- 20 Marks
Question
(a). As a tax consultant, you have been contacted by a prospective investor who is planning his staff budget for expatriates and would like to know if there are any qualifying conditions under which allowances or payments made to an employee (expatriate) by an employer for a passage to or from Ghana in respect of that person’s appointment or termination of employment will not be taxed in the hand of that person (employee) under the tax laws of Ghana.
You are required to indicate the three qualifying conditions available under the Internal Revenue Act, 2000 (Act 592) as amended.
(b). Under what circumstances will a person who owns a chargeable asset be deemed to have realized the asset in accordance with the provisions of the Internal Revenue Act, 2000 (Act 592) as amended. Are there any exceptions?
(c). Jones Lamptey completed construction of a building at a cost of GHS105,000.00 in June 2011 at Madina. In April 2014, he had undertaken repairs to the building amounting to GHS3,600.00 as a result of cracks and leakages to the roof. In June 2014, he also paid an amount of GHS800 for fire insurance on the building to State Insurance Company of Ghana. In September 2014, Jones sold the house to Abeiku Martey for GHS150,900.00 and paid sales commission of 3% of the sales proceed to Dumsor Real Estate Agency, who arranged and facilitated the transaction. In November 2014, Jones used GHS130,000.00 of the sales proceed of the building at Madina to purchase another building at Lakeside Estate because he wanted to live in a gated community.
You are required to determine capital gains, if any, accruing to Jones Lamptey from these transactions.
Answer
(a). The qualifying conditions provided for under Section 8(2b) of the Internal Revenue Act, 2000 (Act 592) as amended are:
(i) Where the person (employee) is recruited or engaged outside the Republic;
(ii) Where the person (employee) is in Ghana solely for the purpose of serving the employer; and
(iii) Where the person (employee) is not a resident of Ghana.
(b). A chargeable asset is treated as realized when
a) that person parts with ownership of the asset including where the asset is
(i) sold, exchanged, surrendered, or distributed by the owner of the asset; or
(ii) redeemed, destroyed or lost;
b) that person begins to use the asset in a way that the asset ceases to be a chargeable asset; or
(c) that person is a resident who becomes a non-resident but only with respect to the chargeable assets.
Exceptions:
A realization does not include realization:
a) By way of gift; and
b) Involving the disposal of shares in the course of the liquidation of a company.
(c).
| Jones Lamptey | ||
|---|---|---|
| Capital gains for 2014 Year of Assessment | ||
| GHS | GHS | |
| Consideration received | 150,900.00 | |
| Less: Cost base: | ||
| Cost of construction | 105,000.00 | |
| Cost of repairs | 3,600.00 | |
| Cost of Insurance | 800.00 | |
| Cost of realisation of the building | 4,527.00 | 113,927.00 |
| 36,973.00 | ||
| Less: Rollover-relief: | ||
| Cost of Replacement asset | 130,000.00 | |
| Less: Cost base | 113,927.00 | 16,073.00 |
| Assessable capital gains | 20,900.00 | |
| Less: Exempt amount | 50.00 | |
| Capital gains chargeable to tax | 20,850.00 |
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- Tags: Expatriate Allowances, Ghana tax laws, Income Tax, Passage Costs
- Level: Level 2
- Topic: Employment Income Taxation
- Series: AUG 2015
- Uploader: Samuel Duah