- 23 Marks
Question
a) Mr. Kwame Berko graduated from the University of Ghana in 2017. In 2019, he secured a Government of Ghana scholarship to pursue a master’s program in Agricultural Science at the University of Alabama in the United States of America. During the course of the master’s program, he developed unique ideas on how to establish a commercial farm and also engage in the processing of the farm products. On his return to Ghana, he decided to implement the ideas developed during his time at the University of Alabama. His business plan shows that he intends to: i. establish a farm to grow coconut and as well as an associated factory to process the coconut into milk for domestic consumption. ii. establish a poultry farm to produce chicken and eggs for domestic consumption.
Mr. Berko has submitted his business plan to you for tax advice.
Required: As a tax advisor of high repute, advise Mr. Kwame Berko on the following: a. the income tax benefits of farming coconut and establishing a processing factory.
b. the income tax benefits of establishing a poultry farm.
c. the most suitable place in Ghana to establish the farms and the factory in order to derive maximum tax benefits.
Answer
The Income Tax (Amendment) (No. 2) Act, 2016 (Act 924) inserted the following applicable tax rates for the next five-year period after the temporary concession period:
| LOCATION | RATE OF INCOME TAX |
|---|---|
| Accra and Tema | 20% |
| Other Regional Capitals outside the Northern Savannah Ecological Zone | 15% |
| Outside other Regional Capitals | 10% |
| The Northern Savannah Ecological Zone | 5% |
Thus, for the coconut and poultry farms, Mr. Berko can consider establishing the farms outside the Regional Capitals or in the Northern Savannah Ecological Zone in order to enjoy a reduced tax rate for an additional five years after the initial five-year concessionary period expires. If the processing factory is treated as an agro-processing business, the coconut processing factory can benefit from the locational incentives provided in the table above for an additional five years after the initial five-year concessionary period expires. If the processing factory is treated as a manufacturing business, the First Schedule to the Income Tax Act, 2015 (Act 896) provides the following locational incentives for manufacturing companies.
| LOCATION | RATE OF INCOME TAX |
|---|---|
| Accra and Tema | 25% |
| Regional Capitals | 25% rebate on tax rate [18.75%] |
| Outside Regional Capitals | 50% rebate on tax rate [12.5%] |
- Tags: Agriculture, Agro Processing, Coconut farming, Income Tax, Tax Incentives
- Level: Level 2
- Topic: Taxation of Specialized Business Sectors
- Series: FEB 2020
- Uploader: Salamat Hamid