Question Tag: Corporate Tax

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  • 10 Marks

PT – Nov 2024 – L2 – Q4a – Chargeable Income Computation

Compute the chargeable income and tax payable for Amasa Architecture and Building LTD for the 2022 and 2023 years of assessment.

Amasa Architecture and Building LTD has been in business for the past seven years. The following information relates to the company’s operations for the years ending 31 December 2022 and 2023.

DETAILS 2022 (GH¢) 2023 (GH¢)
Profit before tax 795,000 2,110,000
Provision for Depreciation 230,000 115,000
Donation to Manhyia Children Home (Approved by Social Welfare Department) 350,000 210,000
Donation towards 2023 Adae Kese Festival 105,000 150,000
Capital allowance agreed with the Ghana Revenue Authority 1,500,000 1,700,000
Withholding tax paid as contained in certificates received 10,000 25,000

Required:
Using the information provided above, compute the chargeable income and tax payable by Amasa Architecture and Building LTD for the years of assessment 2022 and 2023.

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  • 20 Marks

FM – Nov 2024 – L2 – Q2 – Investment Appraisal

Calculate the NPV of launching two new products, Agbui and Loloi, and advise on the investment decision.

Santrofi PLC is a publisher that wants to expand its market share in magazine publications. The company plans to launch two new products, Agbui and Loloi, at the start of January 2025, which it believes will each have a 4-year life span. The sales mix is assumed to be fixed. The information below is relevant:

  1. Expected sales volumes (units) for Agbui:
Year 1 2 3 4
Volume 30,000 55,000 50,000 15,000

  1. The first year’s selling price and direct material costs for each Agbui unit will be GH¢31 and GH¢12, respectively. On the other hand, the company expects to sell 25% more Loloi units than Agbui. Both selling price and direct material cost of Loloi are expected to be 25% less than Agbui’s.

  2. Incremental fixed production costs are expected to be GH¢500,000 in the first year of operation, apportioned based on revenue. Advertising costs will be GH¢250,000 in the first year of operation and then GH¢125,000 per year for the following two years.

  3. To produce the two products, an investment of GH¢1 million in machinery and GH¢500,000 in working capital will be needed, payable at the start of the period. Santrofi PLC expects to recover GH¢600,000 from the sale of machinery at the end of the project life. Investment in machinery attracts a 100% first-year tax-allowable depreciation. The company has sufficient profit to take full advantage of the allowance in Year 1. For the purpose of reporting accounting profit, the company depreciates machinery on a four-year straight-line basis.

  4. Revenue and costs are expected to be affected by inflation after the first year as follows:

    • Selling price: 3% a year
    • Direct material cost: 3% a year
    • Fixed production cost: 5% a year

  5. The company’s real discount rate is 10% for investment appraisal. Average inflation is deemed to be 3%. The applicable corporate tax rate is 25%.

Required:
Calculate the Net Present Value (NPV) of the proposed investment in the two products and advise the company on its investment appraisal.

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  • 5 Marks

ATAX – May 2019 – L3 – Q7b – Corporate Tax Compliance and Reporting

Compute the total tax liabilities for Alaba Trading Limited for the 2018 assessment year, considering its assessable profit, capital allowances, and dividend payable.

For the assessment year 2018, below are the extracts from the tax computations of Alaba Trading Limited:

Item Amount (₦)
Assessable profit 8,200,000
Capital allowances 5,400,000
Dividend payable 6,000,000

Required:
Determine the total tax liabilities of Alaba Trading Limited for the assessment year.

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  • 7 Marks

ATAX – May 2019 – L3 – Q5c – Double Taxation Reliefs and Credits

Advise on double taxation relief for SOKGlobal Limited and compute the applicable relief.

