- 4 Marks
Question
Mike Kotex, a resident individual, received interest from the following:
| Source | Amount (GH¢) |
|---|---|
| Resident Financial Institution | 10,000 |
| Pearl Micro-Finance | 9,000 |
| ABC Ltd – Oil Marketing Company | 8,000 |
Required:
Compute the taxes payable on the payments to Mike Kotex and comment on the payment of interest by ABC Ltd to Mike Kotex. (4 marks)
Answer
| Source of Interest | Amount (GH¢) | Tax Rate | Withholding Tax (GH¢) |
|---|---|---|---|
| Resident Financial Institution | 10,000 | Exempt | – |
| Pearl Micro-Finance | 9,000 | Exempt | – |
| ABC Ltd – Oil Marketing Company | 8,000 | 1% | 80 |
| Total Tax Payable | 80 |
Comment on Interest Payment by ABC Ltd:
Interest paid by a resident financial institution, such as a bank or microfinance institution, is exempt from tax. However, ABC Ltd, an oil marketing company, is not classified as a financial institution, so the interest paid by ABC Ltd to Mike Kotex is subject to a 1% withholding tax.
- Tags: Financial Institutions, Interest, Resident Individual, Withholding Tax
- Level: Level 2
- Topic: Withholding Tax Administration
- Series: NOV 2020
- Uploader: Kwame Aikins