- 5 Marks
PT – April 2022 – L2 – Q5c – Income Tax Liabilities
Explain how gifts received by individuals in relation to employment, business, or investment are taxed.
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- 5 Marks
PT – Aug 2022 – L2 – Q5d – Income Tax Liabilities
Explain how gifts received not related to employment or business are taxed under the Income Tax Act.
Question
An individual who is required to furnish the Commissioner-General (CG) with a return in relation to a gift has to do so to enable the CG subject it to appropriate tax.
Required:
Explain the treatment of a gift not received under employment or business.
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- Tags: Business income, Employment Income, Gift tax, Income Tax
- Level: Level 2
- Topic: Income Tax Liabilities
- Series: AUG 2022
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- 5 Marks
PT – Nov 2021 – L2 – Q5c – Taxation of Capital Gains
Compute the appropriate tax for gifts received by Flowqueen for the 2020 year of assessment.
Question
Flowqueen, a sole proprietor of Freddy Ent, was adjudged the best distributor of Mino Ltd for the year 2020 and received the following gifts:
- 70 Inches Samsung LED valued at GH¢50,000 from Freddy Ltd.
- Toyota saloon car worth GH¢80,000 from the clients of Freddy Ltd.
Her income from the business for the 2020 year of assessment amounted to GH¢120,000.
Required:
Compute the appropriate tax or taxes of Flowqueen for the 2020 year of assessment.
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- Tags: Business income, Capital gains tax, Gift tax, Sole Proprietor, Tax computation
- Level: Level 2
- Topic: Taxation of Capital Gains
- Series: NOV 2021
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- 4 Marks
TX – May 2019 – L3 – Q3C – Tax Planning
Discuss the tax benefits associated with investing in farming and agro-processing businesses in Ghana.
Question
c) Your senior brother has stayed in the United Kingdom for more than 20 years and would like to return to Ghana and establish a business. He is confused as to which area to invest to maximise the benefits from tax planning.
He has been told that you are undertaking a course in Taxation and would like to have your explanation and the tax benefits, if any, from investing in the following areas:
i) Farming (2 marks)
ii) Agro-Processing Business (2 marks)
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- Tags: Agro Processing, Business income, Farming, Investment, Tax Concessions, Tax Planning
- Level: Level 3
- Topic: Tax planning
- Series: MAY 2019
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- 4 Marks
TX – May 2019 – L3 – Q5c – Business Income – Corporate Income Tax
Evaluate the statement regarding offsetting losses from export of non-traditional products against profits from local sales.
Question
A company engages in exports of non-traditional products and makes local sales of its products. It has as recently, as of 2018, recorded huge losses on the exports but makes gains on the local sales and intends to offset the loss against the profit from the local sales as both represent its business activities.
Required: Evaluate the above statement critically in light of the tax provisions and its effect, if any, on revenue.
(4 marks)
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- Tags: Business income, Export, Local sales, Losses, Non-Traditional Products, Revenue
- Level: Level 3
- Topic: Business income - Corporate income tax
- Series: MAY 2019
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- 6 Marks
AT – April 2022 – L3 – Q1a – Business income – Corporate income tax
Explain the mechanism of carrying over business losses for tax purposes.
Question
All persons can carry over their losses, so far as it can be proven that it is a loss by the person making the claim. This was mooted at a seminar organised for a business community in some parts of Accra, the capital city of Ghana.
Required:
Explain the mechanism of carryover of losses.
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- Tags: Business income, Loss Carryover, Tax Relief
- Level: Level 3
- Topic: Business income - Corporate income tax
- Series: APR 2022
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- 20 Marks
AT – Aug 2022 – L3 – Q4 – Capital Allowance
Calculation of capital allowances, provisional tax, chargeable income, company tax, and additional tax liability for Zimbo Ltd for the year ended 31 December 2021.
Question
Zimbo Ltd (Zimbo) specialises in the manufacture of personal hygiene soaps and related
products at their factory in the industrial area of Accra. Zimbo commenced business operations
on 1 April 2020 and had an assessed loss of GH¢112,000 for the period ended 31 December
2020 attributable to large start-up costs in the first period of trading.
Turnover for the year ended 31 December 2021 amounted to GH¢1,980,000 of which
GH¢700,000 relates to export sales. Zimbo is trying to increase its turnover from export sales
through participation in foreign market trade fairs as well as other marketing campaigns. The
gross profit margin for the year ended 31 December 2021 was 60%.