SOKGlobal Limited is a wholly owned Nigerian company that deals with stationery items. It has a functional business unit in Cape Town, South Africa. The company’s operating results for the year ended December 31, 2017, are as follows:

Profit attributable to South Africa business: ₦8,740
Capital allowances agreed with tax officials for Nigeria and South Africa businesses were ₦5,500,000 and ₦2,210,000, respectively.

Required:
Advise the company on the double taxation relief applicable to the company, showing the necessary computations.

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  • 20 Marks

ATAX – May 2019 – L3 – Q3 – Taxation of Companies

Prepare capital allowance computations and tax liabilities for Pardo Nigeria Limited based on its financial data and asset acquisitions.

Pardo Nigeria Limited is a manufacturer of polythene bags. It was incorporated on January 1, 2013, but commenced business operations on March 1, 2013. The following is the summary of its adjusted profits for the respective years:

Period Ended Adjusted Profit (₦’000)
December 31, 2013 7,200
December 31, 2014 10,700
December 31, 2015 12,650
December 31, 2016 15,220
December 31, 2017 19,850

The company acquired the following assets:

Date Asset Type Amount (₦’000)
April 5, 2013 Factory building 5,400
January 17, 2014 Office furniture 2,750
December 1, 2014 Motor vehicle 4,500
January 3, 2015 Production plant 1,820

The company sold some of its assets on December 31, 2017 as follows:

Asset Type Cost (₦’000) Proceeds (₦’000)
Office furniture 250,000 35
Production plant 650,000 60

As the newly appointed tax consultant to the company, the managing director sought your advice on both capital allowances available to the company and the tax liabilities resulting from them for the relevant years. He, however, informed you during the finalization of the engagement that the factory building was purchased second-hand from a company that had ceased operation six months earlier.

Required:
Prepare a report addressed to the managing director of the company showing, for all the relevant years:

a. Capital allowance computations (9 Marks)
b. Tax liabilities payable (11 Marks)

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  • 15 Marks

ATAX – Nov 2016 – L3 – Q4b – Corporate Tax Compliance and Reporting

Compute the relevant tax liabilities for Gringrin Nigeria Ltd. in scenarios with different accounting dates

Gringrin Nigeria Limited is proposing to embark on two courses of action:

i) Change its accounting date from March 31 to June 30; or
ii) Change its accounting date from March 31 to December 31.

The adjusted profits in each scenario are as follows:

  • Change to June 30:
Period Adjusted Profits (N’000)
Year ended March 31, 2011 30,000
Year ended March 31, 2012 33,000
Period ended June 30, 2013 (15 months) 78,000
Year ended June 30, 2014 34,000
  • Change to December 31:
Period Adjusted Profits (N’000)
Year ended March 31, 2011 50,000
Year ended March 31, 2012 60,000
Period ended December 31, 2013 (21 months) 180,000
Year ended December 31, 2014 70,000

As the Tax Consultant, you are required to:

Compute the relevant tax liabilities. (15 Marks)

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  • 15 Marks

FM – Nov 2021 – L3 – Q7 – Financing Decisions and Capital Markets

Analyze the effects of a 1-for-5 rights issue for James Obasi plc, calculate theoretical ex-rights price, and assess investor options and impacts.

James Obasi plc, a medium-sized drone manufacturing firm, is considering a 1-for-5 rights issue at a 15% discount to the current market price of N4.00 per share. Expected issue costs are N2 million, payable from the funds raised. The proceeds from the rights issue will be used to redeem some of the company’s existing bonds at par.

Financial Information:

Statement of Financial Position (N’000):

Required:

a. Ignoring issue costs and any use of the funds raised by the rights issue, calculate: i. The theoretical ex-rights price per share. ii. The value of rights per existing share. (4 Marks)

b. Identify the alternative actions available to an owner of 1,500 shares in James Obasi plc concerning the rights issue and determine the effect of each action on the investor’s wealth. (6 Marks)

c. Calculate the current earnings per share and the revised earnings per share if the rights issue funds are used to redeem some of the existing bonds.
(5 Marks)

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  • 30 Marks

ATAX – Nov 2021 – L3 – Q1 – Corporate Tax Compliance and Reporting

Calculation of tax liabilities, corporate tax compliance, and adjustments in financial reporting.

