Level: Level 3

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  • 20 Marks

STP – Feb 2007 – L3 – Q5 – VAT Apportionment

Explain VAT rules for goods on sale or return and input tax apportionment for taxable and exempt supplies.

a) Tanji Enterprises Ltd. operates a Fuel Filling Station and a huge Supermarket in Tamale within the same premises. A joint tax audit team from the LTU Office visited Tanji and noted that Tanji supplies taxable and non-taxable goods and services to customers but fails to notice the split distinction between these services. The VAT team therefore has disallowed some claims and apportioned others to reflect the true VAT claimable.

Required:
i. Explain the VAT rules for goods supplied on sale or return.
ii. Discuss the apportionment of input tax for taxable and exempt supplies.

(b).Required:

Discuss the VAT rules on the timing of supply for the following:

i. Goods or services applied to own use, gifted, or supplied under hire purchase or finance lease.

ii. Continuous or metered supplies like electricity.

iii. Goods supplied under a hire purchase agreement or finance lease.

iv. Goods or services supplied under rental agreements or periodic payments.

v. Ancillary supplies.

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  • 20 Marks

STP – Feb 2007 – L3 – Q4 – Employee Loan Taxation

Advise on tax implications of a $300M loan and bonus for Dr. Ababio, including relevant Tax Act provisions.

(a). Dr. Ababio discusses an engagement she recently accepted with an investment banker with you for advice. She indicates that one of the recruiting inducements that convinced her to accept the position is a $300M loan from her employer. She will receive the loan proceeds on her first day of work and must sign a note to repay the loan plus accrued interest in five equal annual installments.

The employer will forgive any amount of the unpaid debt if Dr. Ababio dies, becomes disabled, or is terminated from employment through no fault of her own. Dr. Ababio’s contract provides that the employer will pay an annual bonus equal to each loan repayment. The contract stipulates that the bonus must be applied to the repayment of her loan.

Required:
i) Advise Dr. Ababio on the implications, if any, of this engagement provisions.
ii) Discuss any three provisions in the Tax Act which will support the position the Commissioner will take in respect of the taxability or otherwise of this engagement provision.

(b). The Free Zone Act declares a 10-year tax holiday for Free Zone Operators. Sweet Entities Inc. desires to set up in the Free Zone enclave but requires an understanding of the practical tax concessions granted to free operators. To this effect, the Tax Director of Sweet Entities Inc. requires that you do a practical presentation of the flow of the corporate tax-exempt concession as extended to the operator. He therefore provides you with the following business forecast for the first 10-year period as follows.
All figures in $M

Year 1 2 3 4 5 6 7 8 9 10
Adjusted Profit 10 60 150 500 1,000 1,000 1,000 520 600 620
Capital Allowance 1000 600 300 150 50 20 20 600 340 200

Compute the tax position, if any, of Sweet Entities Inc. for the exempt period.

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  • 20 Marks

STP – Feb 2007 – L3 – Q3 – Venture Capital Taxation

Present tax concessions for Venture Capital Operators compared to traditional banks.

As part of the post qualification requirements of The Chartered Institute of Taxation, you have been invited to do a presentation on the topic “Venture Capital Fund” to a select group of business men, tax professionals, financial institutions and students.

Invitation
Members of the Ghana Institute of Taxation and the Institute of Bankers wish to use this opportunity to strengthen the cordial relationship subsisting between them and have therefore invited you to do a presentation on the tax effects of Venture Capital Operators as compared with that of the traditional financial institutions.

Required:
Please prepare a presentation as required under Invitation above clearly distinguishing between Tax concessions granted to a Venture Capital as compared with the Bank.

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  • 20 Marks

STP – Feb 2007 – L3 – Q2 – Employee Taxation

Outline Ghanaian tax and social security implications for a French employee working in Ghana under a Double Tax Treaty.

Mr. Nor Amid, the Human Capital Resource Person of Amanda Inc, an entity registered in France sends a brief note to you in respect of a duty tour of an employee as follows:
“Amanda is sending an employee to Ghana and I am hoping that you could provide guidance for Amanda. Our understanding is as that:

  • The employee is French and may be kept on the French payroll
  • The employee’s remuneration will be cross charged to Amanda in France and Ghana
  • The employee, according to French Tax Law, will be French for tax purposes
  • The employee will spend 40% or less of his time in France
  • The employee will spend between 40 to 60% of his time in Ghana and whilst in Ghana the employee will be accommodated in hotels, will have free use of car with fuel and free meal.
  • The employee will spend his time in Ghana from 7 to 25 days at a time depending on need.