Zimbo recorded a net profit of GH¢315,000 for the year ended 31 December 2021 after taking
into account the following transactions:
Additional information:
i) The gross rental income earned was from leasing one wing of the head office building. The
wing constitutes 10% of the entire building.
ii) The registration of three trademarks, ‘Cleanex’, ‘Perfect’ and ‘Alfresh’ at a total cost of
GH¢30,000 in respect of Zimbo’s personal hygiene soaps that is to last for fifteen years. The
market research expenses incurred in connection with the development of these soaps
amounted to GH¢65,000.
iii) The donation was made to a local government assisted school as part of Zimbo’s corporate
social responsibility programme.
iv) GH¢25,000 of the marketing cost was incurred when the export market Development Manager
attended two trade conventions and one trade mission as part of Zimbo’s efforts to increase its
export sales. The trade mission was duly approved. The remaining GH¢63,000 of costs were
incurred in marketing Zimbo’s soaps to foreign markets.
v) GH¢28,000 of the general costs was incurred in underpinning the office building to strengthen
its foundations against sinking.
vi) The compensation cost was as a result of the production manager incurring an injury while
working on one of the production lines in the factory. The Production Manager was rendered
incapacitated as a result of the incident. Zimbo settled out of court. GH¢250 000 of the costs
relate to a payment made to the Production Manager in full settlement of the case. GH¢50,000
of the GH¢250,000 out-of-court settlement was paid in order to prevent the Production
Manager from setting up a similar business in competition with Zimbo. The remaining
GH¢40,000 of costs represent fines imposed by the Factory Inspectorate Division following
the incident. The production line was also condemned as a result.
vii)The interest paid was incurred in respect of Zimbo’s GH¢200,000 overdraft facility.
GH¢100,000 of the facility was applied towards recurrent expenditure while the other
GH¢100,000 of the facility was applied towards the cost of a new showroom.
viii) Ghana Revenue Authority considers 40% of other expenses to be prohibited for tax purposes.
ix) Zimbo’s projected taxable income for the year ended 31 December 2021 was GH¢360,000.
The Accountant remitted the provisional tax for the three quarterly payment dates (QPDs) on
time but, due to the pressures of year-end work, forgot to submit the return for the final QPD.
The Accountant also omitted the brought forward assessed loss from his computations of the
provisional tax.
x) During the year, a showroom was constructed in close proximity to Zimbo’s factory building.
The showroom is used to display the soaps from the factory as well as for storage purposes
pending shipment to various destinations. The showroom was constructed at a total cost of
GH¢100,000 and was wholly funded by Zimbo’s overdraft facility. The showroom was
brought into use on 1 August 2021. Zimbo has made all tax appropriate elections in connection
with the showroom.
xi) Details of Zimbo’s other fixed assets are provided below. These were all acquired/constructed
during the year to 31 December 2020:
Required:
a) Calculate the capital allowances claimable by Zimbo for the year ended 31 December 2021,
assuming all favourable elections are made. (6 marks)
b) Calculate the provisional tax which should have been paid by Zimbo for the year ended 31
December 2021, clearly indicating the due dates and the respective tax amounts. (3 marks)
c) Calculate the chargeable income and company tax payable by Zimbo for the year ended 31
December 2021. (10 marks)
Note: Your calculations should assume that the provisional tax paid was as calculated in
part b) of the question.
d) Compute any other tax liability apart from the company tax. (1 mark)
(Total: 20 marks)
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- Tags: Business income, Capital Allowance, chargeable income, Provisional Tax, Rental Tax
- Level: Level 3
- Topic: Capital allowance
- Series: AUG 2022
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- 20 Marks
AT – Nov 2021 – L3 – Q4 – Business income – Corporate income tax | Minerals and mining
Compute the chargeable income and tax payable for Akwatia Gold Mines for 2020 and identify tax optimization opportunities.
Question
Akwatia Gold Mines was established ten years ago. For the year ended 31 December 2020, the following income statement was prepared and submitted to the Ghana Revenue Authority as part of its financial statement.
Akwatia Gold Mines
Income Statement for the Year Ended 31/12/2020
1.
2.
3.
4.
5.
6.
7.
The capital allowance agreed for the period was GH¢24,320,500.
Required:
a) Compute the chargeable income of the company and the tax payable. (15 marks)
b) Advise Akwatia Gold Mines on how to identify opportunities within the tax laws to optimise tax payable for the year ended 31 December 2020. (5 marks)
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- 3 Marks
AT – May 2020 – L3 – Q4b – Business income – Corporate income tax
Explain the treatment of unrelieved losses for ABC Ltd based on given business and investment income/loss for 2017 and 2018.
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- Tags: Business income, Investment income, Loss relief, Unrelieved losses
- Level: Level 3
- Topic: Business income - Corporate income tax
- Series: MAY 2020
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- 17 Marks
AT – May 2020 – L3 – Q4a – Business income – Corporate income tax
Compute the chargeable income for Mamavi, a retail business owner, for the year ended 31 December 2018 based on the provided profit and loss account.