Carrol Nigeria Limited, a medium-sized company, commenced business in 2011. The company has three subsidiaries in the manufacturing of household utensils and baby products. Over the last three years, its fortunes have dwindled due to high costs of imported raw materials, overheads, low patronage from customers, and increasing demands from the host communities for social amenities.

Due to the challenging business environment, the board decided in 2016 to reduce workforce and permanently close one of its subsidiaries. This led to the appointment of a young accountant with limited taxation and fiscal policy knowledge as the Group Accountant after two Finance Department staff were affected.

In the past three years, the company faced challenges with tax authorities on tax compliance. The Group Managing Director was embarrassed when informed by the tax officer that essential records necessary for determining tax liabilities were not maintained. Gaps were also observed in the annual returns filed by the company, and the Revenue Service is conducting a back duty audit.

The Group Managing Director has sought assistance in addressing these challenges and provided documents for recomputation of the company’s income tax liabilities for the year ended December 31, 2020.

The statement of profit or loss for the year ended December 31, 2020, is as follows:

Additional Information:

  1. Other income included ₦320,000 realized from the disposal of an old plant.
  2. Administrative expenses included ₦250,000 paid to a legal practitioner for the defense and release of the company’s driver caught by traffic officers.
  3. 30% of motor running expenses was expended on the personal expenses of the Managing Director.
  4. 20% of the donation was paid to a State Government fund assisting insurgent victims.
  5. Repairs and maintenance included ₦215,000 for erecting a gate destroyed during a youth protest.
  6. Allowance for doubtful debts comprised ₦600,000 in general provision and ₦400,000 in specific provision.
  7. Miscellaneous expenses included ₦450,000 for hamper gifts to customers during Sallah and Christmas.
  8. A review revealed the gross turnover was understated by ₦750,000.
  9. The following is the schedule of qualifying capital expenditure on property, plant, and equipment:
    Nature Date of Acquisition Amount (₦’000)
    Factory building September 8, 2016 3,800
    Furniture & fittings October 12, 2016 1,600
    Motor van June 19, 2018 4,200
    Factory building March 8, 2020 6,500
    Furniture & fittings April 15, 2020 2,000
    Industrial plant July 1, 2020 5,700
    Motor van December 20, 2020 4,240
  10. Unutilized capital allowances brought forward was ₦1,500,000, with a balancing charge of ₦155,000 on disposal of the old plant.

Required:
As the company’s tax consultant, prepare a report to the Group Managing Director covering the following:

a. Provisions of the Companies Income Tax Act CAP C21 LFN 2004 (as amended) and Finance Act 2020 regarding maintenance of books or records of accounts (4 Marks)

b. Back duty audit and its implications (4 Marks)

c. Computation of the company’s tax liabilities (with supporting schedules) for the relevant tax year (22 Marks)

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  • 30 Marks

ATAX – Nov 2020 – Q1 – Taxation of Companies

Analyze tax implications for Sunchi Limited's operations in Nigeria and corporate tax obligations for resident and non-resident companies.

The recent trade tariff war on goods exported between the United States and China has opened a vista for corporate players in the two countries and their allies to venture into new areas considered to be business-friendly.

Sunchi Limited, Shanghai, is a computer accessories company that was incorporated in China in 2003. The company established its subsidiary outlet, Sunchi West Africa Holdings, in Ibadan, Nigeria, on January 1, 2018. The Nigerian company adopted December 31, annually (same as the parent company) as its end of financial year.

The first set of consolidated accounts was audited by a reputable audit firm based in China. Taxes for both business operations were also paid in China.

