QUESTION 2                                                                                                           21 marks
Kalahari Industries (Pty) Ltd (Kalahari) manufactures laptop computers in a state-ofthe-art facility outside the town of Outjo, Namibia. Outjo was selected as the site for the factory because of the lack of moisture in the air, vital when assembling laptop computers.
Kalahari is a registered for Value-Added Tax (VAT) Vendor. Kalahari’s financial year end is 31 December.
Kalahari’s business comprises both the manufacture of affordable laptops for the domestic and SADC (Southern African Development Community) market, and the importation of already manufactured tablet computers that they import from a manufacturer in Vietnam, Giap Industries LLC (Giap). By mutual agreement all purchase transactions between Kalahari and Giap are denominated in United States Dollars (USD).
The commissioner regards the manufacture of laptops as a process of manufacture in terms of the Income tax Act (i.e. capital allowance of a 1/3 is allowed for manufacturing assets used in its operations – no apportionment)
Issue 1
On 1 November 2018 Kalahari imported a specialized robotic assembly machine to further automate the assembly of its laptops from South Korea for a cost of KRW 1 000 million (South Korean Won). The machine was shipped Free-On-Board on 30 November 2018 from South Korea, the point at which the risks and rewards of ownership passed to The assembly machine arrived at the Walvis bay Harbour and
Page 13 of 19

Customs Duty of 20% was paid on a customs duty value of NAD13 000 000 on 15 December 2018.  
The assembly machine arrived at Kalahari’s facility on 20 December 2018. The assembly machine was brought into use as part of the manufacturing process on 18 January 2019.
Transportation and installation costs came to NAD38,000 to bring the machine into use.
The debt was settled in full on 31 March 2019.
Issue 2
The other purchases from Giap have been correctly recorded for both Financial Accounting and Taxation purposes. Kalahari’s bookkeeper is however unsure of how to treat the last purchase of the year for taxation purposes:
Kalahari made the purchase from Giap towards the end of the 2018 financial year. The goods were shipped Free-On-Board from the Port of Da Nang in Vietnam on 10 December 2018, 18 000 tablet computers at a cost of USD90 each. The goods arrived in Walvis BAY 28 December 2018, the goods had a Customs Duty Value of NAD 24 980 400 and Customs Duty of NAD3 747 060 was levied on the import.
The goods only arrived at Kalahari’s warehousing facility on 5 January 2019. Kalahari’s closing stock for the 2019 year of assessment does not take this amount into account.  
Other information:
Exchange Rates: Namibian Dollar (NAD) and South Korean Won (KRW)

Spot Rate
30 November 2018 NAD1 = KRW 83.33
15 December 2018 NAD1 = KRW 89.24
31 December 2018 NAD1 = KRW 87.64
18 January 2019 NAD1 = KRW 85.89
31 March 2019 NAD1 = KRW 84.27

Page 14 of 19

2018 Average Exchange Rate NAD1 = KRW 84.21

Exchange Rates: United States Dollar (USD) and Namibian Dollar (NAD)
Spot Rate
10 December 2018 USD1 = NAD 14.98
28 December 2018 USD1 = NAD 15.42
05 January 2019 USD1 = NAD 15.21

2018 Average Exchange Rate USD1 = NAD 14.81

a) Calculate, referring to legislation where appropriate, the Value-Added Tax and Normal Tax consequences relating to Issue 1 for the 2018 and 2019 years of assessment.(17) b) Explain the income tax consequences of the transaction described in Issue 2 for the 2019 year of assessment. (4)

"Get 15% discount on your first 3 orders with us"
Use the following coupon

Order Now