Question
Mamavi is a retail business woman with a chain of shops in Ghana. She commenced business on 1 March 2011, with the business name of Unity Enterprise. She sells health foods, fruits, vegetables and juices.
The Enterprise’ profit or loss account for the year ended 31 December 2018 as prepared by the Accountant are reproduced below:
NOTES
A business loan was taken out to finance the cost of improvements to the store, in particular
the juice bars. The interest element included in the loan repayment amounted to GH¢1,750.
A mortgage loan was taken out by Mamavi to buy the family a house in Hlefi, Volta Region.
The interest element in the loan repayment for the mortgage was GH¢2,670.
This court case was as a result of a car hitting Mamavi when she was walking her dog out
at night. The car owner claimed Mamavi stepped out in front of him and therefore it was
her fault. Mamavi’s Lawyer told her to respond to the allegation because she needed five
sessions of physiotherapy to help heal her leg. Mamavi is suing the car owner for her costs.
GH¢700 of the painting cost related to the painting of Mamavi’s private house. The balance
related to painting her shop. GH¢1,200 lease charges relate to the leasing of a car for the
business
Required:
Compute Mamavi’s chargeable income for the year ended 31 December 2018
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- 8 Marks
AT – Nov 2020 – L3 – Q3b – International taxation
Tax computation for Andrew Soweah as an individual, granting relief under the Ghana/UK Double Taxation Agreement using the credit method.
Question
Andrew Soweah recently relocated to Ghana to commence his business after retirement from TaskForce (UK) Ltd, a security company he served for over 20 years. The nature of the business was to provide private security to diplomats and the very affluent.
Before coming to Ghana, he rented out his apartment in the UK for a yearly rent of £18,000. He also maintained a healthy balance in his account with Diamond Bank in London.
His income for 2019 year of assessment is summarized as follows:
- Business Income (net of all taxes): GH¢126,000.
- Dividend received from Faithful Ltd, a resident company at gross amount was GH¢18,000.
- Rent of £16,200 was paid into his account with Diamond Bank. Withholding tax amounting to £1,800 had been deducted.
- Diamond Bank credited his account with net of £8,100 bank interest. UK tax rate on interest is 10%.
Additional Information:
- Exchange rate is GH¢7.5 for £1.
- Andrew Soweah does not contribute to social security in Ghana.
Required: Compute his tax liability as an individual for the relevant year of assessment while granting him relief for double taxation under the Ghana/UK Double Taxation Agreement using the credit method.
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- Tags: Business income, Double Taxation, Foreign income, Ghana-UK treaty, Individual tax, Rental Income, Tax Relief
- Level: Level 3
- Topic: International taxation
- Series: NOV 2020
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- 20 Marks
AT – Dec 2023 – L3 – Q4 – Business income – Corporate income tax
Computing the maximum capital allowances and chargeable income for STE Ltd for the year ended 31 December 2021.
Question
STE Ltd was incorporated in 2020 and commenced business operations on 1 January 2021, specializing in manufacturing and distributing solar panels and related products. The company secured a two-year loan of GH¢750,000 with an interest rate of 15% per annum from a local financial institution. The loan was applied as follows:
| Loan Application | Amount (GH¢) |
|---|---|
| Showroom construction at Tema | 100,000 |
| Procurement of plant and machinery | 250,000 |
| Procurement of raw materials | 300,000 |
| Procurement of commercial vehicles | 70,000 |
| Amount applied towards 2021 consultancy fees | 30,000 |
| Total | 750,000 |
The company’s fixed asset register as at 31 December 2021 is as follows:
| Fixed Assets | Cost (GH¢) | Depreciation (GH¢) | Net Book Value (GH¢) |
|---|---|---|---|
| Head office building | 150,000 | 3,750 | 146,250 |
| Factory building | 120,000 | 6,000 | 114,000 |
| Furniture and fittings | 65,000 | 6,500 | 58,500 |
| Office computers | 80,000 | 16,000 | 64,000 |
| Total | 415,000 | 32,250 | 382,750 |
STE’s statement of comprehensive income for the year ended 31 December 2021 is as follows:
Additional information:
- Staff welfare includes a penalty for late PAYE payment (GH¢5,000), staff end-of-year party (GH¢7,350), and initial payroll software license (GH¢14,000).
- Advertising and marketing includes GH¢3,800 spent on entertaining the Marketing Director’s family and friends.
- Utility costs include GH¢13,640 for installing solar panels at the Tema showroom.
- Interest consists of GH¢15,000 for a loan establishment fee, GH¢56,250 for 2020 interest, and GH¢112,500 for 2021 interest.
- Research and development contributions were made to the Energy Commission of Ghana for solar-powered cookers and heaters research.
- The operating licence was paid to the Tema Metropolitan Assembly for the factory’s initial license.
