i) Tax implications of the above arrangement:

• Thin Capitalisation: The debt-to-equity ratio (Safe Harbour Rule) is 3:1, meaning for every GH¢3 of debt, there should be at least GH¢1 of equity. Given that Adidas Ltd has negative retained earnings, its equity is very low (GH¢110,000 as of 31 December 2020). This implies that the company is excessively financed by debt, which triggers thin capitalisation.
• Non-Deductibility of Interest: Since the equity is negative, any interest payable on the loan from IDAS is not allowable for tax deduction under thin capitalisation rules. Hence, the interest payable of GH¢150,000 should be disallowed for tax purposes.
• Foreign Exchange Loss: Similarly, the foreign exchange loss of GH¢20,000 associated with the loan should also be disallowed for tax purposes due to the thin capitalisation rules.
• Withholding Tax on Interest: The interest paid to IDAS (GH¢150,000) is subject to withholding tax at a rate of 8%. Therefore, the company must pay a withholding tax of GH¢12,000 (8% of GH¢150,000).

ii) Tax implication of the movement in stated capital:
The increase in the stated capital by GH¢200,000 (from GH¢1,000,000 to GH¢1,200,000) indicates that the company has issued new shares. As a result, the company must pay stamp duty on the additional capital introduced. The stamp duty rate is 0.5%, meaning a duty of GH¢1,000 (0.5% of GH¢200,000) must be paid to the Ghana Revenue Authority through the Registrar General’s Department.