Would you kindly provide us with a brief outline of the Ghanaian tax and social security implications for Amanda and the employee? Kindly note that Ghana has an operating ‘Double Tax Treaty’ with France.

Required:
(a). Please submit a memo to respond to the concerns raised by Mr. Nor Amid.

(b). Ghana has general tax-avoidance rules in the tax acts. Kindly discuss any three practice methods adopted by the Revenue Agencies to regulate transfer pricing between related parties?

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  • 20 Marks

STP – Feb 2007 – L3 – Q1 – Strategic Tax Planning

Advise on tax concerns and advantages of capitalizing profits as dividends for JoyCo Ltd.

(a). Mr. Joe Mensah, the MD of JoyCo Ltd is required to submit his company’s financial statement for the year 2006 to the Board next Tuesday. One particular item which Mr. Mensah intends to push for Board approval is a declaration of dividends consisting of a capitalization of profits to firm up member’s confidence in the earnings power of their investment in Joyco Ltd.

Mr. Joe Mensah has approached you with this strategy and requires that you advise on the tax concerns and advantages that capitalization of profits could have under the Internal Revenue.

Required:
Please advise Mr. Mensah as required above on this strategy.

(b). At a tax forum organised by the Chartered Institute of Taxation, a VAT representative submitted that “because of the right to deduct input VAT, VAT should be neutral for persons subject to VAT. A supplier of goods and services charges output VAT on sales and deducts input VAT on purchases, paying the balance to the VAT Service”

Mr. Anamang strongly objected to this simple statement and proposed a modification to it. He proposed “however, there is often a mismatch between theory and reality. VAT administrations for companies pose grave problems, but there are benefits in a VAT grouping scheme.

Required:
Kindly discuss any four VAT imposed problems that could be eliminated where group members are permitted to report a VAT transaction as a group rather than as a single taxable person.

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  • 20 Marks

STP – Aug 2012 – L3 – Q5 – Taxable Supplies

Determine when specified transactions become taxable supplies under Act 592.

a). Determine when the following items become taxable supplies under Act 592.

  1. Imported services
  2. Supplies made by a non-resident person
  3. Deposits given in respect of a supply
  4. Goods supplied on sale or return.

b). The need for Customs, Excise, and Preventive Service (CEPS) to examine goods imported has often been debated since the nature, description, quantity and quality of the goods are in most cases declared in many ways. This practice has its advantages and disadvantages.

Required:
Discuss any four major reasons to support the need for CEPS personnel to examine goods and their relevant documents before export or import.

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  • 20 Marks

STP – Aug 2012 – L3 – Q4 – International Employment Taxation

Advise on tax implications for employee transferred to Guinea.

(a). Hi Yaw,
We need your advice on a new development in our outfit concerning the payment of salary to one of our employee who has been assigned to our project in Guinea. We shall be paying him physically from here (Ghana) and surcharge this cost to our Guinea Office as that is where we want his cost to settle in.

Please kindly advise us on the tax implications as we do not want to pay double tax on this both in Ghana and in Guinea.

The employee is in the books (payroll) of the Ghana Office currently and is living in a house rented by the Ghana office. He has paid his tax up to date of his transfer.

Required:
Please advise as appropriate.

(b). A VAT validation team visited Otere Company Ltd., a VAT registered entity for a routine audit. The validating team found no significant VAT records to support Otere’s business activities and the monthly VAT return. The MD of Otere responded to questions posed by the VAT team leader that it is not his business to keep records for the VAT office at his own cost.
The MD further said that he keeps records as he finds useful for his business interests. ‘It is the business of the VAT office to keep records for VAT registered persons. Why should I pay the salaries of staff only to keep records for the VAT office?’ he opined

Required:
As leader of the VAT team, kindly discuss the position of the VAT Act with respect to the keeping of records for purposes of the VAT.

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  • 20 Marks

STP – Aug 2012 – L3 – Q3 – Tax Responsibilities

Advise BIC on VAT, corporate, expatriate, and withholding tax responsibilities.

Broadway International Contractors (BIC) won the bid to construct the George Bush highway for five years but was ill advised about the tax responsibilities in respect of the construction work.

The GRA conducted a tax audit on completion of the project and noted several weaknesses in BICs tax compliance requirements.

