefits payable in terms of the Unemployment Insurance Contributions Act
C Retirement Lump Sums
D The capital element of an annuity amount received under an annuity contract
1.5. In order for an amount to be deductible by a taxpayer in terms of the general deduction formula, the
taxpayer must be:
A Carrying on a trade
B A South African Resident
C Earning a profit from a trade
D Earning exempt income from the trade
1.6. Where a taxpayer earns only a retirement funding salary of R 120 000 and contributes R 30 000 to a
pension fund and R 4 000 to a retirement annuity fund, he will be entitled to the following deductions in
terms of S11(k) for the year ended 28 February 2017:
A S11(k): 4 000
B S11(k): 30 000
C S11(k): 33 000
D S11(k): 34 000
1.7. Where an employee is provided by his employer with the use of a vehicle costing R 150 000 (the
vehicle has no maintenance plan) and his employer expects that he will use this vehicle 50% for
business purposes, the following amount must be included in the employee’s monthly remuneration for
PAYE purposes:
A R 2 625
B R 4 200
C R 1 050
D R 5 250
1.8. The following will result in a taxable fringe benefit in the employee’s hands:
A A low-interest loan granted to an employee to enable him to further his studies
B A meal provided to an employee during business hours
C A bravery award to a police officer with a cost of R 5 000
D The payment of an employee’s medical by his employer where the employee is 75 years old
1.9. Where an employee (aged 30 years old) receives a monthly salary of R 20 000 and pays a retirement
annuity contribution of R 4 000 and a medical aid contribution of R 900 (he is the sole member), his
monthly PAYE during the year ended 28 February 2017 will be:
A R 1 495.67
B R 1 593.00
C R 1 781.67
D R 2 535.67
1.10. Provisional tax is not:
A A prepayment of annual income tax
B Payable by companies
C Required to be paid by individual provisional taxpayers by 31 August and 28/29 February each year
D Payable by an individual who earns only a monthly salary and a travel allowance
1.11. A provisional taxpayer who has a taxable income R 1 020 000 in the tax year ending 28 February 2017
and a basic amount of R 900 000 must estimate his second provisional tax payment for the 2017 tax
year on a minimum of the following taxable income in order to avoid under-statement penalties:
A R 816 000
B R 918 000
C R 1 020 000
D R 900 000
1.12. In order for an individual to be treated as a resident of South Africa for income tax purposes that person
must:
A Own property in South Africa
B Spend more than half the year in South Africa in the current tax year
C Either pass the ordinarily resident test or the physical presence test
D Run a business in South Africa
1.13. The following are not exempt from dividends withholding tax on dividends received:
A South African resident companies
B The Government
C Non-resident individuals where the dividend is paid by a local private company
D A shareholder in a registered micro business where the dividend is less than R 200 000 in the year of
assessment
1.14. Income that is retained by a testamentary is taxed in the hands of the:
A Trust
B Beneficiaries
C Founder
D Trustees
1.15. The base cost of an asset acquired after 1 October 2001 for capital gains tax purposes will generally
exclude:
A Advertising costs to find a buyer
B Valuation costs for the purposes of determining the capital gain/loss
C Costs of improvements or enhancements to the asset
D Borrowing costs incurred when purchasing the asset
1.16. The following gains/losses are excluded for capital gains tax purposes
A Disposal of personal use assets
B Disposal of primary residence for less than R 2 000 000
C A lump sum benefit from a pension provident or retirement annuity fund
D All of the above
1.17. The following are not exempt donations in terms of S56
A Donations made prior to a person’s death
B Donations between a husband and wife
C Donation of property situated outside of South Africa which was acquired by the donor before the donor
became a resident of the country for the first time
D Distributions from a trust to a beneficiary
1.18. Mrs X donates a car which cost her R 150 000 and at the date of donation had a value of R 120 000 to
her son (this was the only donation she made during the tax year). Mrs X would be liable for donations
tax of:
A R 30 000
B R 4 000
C R 24 000
D R 10 000
1.19. Which of the following statements is false in respect of Estate Duty
A It is payable at a rate of 20% on the dutiable estate
B Property is valued for estate duty purposes at its original cost
C An amount may be included in an individual’s estate even if it is not owned by him provided he could
dispose of this property for his own benefit or the benefit of his estate
D Debts due by the deceased to persons ordinarily resident in SA can be deducted from the gross estate
in order to calculate the net estate.
