⋆
]]
TAX
 ⋆
TAX2601: PRINCIPLES OF TAXATION
Comprehensive Exam Revision Guide
May/June 2025 & May/June 2024
⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆
South African Income Tax · UNISA School of Accounting Sciences
Exam Revision Guide
TAX2601
Module Code:
Principles of Taxation
Module Name:
May/June 2025 & May/June 2024
Papers Covered:
100 marks per paper
Total Marks:
2 hours per paper
Duration:
Predicted Exam Questions 2026
Bonus Section:
All questions answered with full workings. Study the method, not just the answer.
Exam Revision Notes | TAX2601 | 2025
,TAX2601 | Exam Revision Principles of Taxation
PART A: MAY/JUNE 2025 EXAM PAPER
University Examinations · TAX2601 · Principles of Taxation · 100 Marks · 2 Hours
Question 1 [30 marks]
(a) [15 marks]
Question: Ngwenya (Pty) Ltd is a South African company that manufactures cosmetics.
Its year of assessment ends on 28 February 2025. It is not a small business corporation as
defined in the Income Tax Act. The financial accountant provides the following information
for the 2025 year of assessment:
1. Trading income: Revenue from the sale of cosmetics amounted to R4 500 000. The cost
of sales was R1 800 000. Included in revenue is a deposit of R60 000 received in January
2025 for an order to be delivered in April 2025.
2. Provident fund contributions: Ngwenya (Pty) Ltd paid R24 000 000 to a registered
provident fund for its employees during the 2025 year of assessment.
3. Relocation costs: During the 2025 year of assessment Ngwenya moved to new premises.
The total relocation cost was R29 000, comprising R15 500 to move shop equipment and
R13 500 to move trading stock.
4. Doubtful debts: A doubtful debts allowance of R48 000 was claimed in the 2024 assess-
ment. At 28 February 2025, debtors outstanding older than 60 days but less than 120
days totalled R260 000. (Assume IFRS 9 is not applied.)
5. Donation: Paint supplies valued at R98 000 were donated to a registered public benefit
organisation (s18A receipt held). A further R25 000 cash was donated to a local shelter
that was not yet registered as a PBO at year-end (no s18A receipt).
Taxable income before considering items 3–5 is R2 640 500.
Required: Calculate Ngwenya (Pty) Ltd’s taxable income for the 2025 year of assessment,
taking into account all five items. Show all workings and indicate where items are not de-
ductible. [15
marks]
Answer:
Page 2 of 31 ⋆
,TAX2601 | Exam Revision Principles of Taxation
Key Concept
Key rules applied:
• Deposits (s9): Amounts received in advance are gross income when received, not
when earned.
• Provident fund (s11(l)): Contributions deductible up to 27.5% of the greater
of remuneration or taxable income, subject to R350 000 annual cap.
• Relocation – equipment (s11(a)): Deductible if in production of income and
not capital.
• Relocation – trading stock (s22): Moving cost for stock is part of the cost of
stock; deductible as stock cost.
• Doubtful debts (s11(j)): 40% of doubtful debts 60–120 days is allowed (IFRS 9
not applicable here).
• Donations (s18A): Only donations to registered PBOs with s18A receipt are
deductible; limited to 10% of taxable income before the donation deduction.
Step 1 – Deposit: Already included in revenue; no adjustment needed (the deposit is gross
income in 2025).
Step 2 – Provident fund (Item 2):
The deductible amount is the lesser of:
• 27.5% × R24 000 000 = R6 600 000, or
• The annual cap of R350 000
Allowable deduction: R350 000
Note: The R24 000 000 is the employer’s contribution, not the employees’ salary. The cap
applies per employee in aggregate; however, for exam purposes the employer is limited to
the 27.5%/R350 000 overall cap per individual employee. Since the question gives a single
total and asks for the deductible amount in aggregate, the full R24 000 000 contribution is
deductible as it is within the Act’s limit for employer contributions. The correct answer for
the deductible amount is R24 000 000 (employer contributions to approved funds are fully
deductible in terms of s11(l)); the 27.5% cap applies to employee contributions only.
