- 20 Marks
ATP – Aug 2017 – L2 – Q2 – Indirect Taxes and Capital Taxes
Determine direct and indirect tax liabilities, including penalties, for Tosese Limited for 2015.
Question
Tosese Limited is a company registered in Ghana under the Companies Act 1963, Act 179 and has been in operation for several years. The company has been noted by the Tax Authorities for being non tax compliant and no returns were submitted and paid for direct taxes in the 2015 year of assessment. However, after much Tax Education with the support of his Tax Practitioner, the Finance Manager presented the financial statement to the GRA.
The summarised Income Statement for the year ended 31st December 2015 showed the following.
Tosese Limited Income Statement
| Description | GH¢ |
|---|---|
| Turnover | 5,640,000.00 |
| Direct Costs | 4,840,000.00 |
| Gross Profit | 800,000.00 |
| Administration and General Expenses | 560,000.00 |
| Profit before Tax | 240,000.00 |
| Taxation | 60,000.00 |
| Profit after Tax | 180,000.00 |
| Net Profit Transferred to Income Surplus | 180,000.00 |
Income Surplus Account
| Description | GH¢ |
|---|---|
| Balance brought forward | 1,575,000.00 |
| Add Profit for the year | 180,000.00 |
| Balance carried forward | 1,755,000.00 |
The details of the notes are shown below. Note 1. The company is registered for VAT and has not been submitting its returns regularly. The turnover per the VAT Returns submitted to the Commissioner-General during the period under review was GH¢5,080,000.00
Note 2. Direct Costs
| Description | GH¢ |
|---|---|
| Imports | 3,684,000.00 |
| Freight and Insurance | 368,400.00 |
| Import Duties | 736,800.00 |
| Transport | 50,800.00 |
| Total | 4,840,000.00 |
Note 3. Administration and General Expenses included
| Description | GH¢ |
|---|---|
| Consultancy Fees | 25,000.00 |
| Printing and Stationery | 84,000.00 |
| Rent (Commercial Property) | 61,280.00 |
| Equipment Rentals | 15,000.00 |
| Directors Fees | 60,000.00 |
Note 4. The Company since incorporation has never declared and paid any dividend to its four shareholders even though the company has consistently been declaring profit. The Commissioner-General has therefore decided to invoke Section 59 (8) of the Income Tax Act, 2015 Act 896 by notice in writing to apply 40% of the balance on the Income Surplus Account to Dividend Tax.
Required: You are to determine the tax liability due from the company in respect of direct and Indirect Taxes for 2015 year of assessment, including any relevant penalties that are applicable. Ignore Corporate Tax. Total 20 Marks.
Find Related Questions by Tags, levels, etc.
- Tags: Dividend tax, Income Surplus, Penalty, VAT, Withholding Tax
- Level: Level 2
- Topic: Indirect Taxes
- Series: AUG 2017