1.20. Registration with SARS as a tax practitioner is required in the following circumstances:
A Where a person provides tax advice for free to friends
B Where an attorney provides advice to a taxpayer during a lawsuit involving SARS
C Where a person provides advice or assists in completing a return under the direct supervision of a Tax
Practitioner
D None of the above
Section B: All questions are compulsory
QUESTION 1 SHORT THEORY QUESTIONS
PART A
The following information relates to taxation:
COLUMN A COLUMN B
1. Minimum marginal tax rate for individuals A 50%
2. Capital gains inclusion rate for companies B Medical aid contribution paid on behalf of an employee
3. Fringe benefit C 15%
4. Small business gross income threshold D 0%
5. EMP201’s E Allowable retirement contributions
6. EMP501’s F Due monthly
Inclusion rate of travel allowance for PAYE purposes when
7. G Costs of travelling work
employee uses vehicle 50 % for business purposes
Deducted from an employee’s gross remuneration in determining
8. H 20%
net remuneration for PAYE purposes
9. Annual donation exemption for individuals I Due Bi-annually
10. Current tax on dividends J R 1 000 000
K R 20 000 000
L Secondary Tax on Companies
M 80%
N R 100 000
O Dividends Withholding Tax
P R 100 000
Q 18 %
Required:
Match the items listed in COLUMN B with those listed in COLUMN A. Write down only the letter of your choice
next to the corresponding number. For example: 1. J
2. B, etc.
PART B
Fill in the Missing word for each of the below statements.
1. In order for an amount to be included in gross income it must be received by or _______ to a taxpayer
during the current tax year.
2. In order to be claimed under the general deduction formula an expense or loss must not be of a _______
nature.
3. In the basic formula for the calculation of income tax, gross income less_______ income is equal to
income.
4. Retirement contributions are limited to 27.5% of the greater of _________ and taxable income.
5. Annual bonuses are generally taxed at the employee’s _______ tax rate.
6. Effective from 1 January 2015, interest paid to any non-resident from a South African source will be subject
to a final _______ tax of 15 % on the date it is paid or becomes due and payable.
7. Partners are taxed on their share of _______ regardless of their drawings from the partnership.
8. A _______ trust is a trust created solely for the benefit of a person who suffers from a mental illness or
physical disability that prevents him from earning sufficient income for his maintenance.
9. A company with a year end of 28 February must pay all outstanding income tax within _______ months of
year-end in order to avoid incurring interest on the outstanding amount.
10. Individuals ordinarily resident in South Africa at the date of their death must include their _______ assets in
their estate for Estate Duty purposes.
PART C
1. List 4 deductions that may be claimed by individuals who earn only salary income.
2. Discuss the factors that SARS will generally consider in determining whether a natural person is ordinarily
resident in South Africa during the tax year.
3. What is the difference between a testamentary and an inter-vivos trust? List the potential taxpayers on
income earned by each trust.
4. List 4 requirements that must be met in order for a business to qualify as a micro business.
5. Discuss the difference between tax evasion and tax avoidance.
QUESTION 2 TAXATION OF A COMPANY
Design (Pty) Ltd, a manufacturer, has the following income and expenses for the year ended 28 February 2017:
Sales 1 547 650
Interest 39 884
Dividends received (25 March 2016) 108 520
Cost of Sales (514 943)
Salaries & wages (342 675)
Factory rental (136 955)
Pension fund and medical aid contributions on behalf of employees (30 919)
Vehicle costs (excluding wear and tear) (42 118)
Audit fees (28 575)
Penalty on late submission of tax returns (1 890)
In addition:
1. On 1 March 2016, Design completed construction work costing R 168 224. This work was required in terms
of the factory lease agreement (between the entity and the lessor) and involved extending the premises.
The lease agreement stipulated that the work should cost R 132 000. The lease commenced on
1 September 2014 for a 5 year period.
2. On 31 January 2015, Design purchased computer equipment R 36 990. This equipment was stolen on
1 October 2016 and insurance proceeds of R 15 675 were received. SARS permits a 3 year write off on
computer equipment.
3. Design purchased new machines on 25 August 2016 at a cost of R 172 660 to be used in the process of
manufacture. These machines were moved to new factory premises on 14 September 2016 at a cost of
R 6 880. The machines were brought into use the following day.
4. Design paid a monthly annuity of R 625 to the spouse of an ex-employee.
5. Design had a list of doubtful debts of R 24 816. The Commissioner had allowed a S11(j) allowance of
R 5 115 in the prior year.
6. A delivery vehicle was purchased for R 92 114 on 31 August 2016. SARS permits a 5 year write off on
vehicles.