Watch Out
Do not confuse employee retirement fund contributions (capped at 27.5%) with em-
ployer contributions to approved funds. Employer contributions to approved pension,
provident and retirement annuity funds are fully deductible under s11(l) without the
27.5% cap. However, contributions to unapproved funds are not deductible.
Employer contributions to registered provident fund: fully deductible =
R24 000 000
Page 3 of 31 ⋆
, TAX2601 | Exam Revision Principles of Taxation
However, since the question states taxable income before items 3–5 is R2 640 500 (i.e., items
1 and 2 are already factored in), we proceed with adjustments for items 3–5 only.
Step 3 – Relocation costs (Item 3):
• Moving of equipment (R15 500): deductible under s11(a) as a revenue expense in produc-
tion of income.
• Moving of trading stock (R13 500): deductible as it forms part of the cost of trading
stock under s22.
• Total relocation deduction: R29 000
Step 4 – Doubtful debts (Item 4):
• Previous year’s allowance brought back into income: +R48 000
• Current year’s allowance: 40% × R260 000 = (R104 000)
Net effect: R48 000 − R104 000 = (R56 000) net deduction
Step 5 – Taxable income before donations:
Item Amount (R)
Taxable income per question (before items 3–5) 2 640 500
Less: Relocation costs (Item 3) (29 000)
Add back: Prior year doubtful debts allowance 48 000
Less: Current year doubtful debts allowance (40% × R260 000) (104 000)
Taxable income before donations 2 555 500
Step 6 – Donations (Item 5):
• R98 000 to registered PBO with s18A receipt: potentially deductible.
• R25 000 to unregistered shelter, no s18A receipt: NOT deductible (nil).
• Section 18A cap: 10% × R2 555 500 = R255 550.
• R98 000 < R255 550, so full R98 000 is deductible.
• Donations deduction: R98 000
Final taxable income calculation:
Calculation Amount (R)
Taxable income before donations 2 555 500
Less: s18A donation deduction (R98 000) (98 000)
Taxable income for 2025 year of assessment 2 457 500
Page 4 of 31 ⋆
]]
TAX
 ⋆
TAX2601: PRINCIPLES OF TAXATION
Comprehensive Exam Revision Guide
May/June 2025 & May/June 2024
⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆
South African Income Tax · UNISA School of Accounting Sciences
Exam Revision Guide
TAX2601
Module Code:
Principles of Taxation
Module Name:
May/June 2025 & May/June 2024
Papers Covered:
100 marks per paper
Total Marks:
2 hours per paper
Duration:
Predicted Exam Questions 2026
Bonus Section:
All questions answered with full workings. Study the method, not just the answer.
Exam Revision Notes | TAX2601 | 2025
,TAX2601 | Exam Revision Principles of Taxation
PART A: MAY/JUNE 2025 EXAM PAPER
University Examinations · TAX2601 · Principles of Taxation · 100 Marks · 2 Hours
Question 1 [30 marks]
(a) [15 marks]
Question: Ngwenya (Pty) Ltd is a South African company that manufactures cosmetics.
Its year of assessment ends on 28 February 2025. It is not a small business corporation as
defined in the Income Tax Act. The financial accountant provides the following information
for the 2025 year of assessment:
1. Trading income: Revenue from the sale of cosmetics amounted to R4 500 000. The cost
of sales was R1 800 000. Included in revenue is a deposit of R60 000 received in January
2025 for an order to be delivered in April 2025.
2. Provident fund contributions: Ngwenya (Pty) Ltd paid R24 000 000 to a registered
provident fund for its employees during the 2025 year of assessment.
3. Relocation costs: During the 2025 year of assessment Ngwenya moved to new premises.
The total relocation cost was R29 000, comprising R15 500 to move shop equipment and
R13 500 to move trading stock.
4. Doubtful debts: A doubtful debts allowance of R48 000 was claimed in the 2024 assess-
ment. At 28 February 2025, debtors outstanding older than 60 days but less than 120
days totalled R260 000. (Assume IFRS 9 is not applied.)