Required:
a) Calculate the maximum capital allowances claimable by STE Ltd for the year ended 31 December 2021.
b) Calculate the chargeable income and tax payable by STE Ltd for the year ended 31 December 2021.
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- Tags: Business income, Capital allowances, Corporate Income Tax, Depreciation
- Level: Level 3
- Topic: Business income - Corporate income tax
- Series: DEC 2023
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- 20 Marks
AT – July 2023 – L3 – Q4 – Business income – Corporate income tax
Computing chargeable income and identifying relevant assumptions for a retail company.
Question
The following relates to the financial records of Konadu Yiadom Company Ltd submitted to the Ghana Revenue Authority for the year ended 31 December 2021. The company is into retail operations.
Notes:
- The sales figure includes GH¢21,500 from the sale of old shop fittings which were replaced by new fittings during the year. The profit on the sale of the shop fittings was GH¢3,770.
- Following completion of the accounts, the accountant received an invoice dated 14 December 2021 in respect of goods for resale, which were delivered in late December. This invoice was not recorded, and you have been informed that the total amount on the invoice, including VAT, was GH¢15,110. VAT included on the invoice was GH¢440. All levies are inclusive.
- In June 2021, the company recognized the need to offer a special after-sales service to its customers. The company hired a new staff member and purchased a machine costing GH¢3,500 for the purpose. The local district assembly provided a grant to aid the purchase of the machine to the tune of GH¢1,250. The company included the cost of the machine in the purchases figure.
- Staff cost is the total wages and salaries paid to the staff. GH¢37,000 was paid to fresh graduates employed during the year. They constitute 4% of the total workforce for the year 2021.
- Promotion and Advertising is made up of:
- Managing Director’s wedding reception: GH¢2,800
- Refreshment during the opening of a new shop: GH¢5,000
- Sample product to invited guests during the opening of the new shop: GH¢3,510
- Interest and Bank Payments are made up of:
- Interest on loan used to purchase stock for the business: GH¢3,020
- Overdraft interest on the business account: GH¢7,100
- Legal Fees are made up of:
- Court fine resulting from traffic accident: GH¢3,950
- Defense of company driver for careless driving: GH¢3,830
- Litigation on business plot of land (90% chance of success): GH¢5,130
- Bad Debts are made up of:
- Debt collection (Pursuing bad debts): GH¢455
- Decrease in general bad debts provision: (GH¢1,250)
- Increase in specific bad debts provision: GH¢1,800
- Motor Expenses are made up of:
- Lease of a delivery van: GH¢11,500
- Van running expenses: GH¢6,910
- Sundry Expenses are made up of:
- Trade subscriptions: GH¢16,000
- Support to elect a local Assembly Member: GH¢8,000
- Provision for replacement of windows in the office: GH¢4,000
- Gifts to customers during Christmas: GH¢6,000
- Customer’s claim on defective goods: GH¢27,240
- Provision for staff redundancy cost: GH¢25,000
- Cost of investigating cash fraud: GH¢5,600
- Investigation to acquire a new company: GH¢22,000
Additional Information:
The Ghana Revenue Authority has assessed and granted capital allowance of GH¢57,000 for the 2021 year of assessment.
Required:
You are required to compute the chargeable income for Konadu Yiadom Company Ltd for the 2021 year of assessment. Indicate clearly all necessary assumptions.
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- Tags: Business income, Corporate Tax, Retail Operations, Tax computation
- Level: Level 3
- Topic: Business income - Corporate income tax
- Series: JULY 2023
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- 6 Marks
AT – May 2016 – L3 – Q3b – Business income – Corporate income tax
Compute the penalties payable by the company
Question
b) ABC Ltd is a company under self-assessment and prepares accounts to 31st March each year. Its estimated chargeable income for the year 2014 was GH¢1.2 billion. However, the Company’s Returns, which were submitted to the Large Tax Payers Office at the VAT House on 15th April, 2015, showed a chargeable income of GH¢1.8 billion.
Compute the penalties payable by the company.
(6 marks)
(Note: Rate of Company Tax: 25%)
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- Tags: Business income, chargeable income, Corporate Tax
- Level: Level 3
- Topic: Business income - Corporate income tax
- Series: MAY 2016
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- 20 Marks
AT – May 2016 – L3 – Q2 – Business Income – Corporate
This question asks for the computation of chargeable income based on the profit and loss account details for a manufacturing company for the 2014 Year of Assessment.
Question
Below is the Profit or Loss Accounts of Osu Mart Ltd, a manufacturing company in Accra for the year ended 31st December 2014, submitted to the Commissioner of Domestic Tax Revenue Division of the Ghana Revenue Authority on 30th April 2015.
a) Compute the chargeable income of the company for the 2014 Year of Assessment. (18 marks)
b) State the significance of the Auditor’s Certificate to the Examination of Accounts. (2 marks)
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