7. Design lent two of its employees R 6 000 each to assist them with personal expenses.
8. Design had an assessed tax loss of R 28 115 carried forward from the previous tax year.
9. Design declared and paid a dividend of R 174 000 on 31 January 2017. The dividend was split equally
between its two shareholders – Mr Marks and Pyramid Ltd (a resident company).
Required:
(a) Determine the taxation payable by Design Ltd for the year ended 29 February 2016 (ignoring VAT
implications).
(b) Determine the dividends tax to be withheld by Design Ltd and the net dividends payable to each of its
shareholders.
Section C: Choose 1 of 2 questions
QUESTION 1 TAXATION OF A SALARIED EMPLOYEE
The following information is relevant to Nolizwe, a South African resident (aged 36), during the 2017 tax year.
1. Nolizwe received an annual salary of R 715 000 and a bonus of R 85 000 from his employer.
2. His employer provided him with the use of a motor vehicle which was purchased for R 340 120 (including
VAT and excluding a maintenance plan). His employer covered all vehicle costs and expected that Nolizwe
would use the vehicle equally for private and business purposes. Nolizwe kept a logbook which showed
that he travelled a total distance of 19 875 during the 2017 tax year, of this distance 6 215km related to
business travel.
3. His employer paid his monthly medical aid contributions of R 3 815. Nolizwe is the main member of the
medical aid and his wife and child are dependants on his medical aid.
4. Nolizwe had a car accident and incurred medical expenses of R 64 934 that were not covered by his
medical aid.
5. Nolizwe contributes R 95 000 to a retirement annuity fund – he does not belong to a pension fund.
6. Nolizwe has receipts for donations to Public Benefit Organizations totaling R 38 650.
7. Nolizwe received dividends from his JSE share portfolio of R 310 720 and dividends from UK shares of
R 28 942.
8. He earned interest of R 31 875 on a local money market account.
9. On 30 September 2016 he and his wife jointly purchased a flat and immediately rented this out. They
earned R 64 760 in rental income during the year and incurred the following expenses:
Repairs and maintenance R 19 319
Rates & electricity R 14 278
Bond repayments R 76 784 (including interest of 67 155)
10. They purchased furniture costing R 24 690 on 30 September 2016 to be used by the tenant in the flat.
SARS accepts a 6 year write off period for furniture and fittings.
Required:
(a) Calculate the annual employee’s tax that will be deducted by Nolizwe’s employer (assume that Nolizwe has
provided his employer with proof of his RAF contributions and donations).
(b) Calculate Nolizwe's tax owing to SARS or refund due by SARS for the year ended 28 February 2017 if
employee’s tax as per (a) above was paid by him during the year.
QUESTION 2 ESTATE DUTY AND DONATIONS TAX
On 1 August 2015 Paul, whose age next birthday will be 63, donated a usufructuary interest in a house in Cape
Town valued at R 3 950 000 to his sister, Emily (aged 60) and the bare dominium to his son Kevin. Paul made no
other donations for the year ended 29 February 2016.
Emily died in 2016 at the age of 61, just after her nephew Kevin’s 39th birthday. The following information is
relevant:
1. The house in Cape Town was valued at R 4 175 000 on Emily’s death. Kevin inherited the usufruct on this
house.
2. Emily had been receiving an annuity of R 62 000 per annum, this annuity was paid to Emily by her sister,
Emma, out of rental income earned on a block of flats owned by her. Susan (now aged 66) will have to pay
the annuity to Paul for a period of 5 years.
3. Emily owned two houses in Spain. Property A (fair market value of R 2 415 000) was left to her by her
uncle who was a resident of England at the date of his death. Property B (fair market value of R 1 975 000)
was purchased by herself. Kevin had added a room to the second property with her consent. This room
had cost him R 96 180 and without this renovation, the property would have been worth R 1 825 000. Both
properties were left to Kevin.
4. Emily owned shares in a CC with a fair market value of R 1 670 000 these shares were sold after her death
for R 999 000.
5. Emily left a bequest of R 175 000 to the Red Cross in terms of her will.
6. At the date of her death Emily owed SARS income tax of R 34 119 and penalties and interest of R 10 840.
7. Executor’s fees were R 89 447.
8. Emily was unmarried throughout her lifetime.
Required:
(a) Calculate the donations tax payable by Paul.
(b) Calculate the total estate duty payable in respect of Emily’s estate.
(c) Calculate the estate duty payable by Kevin.
SECTION A: 40 MARKS
SECTION B: 90 MARKS
SECTION C: 50 MARKS
TOTAL : 180 MARKS