As Tax Consultant you have been approached by BIC to advise as appropriate on the tax effects of the work. In particular Broadway International Contractors would wish to receive advice on their
a) Basic VAT responsibilities (8 marks)
b) Basic corporate tax responsibilities (8 marks)
c) Expatriate Payroll liability (4 marks)
d) Withholding tax liability on payments receivable from the Ministry of Highways and payment for services? (2 marks)

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  • 20 Marks

STP – Aug 2012 – L3 – Q2 – Partnership Taxation

Compute chargeable income and tax payable for partners Nancy and Bouncy for 2010.

Nancy and Bouncy are equal partners in a hairdo practice. Partnership profit agreed with the GRA for year 2010 is GHc12,000.
a). Records however indicate that partnership profit was net of:

  1. Drawings of GHc600 each monthly period by Nancy and Bouncy;
  2. Household allowance of GHc150 per month paid by the partnership to each partner;
  3. Salary for each partner paid during the period was GHc200 p.m. on which a withholding tax of GHC per month is paid to the GRA;
    b). Nancy failed to account for GHc1,500 which she was to use to purchase driers for the saloon.
    c). To reciprocate Nancy’s gesture, Bouncy also withdrew GHc1,800 on the pretext of buying flyers for the saloon. She failed to account for the flyers or the amount. It has been agreed that they all should treat the amounts b) and c) above as exceptional drawings from the business.

Required:
Compute the chargeable income and tax payable by each partner for the 2010 year of assessment.
Hint:
Short formula for computing an individual’s annual tax payable for year 2010 is:
Tax = T + (Y – 16,200) × 25%, where
Tax = Total tax payable per annum on annual income earnings
T = tax paid on GH16,200.00 being part of the earnings which is GHC2,574.60
Y = Annual income earned.

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  • 20 Marks

STP – Aug 2012 – L3 – Q1 – Tax Computation

Compute tax liability for Jamaa Mining Company for 2008 and 2009 based on provided financials.

The profit and loss account of Jamaa Mining Company Ltd for the years ended December 2008 and 2009 are as tabled below:

Year Ended 31 December (all amounts in ‘000)
2009 GHC 2008 GHC
Turnover 309,000 430,000
Cost of Sales (164,000)
Gross Profit 145,000
General and Admin Exp (100,000)
Operating Profit 45,000
Other Income 5,300
Net Profit before tax 50,300
Income Tax provision 12,575
Transfer to Income Surplus 37,725
Income Surplus Account
Balance brought forward 46,945
Transfer from profit and loss account 9,220
Surplus carried forward 46,945

Notes:
2. Turnover is made up as follows
For year

2009 2008
Collected for year but included in prior year a/c 291,000
Interest income received for 18 months 0 18,000
309,000
  1. Cost of sales includes:

2009 2008
Withholding taxes paid 1,500 1,000
VAT unclaimed 6,000 8,000
Depreciation 43,000 25,000

4a. Gen and Admin expenses includes

2009 2008
Rent prepaid of 3,000
Rent outstanding 500 500

4b. Includes unrealized foreign exchange gain of but realized in 2009

2009 2008
2,000 2,000

The GRA has agreed a capital allowance of GHC20,000 for year 2009 and GHC15,000 for year 2008.

Required:
Please advise management of Jamaa Mining Company Ltd on the tax due to the GRA for the years 2009 and 2008.

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  • 10 Marks

AT – Nov 2024 – L3 – Q4a – Value Added Tax Deductibility

Determine the deductible input VAT for a VAT-registered company operating multiple business divisions under different VAT treatments.

The two scenarios below relate to ClearTel LTD, a VAT-registered company in Ghana. Each scenario is an independent scenario and should be considered separately.

Scenario 1

ClearTel LTD operates three divisions (XYZ). Division X deals in the sale of computers and mobile phones. Division Y deals in the sale of locally-manufactured sanitary towels. Division Z is into the supply of fertilizers to farmers in Ghana.

Revenue from each division for 2024 is shown below:

Division Description Revenue (GH¢)
X Computers and mobile phones 1,005,700
Y Sale of locally-manufactured sanitary towels 2,500,000
Z Supply of fertilizers to farmers 78,800,000

ClearTel LTD has incurred total input VAT of GH¢50,500,000, and the Finance Manager of the company is unable to determine specifically which division of the business this input VAT amount relates to.

Required:

Determine the amount of input VAT ClearTel LTD can deduct, in line with the provisions of the Value Added Tax Act, 2013 (Act 870 as amended). Justify your answer

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  • 5 Marks

AT – Nov 2024 – L3 – Q3c – Automatic Stabilizers vs Discretionary Fiscal Policies

Explain the difference between automatic stabilizers and discretionary fiscal policies with examples.

