- 20 Marks
Question
(a) Does your country have bonded warehouses in which goods may be stored without triggering a taxable presence?
Required
Discuss three advantages and three disadvantages that the operation of a bonded warehouse will extend to traders in the payment of taxes.
b) Professor Zoel is a visiting professor from the University of South Africa, on sabbaticals in Ghana. He was invited by the head of the Business School, Angella University here in Ghana on 1 January 2016. After a three week closed door brush up, he was persuaded by his host, Prof Mensah, to fill in a vacancy in the department and also to stay in Ghana to the end of his sabbaticals. Prof Zoel has decided to take up the teaching appointment with Angella University.
AngellaUniversity intends to pay Prof Zoel from grants received from Columbia University (USA) marked for a special research work in Ghana. Prof Mensah has assured Prof Zoel that his (Prof Zoel) pay will be paid in USD directly to his bank account in South Africa. Prof Zoel will also receive standard benefit package in cash (relocation allowance, Ghana business travel expense allowance, accommodation, etc.) which will be paid/given to him in Ghana by Angella University.
His salary will be paid by Columbia University on a bimonthly basis and there will be no chargeback of any cost to any other location.
Prof Zoel finds his new working conditions particularly rewarding since he will additionally receive his full Professor’s salary as normally paid by his mother University employer in South Africa.
Prof Zoel is a little disturbed because he was not sure about the tax implications of his combined multiple salaries as he earns allowances in Ghana, is paid by Columbia University for work done in Ghana into his bank account in South Africa and additionally earns his professorial salary in South Africa.
As a Chartered Tax Advisor, Prof Zoel has referred this apparent tax difficulty to you for your advice. Prof Zoel intends to live the full term of his sabbaticals in Ghana which could run for at least 2 years.
Required:
Kindly identify and advise Prof Zoel on the tax implications of his entire earnings for this sabbatical in Ghana.
Answer
(a)
a). Advantages of bonded Warehousing
a) Releases capital to the trader due to fact that duty is paid only when goods are cleared.
b) Large purchases can be made at favourable prices for storage until the market needs the goods.
c) Goods could be canvased for sale whiles in bond. When buyers are found, the goods are then cleared and duty paid.
d) The warehousing regime provides security for the goods on the local market by forestalling shortages of the goods.
e) Importing the goods in bulk reduces cost clearing at the ports.
b) Disadvantages
a) Cost of supervision by the GRA could be very high,
b) Deferment of duty on goods, is a great cost to GRA,
c) The writing off of duty on losses occurring in the warehouse is a loss to the GRA.
d) Providing infrastructure to manage the ware house is a great cost to the GRA.
e) The trader eventually bears all cost associated with running the warehouse, thus increasing the price of the product unnecessarily.
(b). Prof Zoel is a South African on holiday in Ghana. He has intends to work in Ghana for at least 2 years.
Is Prof Zoel resident in Ghana?
Yea Prof Zoel will be classified as a citizen of Ghana since he intends to stay in Ghana for a period of at least 2 years. A citizen is defined by Act 896 as an individual who is present in Ghana for a year of assessment for an aggregate period of 183 days or more in any 12 month period that commences or ends during that year.
Being resident, all incomes earned in Ghana and elsewhere for the two year period are taxable in Ghana.
Prof Zoel however is going to earn three types in incomes during the three year period. These are
- Allowances paid by Angela University in Ghana,
- Research remuneration payable in SA by the Columbia University, and
- His SA regular professorial salary.
- Allowance paid by Angela University is taxable in Ghana
- Research remuneration is also taxable in Ghana even though payment is made into his SA Bank a/c. This is because he exercises the research employment in Ghana and again, he is by definition, Ghana resident.
- His Professorial salary will be taxed in SA as the DTA Ghana signed with SA provides that until end of two years, teachers who move from one contracting state to the other will have their remuneration earned in that contracting state taxed in that state.
The allowances paid in Ghana and research income will all be taxed in Ghana using the usual payroll tax table.
- Tags: Double Taxation, Expatriate Income, Ghana, Payroll Tax, Tax residency
- Level: Level 2
- Topic: Tax Administration and Management
- Series: AUG 2016
- Uploader: Samuel Duah