The Nigerian tax inspectors from the Federal Inland Revenue Service demanded for annual returns and tax computations from the subsidiary company but the General Manager of the company claimed that the company had paid personal income tax of its employees and directors, value-added tax on imported equipment, and relevant custom duties. Furthermore, since the parent company is not registered in Nigeria, there is no reason why it should be liable to companies’ income tax. The issue is yet to be resolved.

The Managing Director of the subsidiary company in Nigeria, with the permission of the head office in China, appointed you as the company‘s tax consultant to help unravel the issue of payment of companies’ income tax by resident and non-resident companies operating in Nigeria. He also submitted to you the statement of profit or loss for the year ended December 31, 2018, after conversion of the transactions in head office‘s Chinese currency (Yuan) to Nigerian Naira.

(i) Miscellaneous income:
This consists of income realised from the sale of component parts to the head office. The transaction was made at open market price.

(ii) Legal expenses comprise:

Description Amount (N’000)
Debt collection 800
Preliminary expenses 2,100
Land acquisition 550
Retainership fee 750
Total 4,200

Required:
As the company‘s tax consultant, you are to prepare a report to the management of Sunchi Limited taking into consideration the following:
a. Resident and non-resident companies (4 Marks)
b. Circumstances under which profit of a non-resident company will be liable to tax in Nigeria. (10 Marks)
c. Relationship between a:

  • Nigeria branch and the parent company (3 Marks)
  • Nigeria subsidiary and the parent company (3 Marks)
    d. Overseas branch of a Nigerian company (3 Marks)
    e. Overseas subsidiary of a Nigerian company (3 Marks)
    f. Advise on, if any, the companies income tax payable by the two business operations in Nigeria. (14 Marks)

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  • 30 Marks

AT – May 2024 – L3 – SA – Q1 – Tax Administration and Dispute Resolution

Provide professional tax advice for the management of Soft Farm and Agro-Allied Ltd, focusing on deductible interest, adjusted profit, and tax liabilities.

Soft Farm and Agro-Allied Limited, a subsidiary of Emperor Agro Incorporated, Italy, was incorporated in Nigeria in January 2018. Soft Farm and Agro-Allied Limited produces palm kernel for domestic use and export to the European market. The Managing Director of the company has just received a letter from the head office (parent company) about an impending visit due to poor business performance (below the group’s return on investment benchmark of 25%) since the business commenced, despite financial and technical support from the parent company.

In January 2022, the parent company granted a loan of N100 million to Soft Farm and Agro-Allied Limited for business expansion.

The Board has scheduled a special meeting for next month to consider the financial report of Soft Farm and Agro-Allied Limited for the year ended December 31, 2022, and to review past financial reports and tax assessments. As the newly engaged Tax Consultant to the company, you have been invited to participate in the meeting to provide a professional opinion on tax-related issues.

The Financial Accountant has been directed by the Managing Director to provide you with financial statements for all periods under review, books of accounts, returns filed with tax authorities, and other supporting documents.

From your preliminary review of the financial report for the year ended December 31, 2022, you noted an item that requires further discussion with management. This issue relates to interest paid on a loan obtained from the parent company.

Extract from Financial Statements for the Year Ended December 31, 2022

Item N’000
Gross turnover:
– Domestic sales 147,500
– Export sales 200,100
– Other operating income 3,300
Total Gross Turnover 350,900
Deduct:
– Staff salary 122,600
– Ground rent paid to State government 3,200
– Motor running expenses 1,750
– Audit and accountancy fees 1,000
– Repairs and maintenance 5,800
– Depreciation of assets 38,240
– Rent paid 1,850
– Power and lighting 5,400
– Legal cost 5,000
– Rates (water) 2,100
– Allowance for doubtful debts 10,500
– Donations 4,000
– Interest and other finance costs paid 15,600
– Income tax provision 23,400
– General expenses 5,900
Total Deductions 246,340
Net Profit 104,560

Additional Information:

  1. Export Sales:
    20% of export sales were made to the parent company at the prevailing international market price.
  2. Other Operating Income:
    Description N’000
    Dividend received (net) 2,700
    Profit from disposal of non-current asset 600
    Total 3,300
  3. Repairs and Maintenance:
    Description N’000
    Repairs of plantation equipment 1,200
    Repairs to premises (non-industrial building) 900
    Expansion to warehouse (industrial building) 3,700
    Total 5,800
  4. Rent Paid:
    This amount is for accommodation for the newly employed General Manager, whose basic salary is N4,800,000.
  5. Legal Cost:
    Description N’000
    Cost of income tax appeal 850
    Cost of debt collection 1,300
    Cost of acquiring new lease 1,700
    Renewal of old lease 1,150
    Total 5,000
  6. Allowance for Doubtful Debts:
    Description N’000
    Specific provisions 5,230
    General provisions 7,870
    Bad debts recovered (2,600)
    Total 10,500
  7. Donations:
    Recipient N’000
    Palm Oil Research Institute 1,400
    National Library 600
    Cocoa Research Institute of Nigeria 1,000
    Women Society of the host community 1,000
    Total 4,000
  8. Interest and Other Finance Costs Paid:
    In January 2022, the company obtained a loan facility of N100 million from the parent company for business expansion at a competitive interest rate of 12% per annum. The loan duration is 10 years, with interest payable for the first three years, and principal and interest repayments due from the fourth year onward. The balance in the financial statements includes other finance costs and bank charges paid to domestic banks on various accounts.
  9. General Expenses:
    Description N’000
    Wedding gift to staff 350
    Fine imposed on company driver for traffic offense 150
    Haulage expenses 3,200
    Transport and travelling 2,200
    Total 5,900
  10. Schedule of Prior Years’ Turnover and Assessable Profits:
    Year Ended December 31 Turnover (N’000) Assessable Profit (N’000)
    2018 154,400 78,750
    2019 198,600 95,120
    2020 310,300 142,800
    2021 314,900 166,900
  11. Schedule of Qualifying Capital Expenditure Incurred:
    Date of Acquisition Asset Type Amount (N’000)
    August 31, 2017 Plantation equipment 4,600
    August 31, 2017 Industrial building 12,000
    August 31, 2017 Non-industrial building 9,000
    January 1, 2018 Motor vehicles (3) 8,400
    January 1, 2018 Furniture and fittings (10) 1,500
    February 14, 2021 Motor vehicles (2) 5,600
    June 12, 2022 Furniture and fittings (10) 2,000
    July 8, 2022 Research and development 7,000

Required:

As the Tax Consultant to the company, draft a report to the Managing Director of Soft Farm and Agro-Allied Limited, in line with the provisions of the Companies Income Tax Act Cap C21 LFN 2004 (as amended). The report should provide professional advice on the following:

  1. Treatment of Excess Amount of Deductible Interest Paid (6 Marks)
  2. Adjusted Profit of the Company for the Year Ended December 31, 2022 (7 Marks)
  3. Tax Liabilities for All Relevant Assessment Years (17 Marks)

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  • 7 Marks

AT – May 2021 – L3 – Q2a – Mergers, Amalgamation and Reorganisation

Write a memo on the tax exposure after a merger involving three companies and asset revaluation gains.

There has been a merger among three companies: Ann Ltd, Bab Ltd, and Cee Ltd. The merger was geared towards creating a monopoly in the market. After careful revaluation of the assets and liabilities of the companies, the following is the outlook:

  • Ann Ltd: GH¢4,200,000
  • Bab Ltd: GH¢5,000,000
  • Cee Ltd: GH¢5,200,000

The following is the outlook of the new company after the merger:

  • Profit: GH¢5,000,000

Required:
As an intern of IKERN and Associates, write a memo to your partner on the company’s tax exposure after the merger.