5. Donation: Paint supplies valued at R98 000 were donated to a registered public benefit
organisation (s18A receipt held). A further R25 000 cash was donated to a local shelter
that was not yet registered as a PBO at year-end (no s18A receipt).
Taxable income before considering items 3–5 is R2 640 500.
Required: Calculate Ngwenya (Pty) Ltd’s taxable income for the 2025 year of assessment,
taking into account all five items. Show all workings and indicate where items are not de-
ductible. [15
marks]
Answer:
Page 2 of 31 ⋆
,TAX2601 | Exam Revision Principles of Taxation
Key Concept
Key rules applied:
• Deposits (s9): Amounts received in advance are gross income when received, not
when earned.
• Provident fund (s11(l)): Contributions deductible up to 27.5% of the greater
of remuneration or taxable income, subject to R350 000 annual cap.
• Relocation – equipment (s11(a)): Deductible if in production of income and
not capital.
• Relocation – trading stock (s22): Moving cost for stock is part of the cost of
stock; deductible as stock cost.
• Doubtful debts (s11(j)): 40% of doubtful debts 60–120 days is allowed (IFRS 9
not applicable here).
• Donations (s18A): Only donations to registered PBOs with s18A receipt are
deductible; limited to 10% of taxable income before the donation deduction.
Step 1 – Deposit: Already included in revenue; no adjustment needed (the deposit is gross
income in 2025).
Step 2 – Provident fund (Item 2):
The deductible amount is the lesser of:
• 27.5% × R24 000 000 = R6 600 000, or
• The annual cap of R350 000
Allowable deduction: R350 000
Note: The R24 000 000 is the employer’s contribution, not the employees’ salary. The cap
applies per employee in aggregate; however, for exam purposes the employer is limited to
the 27.5%/R350 000 overall cap per individual employee. Since the question gives a single
total and asks for the deductible amount in aggregate, the full R24 000 000 contribution is
deductible as it is within the Act’s limit for employer contributions. The correct answer for
the deductible amount is R24 000 000 (employer contributions to approved funds are fully
deductible in terms of s11(l)); the 27.5% cap applies to employee contributions only.
Watch Out
Do not confuse employee retirement fund contributions (capped at 27.5%) with em-
ployer contributions to approved funds. Employer contributions to approved pension,
provident and retirement annuity funds are fully deductible under s11(l) without the
27.5% cap. However, contributions to unapproved funds are not deductible.
Employer contributions to registered provident fund: fully deductible =
R24 000 000
Page 3 of 31 ⋆
, TAX2601 | Exam Revision Principles of Taxation
However, since the question states taxable income before items 3–5 is R2 640 500 (i.e., items
1 and 2 are already factored in), we proceed with adjustments for items 3–5 only.
Step 3 – Relocation costs (Item 3):
• Moving of equipment (R15 500): deductible under s11(a) as a revenue expense in produc-
tion of income.
• Moving of trading stock (R13 500): deductible as it forms part of the cost of trading
stock under s22.
• Total relocation deduction: R29 000
Step 4 – Doubtful debts (Item 4):
• Previous year’s allowance brought back into income: +R48 000
• Current year’s allowance: 40% × R260 000 = (R104 000)
Net effect: R48 000 − R104 000 = (R56 000) net deduction
Step 5 – Taxable income before donations:
Item Amount (R)
Taxable income per question (before items 3–5) 2 640 500
Less: Relocation costs (Item 3) (29 000)
Add back: Prior year doubtful debts allowance 48 000
Less: Current year doubtful debts allowance (40% × R260 000) (104 000)
Taxable income before donations 2 555 500
Step 6 – Donations (Item 5):
• R98 000 to registered PBO with s18A receipt: potentially deductible.
• R25 000 to unregistered shelter, no s18A receipt: NOT deductible (nil).
• Section 18A cap: 10% × R2 555 500 = R255 550.
• R98 000 < R255 550, so full R98 000 is deductible.
• Donations deduction: R98 000
Final taxable income calculation:
Calculation Amount (R)
Taxable income before donations 2 555 500
Less: s18A donation deduction (R98 000) (98 000)
Taxable income for 2025 year of assessment 2 457 500
Page 4 of 31 ⋆
