ATP – Feb 2016 – L2 – Q5 – Employment Income Exceptions

List exceptions to the general rule that employment income, including allowances and benefits, is taxable under Act 592.

Question

a). Under the provisions of the Internal Revenue Act, 2000 (Act 592), as amended a person’s income from an employment, as a general rule, is taxable. A person’s income from an employment is that person’s gains or profits from that employment. The gains or profits from an employment of a person include the allowances or benefits paid in cash or given in kind to, or on behalf of, that person from that employment.

As the Head of Tax Department of your company, you are required to indicate exceptions, if any, to the above general rule in your advisory capacity to your Managing Director, who is scheduled to make a presentation to strategic investors of your company. (10 Marks)

b). The Ghana Revenue Authority is in the process of abolishing the Provisional Assessments under section 76 of the Internal Revenue Act, 2000, (Act 592), as amended and instead, fully roll out the Self-assessment under section 78 of the Internal Revenue Act, 2000, (Act 592), as amended to all taxpayers (at the Large Taxpayer Office, Medium Taxpayer Offices, and Small Taxpayer Offices). As a tax consultant, you have been invited by the Association of Ghana Industries to speak to its members on the topic “The Merits of Self-assessment”.

You are required to state briefly only five (5) of the benefits or importance of Self-assessment. (10 Marks)

Answer

a)
Memorandum
From:
To:
Date:
Subject:

Introduction: (Good introduction required)

Body

A reimbursement of discharge of a person’s dental, medical or health insurance expenses where the benefit is available to all full-time employees on equal terms.
A passage to or from Ghana in respect of that person’s appointment or termination of employment where that person:
(i) Is recruited or engaged outside Ghana
(ii) Is in Ghana solely for the purpose of serving the employer’ and
(iii) Is not a resident of Ghana
The provision of accommodation by an employer carrying on a timber, mining, building, construction or farming business to that person at a place or site where the field operation of the business is carried on.
A discharge or reimbursement by an employer of an expenditure incurred by that person on behalf of the employer that serves the proper business purposes of the employer.
A severance pay
A night duty allowance paid to a person who is a night shift employee where the amount involved does not exceed 50% of the monthly basic salary of that person.
A pension or lump sum payment upon retirement on account of old age, sickness or other infirmity.

It is an important tool for the realization of voluntary compliance by taxpayers.
It assists taxpayers in tax planning and cash flow management.
It relieves both the taxpayer and tax administrator from the long and arduous tax of objections and the determination processes which sometimes foster conflicts.
It engenders trust between taxpayers and tax administrator.
The Revenue Authority may be saved from the administrative costs associated with provisional assessments.

Tags: Provisional Assessment, Self Assessment., Tax Compliance, Tax Planning
Level: Level 2

Topic: Tax Compliance Framework
Series: FEB 2016

Uploader: Samuel Duah