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  • 8 Marks

AT – May 2021 – L3 – Q1c – International Taxation | Business Income – Corporate Income Tax

Compute the tax payable by Kaeka Ltd considering both foreign and domestic income.

Kaeka Ltd is a resident company providing cleaning services in Ghana. For the first time in the history of the entity, it launched operations as an external company in January 2020 in Lusaka, Zambia. It came to light that the entity earned the equivalent of GH¢2,500,000, which was evenly made for the 2020 year of assessment. On the home front, it earned GH¢16,000,000 in the 2020 year of assessment as income in Ghana. Assume that allowable costs of GH¢12,000,000 were incurred. It received a dividend net of tax from a company in Israel it acquired shares from, amounting to GH¢20,000 in December 2020. Tax of GH¢5,000 was paid on the dividend received.

Required:
i) Compute the tax payable by Kaeka Ltd.
ii) Explain the tax implication if the company made the income from Zambia in the last quarter of 2020.

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  • 8 Marks

AT – May 2021 – L3 – Q1a – Mergers, Amalgamation and Reorganisation

Discuss the tax implications if Farmer Ltd acquires more than 50% of Bugum Ltd's underlying ownership.

Farmer Ltd is a non-resident company based in the USA. Farmer Ltd has succeeded over the years in acquiring and selling companies in distress alongside its primary objectives of buying and selling cosmetics. In the 2020 year of assessment, it decided to announce its presence in Ghana by acquiring Bugum Ltd, a resident company. Bugum Ltd has had financial setbacks in its fortunes over the last couple of years and became vulnerable to predators.

Required:
Advise the management of Farmer Ltd, what the tax implications are if Farmer Ltd acquires more than 50% of the underlying ownership of Bugum Ltd.

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  • 10 Marks

AT – Aug 2022 – L3 – Q5a – Petroleum operations

Compute the tax payable by Alpha Ltd for the 2020 year of assessment in the upstream petroleum sector.

a) Alpha Ltd is a company operating in the upstream petroleum sector and commenced
production in 2020. The Accountant who is new to the industry provided the following extract
for the 2020 year of assessment with basis period 1 January to 31 December, 2020.

Additional information:
i) Production in barrels is 120,000,000.
ii) Finance Lease:
Principal Repayment is GH¢15,000,000.
Finance cost is GH¢1,200,000.
Lease is over 6 years starting from 1/1/2020.

Required:
Compute the tax payable for Alpha Ltd for 2020 year of assessment. (10 marks)

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  • 20 Marks

AT – Aug 2022 – L3 – Q3 – Tax planning | International taxation

Provide a briefing paper on tax planning options available for an individual and their companies.

John Zookay is a Ghanaian Citizen who has lived in the Republic of Liberia for many years.
He is also a citizen of Liberia. He is an employee of a Multinational Company that has a
subsidiary company in Ghana and Liberia. He works for the Ghanaian subsidiary company,
but his role makes him work for the other subsidiary in Liberia as well. John has chosen Ghana
as a place of his permanent home even though his immediate family is based in the Republic
of Liberia and he visits Ghana anytime during the year.
In 2018, John spent more than 184 days outside Ghana working for the Liberia office. In
addition to his employment income in Ghana, he earned some income from a high yielding
fixed deposit accounts maintained with Bank of Africa, Ghana. His gross interest income for
the year 2018 was GH¢10,000 from Bank of Africa. A few years back, whilst studying in the
United Kingdom, he maintained some high yielding interest bearing account from which he
earned £3,500 in 2018. John does not know how the current income tax law “Income Tax Act,
2015 (Act 896)” will affect his incomes earned from Ghana and elsewhere in the United
Kingdom and is worried that he would be liable to tax on all his incomes in Ghana. He is keen
on getting tax planning advice from you to enable him reduce his tax liability (if any).
John also had serious business interests in Ghana. In view of this interests, he set up two
companies limited by shares in Ghana in which he implemented his business ideas. The
following are the objects of his two companies:
1) farming and production of palm fruits on commercial scale; and
2) processing of palm fruits into oil for both the local and international market

