UNIVERSITY OF SOUTH AFRICA
College of Economic and Management Sciences
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
TAX3701: The Taxation of Business Activities
Assignment 2 — Semester 1, 2026
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
TAX3701
Module Code:
The Taxation of Business Activities
Module Name:
Assignment 2
Assignment Number:
Semester 1, 2026
Semester:
16 April 2026
Due Date:
40
Total Marks:
Submitted in partial fulfilment of the requirements for TAX3701 — UNISA 2026
, UNISA | TAX3701 Assignment 2 – Semester 1, 2026
Question 1: Normal Income Tax Liability – Thabo Manufacturing (Pty) Ltd (2026)
The calculation below determines the normal income tax liability of Thabo Manufacturing
(Pty) Ltd (TM) for the year of assessment ended 31 March 2026. TM is a resident company
and not a small business corporation; the corporate tax rate of 27% therefore applies (In-
come Tax Act 58 of 1962, s 1 read with the Rates and Monetary Amounts and Amendment
of Revenue Laws Act). Each item from the facts is addressed, with reasons provided where
amounts are excluded from gross income or disallowed as deductions.
1.1 Gross Income
Gross income is defined in s 1 of the Income Tax Act as the total amount, in cash or other-
wise, received by or accrued to a resident, other than receipts or accruals of a capital nature
(CIR v Witwatersrand Association of Racing Clubs 1960 (3) SA 291 (A)).
Table 1: Gross Income Computation
Item R R
Sales (Note 1) 27 789 261
Interest – South African banks (Note 15) 17 780
Foreign dividends (Note 15) 145 200
Recoupment on written-off delivery truck (Note 360 000
11b)
Gross Income 28 312 241
Key Distinction
SA Dividends (Note 15 – R114 520): Dividends from South African companies are
exempt from normal income tax under s 10(1)(k)(i) of the Income Tax Act. They are
therefore excluded from gross income. Dividend withholding tax (DWT) at 20% applies
separately and is not part of the income tax computation.
Foreign Dividends (Note 15 – R145 200): TM holds only 3% of the equity shares in the
foreign company. Under s 10B(2)(a), the exemption for foreign dividends applies where
the resident holds at least 10% of the equity shares. TM does not meet this threshold;
the full R145 200 is therefore included in gross income. A s 10B(3) proportional exemp-
tion of 8/28 of the foreign dividend is available where the dividend is subject to foreign
tax, but no such information is given, so no exemption is applied.
Page 2 of 13
College of Economic and Management Sciences
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
TAX3701: The Taxation of Business Activities
Assignment 2 — Semester 1, 2026
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
TAX3701
Module Code:
The Taxation of Business Activities
Module Name:
Assignment 2
Assignment Number:
Semester 1, 2026
Semester:
16 April 2026
Due Date:
40
Total Marks:
Submitted in partial fulfilment of the requirements for TAX3701 — UNISA 2026
, UNISA | TAX3701 Assignment 2 – Semester 1, 2026
Question 1: Normal Income Tax Liability – Thabo Manufacturing (Pty) Ltd (2026)
The calculation below determines the normal income tax liability of Thabo Manufacturing
(Pty) Ltd (TM) for the year of assessment ended 31 March 2026. TM is a resident company
and not a small business corporation; the corporate tax rate of 27% therefore applies (In-
come Tax Act 58 of 1962, s 1 read with the Rates and Monetary Amounts and Amendment
of Revenue Laws Act). Each item from the facts is addressed, with reasons provided where
amounts are excluded from gross income or disallowed as deductions.
1.1 Gross Income
Gross income is defined in s 1 of the Income Tax Act as the total amount, in cash or other-
wise, received by or accrued to a resident, other than receipts or accruals of a capital nature
(CIR v Witwatersrand Association of Racing Clubs 1960 (3) SA 291 (A)).
Table 1: Gross Income Computation
Item R R
Sales (Note 1) 27 789 261
Interest – South African banks (Note 15) 17 780
Foreign dividends (Note 15) 145 200
Recoupment on written-off delivery truck (Note 360 000
11b)
Gross Income 28 312 241
Key Distinction
SA Dividends (Note 15 – R114 520): Dividends from South African companies are
exempt from normal income tax under s 10(1)(k)(i) of the Income Tax Act. They are
therefore excluded from gross income. Dividend withholding tax (DWT) at 20% applies
separately and is not part of the income tax computation.
Foreign Dividends (Note 15 – R145 200): TM holds only 3% of the equity shares in the
foreign company. Under s 10B(2)(a), the exemption for foreign dividends applies where
the resident holds at least 10% of the equity shares. TM does not meet this threshold;
the full R145 200 is therefore included in gross income. A s 10B(3) proportional exemp-
tion of 8/28 of the foreign dividend is available where the dividend is subject to foreign
tax, but no such information is given, so no exemption is applied.
Page 2 of 13