Some commentators in Ghana have argued that economic policymakers should allow automatic stabilizers to shape and direct the destiny of the economy rather than discretionary fiscal policies since the latter has failed woefully.

Required:
Distinguish between automatic stabilizers and discretionary fiscal policies as economic tools. Illustrate with examples.

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  • 3 Marks

AT – Nov 2024 – L3 – Q3b – Prohibitions on Representation and Tax Advice

Explain the prohibitions on representation and tax advice in relation to tax consultants under the Revenue Administration Act, 2016 (Act 915).

With reference to the Revenue Administration Act, 2016 (Act 915), what constitutes prohibitions on representation and tax advice in relation to tax consultants?

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  • 12 Marks

AT – Nov 2024 – L3 – Q3a – Tax Planning and Objection to Tax Assessment

Advise Poyooyo LTD on provisions in tax laws to challenge a disputed tax liability.

The Directors of Poyooyo LTD have heard of the Maxims of Tax Planning, which outline strategies for minimizing tax liabilities legally.

In a recent visit by the Domestic Tax Revenue Division of the Ghana Revenue Authority (GRA), the Large Taxpayers Office (LTO) in Accra conducted a tax audit on the company, resulting in tax assessments raised against Poyooyo LTD for settlement.

Management of the company, in their last meeting with the directors, presented the outcome of the tax audit and strongly argued that the assessment was erroneous. They claimed that the liabilities raised were based on legitimate tax planning strategies the company employed.

They believe that the company is in full compliance with the tax laws and should not be required to settle the tax liabilities assessed. However, payment of the liability would significantly impact the company’s cash flow and disrupt its operations.

Poyooyo LTD has approached your tax consulting firm for assistance and guidance.

Required:

Advise Poyooyo LTD on the provisions of the tax laws that could be taken advantage of to avert the payment of the liability.

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  • 5 Marks

AT – Nov 2024 – L3 – Q2c – Extension of Time and Early Filing of Tax Returns

Explain the conditions for tax return extension and early filing requirements.

Akosua Sokode has set up a small business to sell cosmetics in Accra. She just called you, an associate member of the Institute of Chartered Accountants Ghana, to seek your advice on tax returns and payment of taxes. Akosua Sokode told you that she cannot meet her tax payment deadlines and cannot file tax returns by the due dates. She also confided in you that maintenance of documents is a big problem for her.

Required:

Address the concerns of Akosua Sokode by briefing her on the following:

i) THREE factors regarding the extension of time for filing tax returns.

ii) TWO circumstances under which the Commissioner-General may request for filing of tax returns before the due date.

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  • 9 Marks

AT – Nov 2024 – L3 – Q2b – Tax Implications of 100% Acquisition in Mining Operations

Explain the tax implications of a 100% acquisition and compute the gains from the acquisition.

Tongo LTD (Tongo) is a mining company operating in the Upper East Region of Ghana. The following relates to the operations of Tongo for the 2023 year of assessment:

Description GH¢
Revenue (Gross) 200,000,000
Cost of Operations 80,000,000
Margin/Profit 120,000,000

Additional Information:

  1. Tempane Mines LTD acquired 100% interest in Tongo for a consideration of GH¢310,000,000 at the end of 2023.
  2. The cost of assets acquired at their respective acquisition dates are as follows:
Year Cost of Assets (GH¢)
2020 100,000,000
2021 75,000,000
2023 50,000,000

Required:

i) Explain the tax implication of the 100% acquisition.

ii) Compute the gains from the above acquisition and determine how the gains should be treated.

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  • 5 Marks

AT – Nov 2024 – L3 – Q1b – Challenges in Tax Reforms in Ghana

Analyze two key challenges in tax reforms in Ghana.

Countries, including Ghana, have embarked on various tax reforms geared towards improving tax revenue to help provide infrastructure and guarantee sustainable growth. Tax administration in Ghana has therefore seen a number of reforms over the years, including restoring the tax base, improving tax administration, and the integration of the Revenue Agencies into an Authority to act as a one-stop shop as per the Ghana Revenue Authority Act, 2009 (Act 791).

Required:
In reference to the statement above, analyze TWO challenges (key issues) on tax reforms in Ghana.

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  • 15 Marks

AT – Nov 2024 – L3 – Q1a – Computation of Partnership Chargeable Income

Compute the partnership's chargeable income for the 2023 year of assessment.