John together with his management team strategically decided that each of the companies
maintains equity in each other in order to avoid difficulties with sourcing for external funding
thus using income from dividends within his companies effectively. John intends that at some
point, he will merge the two companies into one to avoid all the legal compliance obligations
and duplication of cost associated with running separate companies. All the two companies are
instalment taxpayers and are required to file their self-assessment estimate at their various tax
offices.
John desperately needs your assistance to enable him structure his personal and business
interest so as to minimise his tax liability.
Required:
a) Prepare a briefing paper to John on the tax implications on him and his companies. (10 marks)
b) Advise him on the compliance obligations of his companies under self-assessment. (10 marks)

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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.

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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  • 10 Marks

AT – Nov 2020 – L3 – Q5a – Tax planning

A draft paper outlining the types of worthwhile causes and donations available, circumstances for accessing them, and their benefits for Gona Jon Ltd.

You have been engaged by Kaek Consult, a tax consulting firm as an intern to be confirmed when you complete the final level of the ICAG examinations.

Your first assignment is to draft a paper to Gona Jon Ltd, who intends to take advantage of contributions and donations to a worthwhile cause. Your write-up should classify the types of worthwhile causes and donations available, the circumstances under which they can be accessed, and their benefits.

Required:
Write a draft paper for your manager’s consideration, which will be reviewed and finalized for Gona Jon Ltd on the worthwhile causes, benefits, and how to access them.

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  • 10 Marks

AT – Mar 2024 – L3 – Q2c – Business income – Corporate income tax

Evaluating the tax benefits of manufacturing ceramics using local and foreign materials versus importing finished ceramics.

Talantula Ltd has engaged you as an ICAG final level candidate on the options that would provide enormous benefits to them and also to the government. The two options are:

  • To manufacture ceramics using both local and foreign materials. The products will be sold locally and on the international market.
  • To import finished ceramics for sale in Ghana.

Required:
Evaluate FIVE (5) tax benefits of either of the business options you will want them to associate with over the other.

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  • 8 Marks

AT – Dec 2023 – L3 – Q2a – Tax Planning

Computation of tax implications under thin capitalization rules and definition of exempt persons in corporate taxation.

Scenario:
Papana Ltd, a resident company in Ghana, has cash flow challenges after a major customer ceased business dealings. Dawadawa Ltd, another resident company, negotiated with Papana Ltd and acquired 52% of its underlying ownership. As part of this arrangement, Dawadawa Ltd secured a loan facility of GH¢100 million for Papana Ltd at an interest rate of 4% above the average rate of 25%. The total interest paid in 2021 was GH¢2 million. Dawadawa Ltd is exempt from tax on all its income.

The capital structure of Papana Ltd for the 2021 year of assessment is as follows:

Required:
i) Compute the tax implications of the above arrangement.
ii) What constitutes an exempt person?

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  • 10 Marks

AT – July 2023 – L3 – Q5a – Tax planning

Computing the tax payable for group companies and identifying applicable tax incentives.

ABG Ltd is a Free Zone Enterprise established in the year 2011. The company is part of Akafina Group of Companies with subsidiaries located in Accra, Kumasi, Ayanfuri, Tema, and Bodie. The following information is relevant to the operations of Akafina Group of Companies:

Taxable Profit for the Year Ended 31 December 2022 Location Activity GH¢ million
ABG Ltd Accra Manufacturing 28
Adooso Ltd Tema Manufacturing 13
Brefa Ltd Kumasi Manufacturing 14
Crame Ltd Bodie Manufacturing 22
Didie Ltd Ayanfuri Manufacturing 33
Frankaa Ltd Accra Manufacturing 14
Greda Ltd (established since 2010) Agriculture 20

Required:
Compute the tax payable by each company and explain the type of tax incentives they may enjoy.

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