Blue Technologies (Pty) Ltd is a technology development company with a focus of driving the 5th industrial revolution through super-smart societies that employ artificial intelligence (AI). Blue Technologies (Pty) Ltd imported a supercomputer for purposes of its trade from Silicon Valley in the United States of America at a cost of USD50 million. The supercomputer arrived in Namibia on 30 November 2021 when the spot exchange rate was N$15.36 for 1 US dollar.

The supercomputer was transported from the port to the premises of Blue Technologies (Pty) Ltd in Okahandja at a cost of N$6 million. A building was constructed at a cost of N$150 million to house the supercomputer which was brought into use on 1 January 2022.

The old computer system which was originally bought for N$250 million in 2018 was sold for N$80 million on 31 March 2022.

Blue Technologies (Pty) Ltd obtained an interest-free loan of RMB50 million on 1 July 2021 from the Bank of China to finance the expansion. The loan is repayable in 10 annual instalments commencing 30 June 2022. Below are the applicable exchange rates:

• 1 July 2021 1 RMB = 2.30 NAD

• 30 November 2021 1 RMB = 2.49 NAD

• 1 January 2022 1 RMB = 2.52 NAD

• 30 June 2022 1 RMB = 2.39 NAD The financial year end of Blue Technologies (Pty) Ltd is 30 June each year.

Required

a) Discuss the components that make up the definition of “gross income”. 

b) Discuss the three tax rate structures. 

c) Calculate the tax implications of the above transaction in Blue Technologies (Pty) Ltd.’s 2022 year of assessment.