Takyi and Kuro commenced a retail business in Goaso, Ghana on 1 January 2020, under the partnership name Ntaafo LTD, sharing profits and losses equally. On 1 January 2023, Tawia was admitted as a new partner. Takyi, Kuro, and Tawia then shared profits and losses in the ratio of 3:2:1 respectively. The partnership prepares its accounts to 31 December annually.

The partnership’s profit and loss account for the year ended 31 December 2023 is as follows:

Note GH¢ GH¢
Gross Trading Profit 4,365,000
Compensation (1) 50,000
Total Revenue 4,415,000
Less: Operating Expenses
Audit Fees 25,000
Rent and Rates (2) 348,000
Wages and Salaries (3) 1,410,000
Interest on Capital (4) 205,000
Contribution towards National Insurance Scheme 111,000
Trade Debts Written Off (Bad Debts) 92,000
Legal Fees (5) 43,000
Entertainment (6) 270,000
Motor Expenses (7) 87,000
Repairs and Maintenance (8) 190,000
Commission (9) 310,000
Printing and Stationery 82,000
Electricity and Telephone 51,000
Depreciation 123,000
Sundry Expenses 270,000
Total Expenses 3,617,000
Net Profit 798,000

Notes:

  1. Compensation:

    • Compensation received from suppliers for delays in supplies: GH¢70,000
    • Court fines paid to client for negligence: (GH¢20,000)

  2. Rent and Rates:

    • Rent for business premises: GH¢180,000
    • Rent for Takyi’s private residence: GH¢156,000 (Disallowed)
    • Business operating permit paid to Goaso Municipal Assembly: GH¢12,000

  3. Wages and Salaries:

    • Takyi: GH¢180,000
    • Kuro: GH¢240,000
    • Tawia: GH¢66,000
    • Mrs. Takyi (staff): GH¢120,000
    • Mrs. Tawia (staff): GH¢144,000
    • Other staff: GH¢660,000

  4. Interest on Capital:

    • Takyi: GH¢30,000
    • Kuro: GH¢40,000
    • Tawia: GH¢10,000
    • Bank interest: GH¢125,000

  5. Legal Fees:

    • Renewal of annual tenancy agreements: GH¢8,000
    • Collection of trade debts: GH¢10,000
    • Preparing contract documents (suppliers and contractors): GH¢5,000
    • Preparing contract documents to acquire a new company: GH¢20,000 (Disallowed)

  6. Entertainment:

    • The entertainment expenses relate to the partners’ private enjoyment (Disallowed).

  7. Motor Car Expenses:

    • Petrol: GH¢52,000
    • Repairs: GH¢30,000
    • Fines for late renewal of vehicle license: GH¢5,000 (Disallowed)

  8. Repairs and Maintenance:

    • Replacement of bolts and nuts on Plant and Machinery: GH¢10,000
    • Major expenditure on Landscaping and Renovation: GH¢180,000 (Capitalized)

  9. Commission:

    • Takyi (for introducing a new customer to the business): GH¢20,000 (Disallowed)
    • Salesmen and Saleswomen: GH¢230,000
    • Unidentified recipient: GH¢60,000 (Disallowed)

Other Information:

  • Capital allowance agreed with the Ghana Revenue Authority (GRA) was GH¢234,000 for the 2023 year of assessment.

Required:
Compute the partnership’s chargeable income for the 2023 year of assessment.

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  • 10 Marks

AAA – Nov 2024 – L3 – Q5b – Anti-Money Laundering Regulations and Auditor Responsibilities

Discuss anti-money laundering regulations in Ghana and auditors' responsibilities in compliance.

Lamsey Jewelers is a family-owned business specializing in high-end jewellery, located in Dunkwa-On-Offin in the Central Region of Ghana. The company sources gold from various suppliers in the small-scale mining sector. Recently, the Minerals Commission received anonymous tips suggesting that Lamsey Jewelers may be involved in laundering money through its operations. Authorities suspect that the business could be used to conceal the origins of illicit funds through gold purchases and sales.

To investigate these suspicions, regulatory authorities have appointed Baba Yara and Associates, an independent auditing firm, to conduct a thorough review of Lamsey Jewelers’ operations and financial transactions. During the audit, Baba Yara and Associates discovered that Lamsey Jewelers has been accepting large cash payments for custom jewellery orders without conducting proper due diligence on the customers. Several transactions involving cash payments exceed typical retail amounts, raising suspicions of potential money laundering.

Required:

i) Discuss the key legal and regulatory requirements in Ghana related to anti-money laundering relevant to Lamsey Jewelers.

ii) Discuss the obligations placed on professional firms such as Baba Yara and Associates in relation to money laundering.

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