- 20 Marks
Question
The following relates to the operation of Merri LTD, a company operating in the upstream
petroleum sector for the 2024 year of assessment.
GH¢ Revenue
11,980,831,000 Cost
8,649,221,000 Profit
3,331,610,000
The following additional information forms part of the above: i) The revenue above includes financial gain from derivatives of GH¢12,500,000. ii) financial cost of GH¢14,200,000 was added to the cost. iii) The cost above includes a depreciation of GH¢22,741,000. iv) Research and development of GH¢2,467,800 incurred was added to the cost of operation. v) Written down value of Merri’s assets as of 31 December 2023 was GH¢8,800,000,000 after
granting capital allowance the second time. This has not been adjusted.
Required: i) Compute tax payable. ii) Comment on the deductibility of financial cost in petroleum operations.
B)
Komedi Petroleum PLC, a petroleum company in the upstream sector was incorporated
on 1 January 2021. The following costs were incurred up to 31 December 2023.
GH¢ Exploration costs
21,200,000,000 Development cost
40,000,000,000 Staff cost
800,000 Penalty for breach of regulations 120,000 Administrative expenses
13,000,000 Acquisition of Other Assets 11,000,000 Depreciation 740,000
The company commenced commercial production on 1 January 2024.
Required: Compute the capital allowance granted for 2024 year of assessment.
C)
Ghana has various taxes which require applicable taxpayers to file appropriate returns
within clearly defined time periods.
Required: i) State TWO direct tax returns and their respective due dates.
ii) State THREE indirect tax returns and their respective due dates.
Answer
A)
i) Merri LTD
Computation of chargeable income Year of assessment 2024 Basis period: January to December 2024
GH¢
GH¢ Net Profit
3,331,610,000 Add back:
Financial costs
14,200,000 Depreciation
22,741,000 Research and Development
2,467,800
39,408,800
3,371,018,800 Less: Financial gains
12,500,000 Capital allowance 8,800,000,000/3 2,933,333,333
2,945,833,333 Chargeable income
425,185,467 Tax payable = 425,185,467 @ 35% = 148,814,913.50
ii) Deductibility of financial cost in petroleum operations.
General Rule Under section 13 of the Petroleum Income Tax Law (PNDCL 188) and corresponding sections of the Income Tax Act, 2015 (Act 896), Financial costs (e.g. interest on loans, finance charges) are deductible only if they are: Wholly, exclusively, and necessarily incurred in the production of petroleum income.
Directly related to petroleum operations, and Not of a capital nature.
Limitations / Restrictions Interest on non-petroleum loans or loans not used for petroleum operations is not deductible.
Financial costs are not deductible if they relate to financing of capital expenditure before commencement of production (these are capitalized). Thin capitalization rules under Act 896 may apply if the entity is debt-financed by related non-residents. Thus, in this case, the financial cost of GH¢14,200,000 would be allowable for deduction if it satisfies the above conditions.
B) Capital allowance Exploration costs
21,200,000,000 Development costs
40,000,000,000 Staff costs
800,000 Administration expenses
13,000,000 Acquisition of assets
11,000,000
61,224,800,000
Capital allowance 20% x 61,224,800,000 = GH¢12,244,960
C)
i) Direct tax returns and their respective due dates
• Employee Monthly PAYE return: 15th day of the following month • Company Income Tax return: 4th month after end of basis period • Property Tax Return: 4th month after end of basis period • Rent Tax: 4th month after end of basis period
• Self-employed person: 4th month after end of Basis period
ii) Indirect tax returns and their respective due dates
• VAT returns: last working day of the following month • Excise duty returns: within 21 days of the close of each month • CST returns: last working day of the following month • NHIL returns: last working day of the following month
- Topic: Sector-Specific Taxation
- Series: NOV 2025
- Uploader: Samuel Duah