Year 3
Group FS
&
Taxation
Bachelor of Commerce in
Accounting
,UNIT 1 – INCOME AND DEFERRED TAXATION
Type of Tax in SA:
1) Transactional tax - is an amount levied on a transactions. In South Africa it is called value-added tax
(VAT) and is levied on goods as well as services
2) Employees tax - refers to the tax incurred by an employee. Furthermore, this tax (also called Pay As You
Earn - PAYE), is calculated and recovered from the employee that pays it over to the authorities
3) Income tax - is a term to describe the tax levied on an organisations profits. In South Africa, the actual
rate in 2019 was 28% and can be adjusted on an annual basis
4) Dividends tax - is an amount levied on dividends received by shareholders. The amount is calculated as
20% of dividends received
1)Transactional Tax:
A)
Exempt supplies: You don’t claim input VAT in production. (Example interest you pay to bank for loan ,
lender - interest on stationary, rented, accommodations, educational , public raid roads, rentals, dental
services, exported mostly)
B)
Zero-rated supply: VAT at zero % which you may claim input VAT from (as it’s not exempt supply)
(transport, fuel - zero rated as there r taxes on here so no VAT, exported things you may claim input VAT)
C) Input VAT : example - Business pays VAT for goods purchasing
D) Output VAT: example - Businesses charging VAT on the goods/services they’re providing
VAT example: Charge VAT:
On the invoice of the transaction:
1) We record the sale. Dr bank . We split between current tax
and sales. Since the tax is a portion payable to the
government , it isn’t our money.
Dr Sales 1k - we earn money
Cr Current Tax Payable (VAT Payment) 150 (to
government-which we had split cuz it’s not ours)
Dr Current Tax Payable 150 - once we made the payment,
since we no longer owe the government, we record this.
150: 1000 x 15% = 150
, Opposite Example: Claiming VAT:
1)A portion of the purchase that she bought (R1
250) some of that belongs to the government that
she’s allowed to claim because she’s a registered VAT
Vendor.
Cr Inventory (R1 150/1,15) 1k (or 1 150-150)
Cr Current tax receivable 150 (as we are allowed to claim this VAT (input portion) on anything bought) we
credit the asset this to make it known.
Dr Current Tax receivable (refund)150 (as after some time they process the info and accept it then the
refund goes to the bank account)
In conclusion: we basically remove the VAT amount from the 1 150 Cr and Dr
1,15 comes from:
Version 1: 1 150/1,15 (115/100 = 1,15) = 1k
Version 2: 1 150 X (100/15+ 100 is: 100/115 ) =1k
Version3: 1 ,15 (1+15%) =1k
Note: 1 is 100% of the amount and 15% is the VAT
2) Employee Tax - Example: 1st: Salaries: Expense: From a company point of view : As this
is not paid yet (A):
DR Bank 16 980 (He gets 24k but he has to pay 7 020 as tax
by the end of the month March so: 24k - 7 020=16 980
Dr Current tax payable 7 020 (has yet to be paid) (Part A)
2nd: Bank: Once it’s been paid to employees (C): Asset:
Dr Bank 16 980 (part A) - cash goes out of company bank
Cr Current Tax Payable 7 020 (30 April)(Part C) paid out so it
decreased
3rd: Current Tax Payable - Closing off (A and C): Liability:
Dr Bank 7 020 (C) - as it’s paid to the tax authorities
Cr Salaries 7 020 (A) - payment made on behalf of the
employee
4th: Statement of comprehensive income:
- we show the full salary 24k under salaries and wages
5th: Statement of financial position:
- At the end of March we have to pay the 7 020 that’s payable to the government on behalf of the employee, it’s
calculated under current tax payable for employee tax (current liaibility)
Group FS
&
Taxation
Bachelor of Commerce in
Accounting
,UNIT 1 – INCOME AND DEFERRED TAXATION
Type of Tax in SA:
1) Transactional tax - is an amount levied on a transactions. In South Africa it is called value-added tax
(VAT) and is levied on goods as well as services
2) Employees tax - refers to the tax incurred by an employee. Furthermore, this tax (also called Pay As You
Earn - PAYE), is calculated and recovered from the employee that pays it over to the authorities
3) Income tax - is a term to describe the tax levied on an organisations profits. In South Africa, the actual
rate in 2019 was 28% and can be adjusted on an annual basis
4) Dividends tax - is an amount levied on dividends received by shareholders. The amount is calculated as
20% of dividends received
1)Transactional Tax:
A)
Exempt supplies: You don’t claim input VAT in production. (Example interest you pay to bank for loan ,
lender - interest on stationary, rented, accommodations, educational , public raid roads, rentals, dental
services, exported mostly)
B)
Zero-rated supply: VAT at zero % which you may claim input VAT from (as it’s not exempt supply)
(transport, fuel - zero rated as there r taxes on here so no VAT, exported things you may claim input VAT)
C) Input VAT : example - Business pays VAT for goods purchasing
D) Output VAT: example - Businesses charging VAT on the goods/services they’re providing
VAT example: Charge VAT:
On the invoice of the transaction:
1) We record the sale. Dr bank . We split between current tax
and sales. Since the tax is a portion payable to the
government , it isn’t our money.
Dr Sales 1k - we earn money
Cr Current Tax Payable (VAT Payment) 150 (to
government-which we had split cuz it’s not ours)
Dr Current Tax Payable 150 - once we made the payment,
since we no longer owe the government, we record this.
150: 1000 x 15% = 150
, Opposite Example: Claiming VAT:
1)A portion of the purchase that she bought (R1
250) some of that belongs to the government that
she’s allowed to claim because she’s a registered VAT
Vendor.
Cr Inventory (R1 150/1,15) 1k (or 1 150-150)
Cr Current tax receivable 150 (as we are allowed to claim this VAT (input portion) on anything bought) we
credit the asset this to make it known.
Dr Current Tax receivable (refund)150 (as after some time they process the info and accept it then the
refund goes to the bank account)
In conclusion: we basically remove the VAT amount from the 1 150 Cr and Dr
1,15 comes from:
Version 1: 1 150/1,15 (115/100 = 1,15) = 1k
Version 2: 1 150 X (100/15+ 100 is: 100/115 ) =1k
Version3: 1 ,15 (1+15%) =1k
Note: 1 is 100% of the amount and 15% is the VAT
2) Employee Tax - Example: 1st: Salaries: Expense: From a company point of view : As this
is not paid yet (A):
DR Bank 16 980 (He gets 24k but he has to pay 7 020 as tax
by the end of the month March so: 24k - 7 020=16 980
Dr Current tax payable 7 020 (has yet to be paid) (Part A)
2nd: Bank: Once it’s been paid to employees (C): Asset:
Dr Bank 16 980 (part A) - cash goes out of company bank
Cr Current Tax Payable 7 020 (30 April)(Part C) paid out so it
decreased
3rd: Current Tax Payable - Closing off (A and C): Liability:
Dr Bank 7 020 (C) - as it’s paid to the tax authorities
Cr Salaries 7 020 (A) - payment made on behalf of the
employee
4th: Statement of comprehensive income:
- we show the full salary 24k under salaries and wages
5th: Statement of financial position:
- At the end of March we have to pay the 7 020 that’s payable to the government on behalf of the employee, it’s
calculated under current tax payable for employee tax (current liaibility)
