Question Tag: Personal income tax

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  • 30 Marks

TAX – Nov 2023 – L2 – Q1 – Personal Income Tax (PIT)

Compute the personal income tax payable by a proprietor with specific adjustments for disallowable expenses and capital allowances.

Alhaji Nura Imam, having spent over 20 years as an employee of Apex Limited, retired on November 1, 2020. On January 2, 2021, he registered a business under the name of Nura Imam Enterprises. The profit or loss account of the enterprise for the year ended December 31, 2021, is as follows:

You were provided with the following additional information:

(v) Agreed capital allowance on qualifying capital expenditure was N1,240,000.
(vi) Alhaji Imam received a gratuity of N4,000,000 during the year.
(vii) Alhaji Imam is blessed with five children, all within the ranges of 10 to 21 years.
(viii) The proprietor has a life assurance policy on which he pays a premium of N1,200,000 annually.

Required: Compute the personal income tax payable by Alhaji Nura Imam for the relevant assessment year. (30 Marks)

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  • 20 Marks

TAX – Nov 2014 – L2 – Q4 – Personal Income Tax

Calculate annual and monthly tax liabilities for Mr. David Olaleye.

Mr. David Olaleye retired from the Ministry of Water Resources, Ogun State, on 31 December 2012 and was paid a gratuity of ₦4,000,000. He secured employment with OLAK Limited on 1 January 2013 as a Senior Marketing Manager, with a salary of ₦8,400,000 per annum. He is married with a wife and six children.

His records at the end of his first year of employment revealed:

  1. He was given an official car with a market value of ₦2,500,000.
  2. The company pays ₦820,000 annually for his official accommodation.
  3. He has a life assurance policy with Okonkwo Assurance Plc. (Sum assured: ₦480,000; Monthly premium: ₦4,200).
  4. He contributes ₦20,000 monthly to an approved pension scheme.
  5. He spent ₦17,000 annually for the upkeep of his two aged parents.
  6. He contributes ₦15,000 per month to the National Health Insurance Fund and ₦20,000 per month to the National Housing Fund.

Requirements:

a. Compute the annual and monthly tax liabilities of Mr. David Olaleye for the relevant tax year. (12 Marks)
b. Explain what constitutes Gross Emoluments under the Personal Income Tax (Amendment) Act 2011. (3 Marks)
c. List the benefits of applying computer models in tax administration. (5 Marks)

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  • 20 Marks

TAX – Nov 2015 – L2 – Q3 – Personal Income Tax (PIT)

This question involves computing the personal income tax liability of an employee for two consecutive years.

Mr. Babangida Muhammed was employed as General Manager by Casio Nigeria Limited, a subsidiary of a United Kingdom-based holding company. He commenced the employment on 1 January 2013. He has provided the following details:

2013 (₦’000) 2014 (₦’000)
Basic salary 5,400 6,000
Rent subsidy 1,800 1,800
Furniture grant 600 600
Entertainment allowance 660 660
Other benefits
– Brand new car (valued at) 3,800,000
– Scholarship for children 500 500

Mr. Babangida Muhammed has approached your firm to assist him in determining his personal income tax liability for the last two years and assist in obtaining a current Tax Clearance Certificate on his behalf from his relevant tax authority. Your firm is also to determine whether he had underpaid his tax for the previous two years and if so, how much additional tax he may be required to pay.

Additional information provided:

Income/Expense Category 2013 (₦’000) 2014 (₦’000)
Gratuity from former employment 240 –
Rental income (Gross) 600 600
Interest on Fixed Deposit 75 90
Life Assurance Premium 100 100
Contribution to NHF (2.5% of Basic Salary) 2.5% 2.5%
Contribution to National Pension Scheme (7.5% of Total Emoluments) 7.5% 7.5%
Repair expenses for property – 45
Maintenance of aged parents 480 –
Personal Income Tax paid 850 960

Required:
a. The Personal Income Tax payable in 2013 and 2014 Years of Assessment.
(16 Marks)
b. The effect of previous payments on the tax payable.
(4 Marks)
(Total: 20 Marks)

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  • 1 Marks

TAX – Nov 2020 – L1 – SA – Q17 – Personal Income Tax (PIT)

Identify which tax subject is not covered under the Personal Income Tax Act.

Which of the following does NOT relate to the provision of the Personal Income Tax Act Cap P8 LFN 2004 (as amended)?
A. Taxation of employees
B. Taxation of estates, trusts, and settlements
C. Taxation of partners
D. Taxation of sole traders
E. Taxation of limited liability companies

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  • 20 Marks

TAX – May 2022 – L2 – SA – Q2 – Personal Income Tax (PIT)

Compute the personal income tax assessable for each partner in a partnership, considering legal fees, capital allowances, and profit-sharing.

You attended an interview for employment as Assistant Manager (Tax) in a professional firm. The following were presented to you to proffer solutions:

Mariam, Ola, Jude and Co., a firm of quantity surveyors, makes up its accounts to December 31 of each year. The following details were extracted from the firm’s accounting books in respect of the year ended December 31, 2019:

Item Amount (N)
Net profit for the year 1,540,000
Legal expenses for successfully defending one of the partners for alleged professional misconduct 100,000
Depreciation 360,000
Profit on sale of property, plant and equipment 4,220
Balancing charge 10,400
Balancing allowance 6,900
Capital allowances for the year 300,000

Additional information:

  1. Profit sharing ratio agreed by the partners: Mariam 2, Ola 3, Jude 5
  2. Mariam, Ola, and Jude received N7,400 each per annum as interest on loan to the firm
  3. Salaries paid to each of the partners are:
    • Mariam: N240,000
    • Ola: N200,000
    • Jude: N220,000

Required:
Compute the personal income tax assessable for each partner for the relevant year of assessment.

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  • 30 Marks

AX – Nov 2021 – L2 – Q1 – Personal Income Tax (PIT)

Calculation of personal income tax liability for two job offers and providing advice on the offer that yields a higher income after tax.

Miss Opeyemi Olunba is a young engineer who has been working in an oil sector for
over 5 years. She currently earns a gross salary of N10,000,000 per annum. She
recently attended two interviews for a new job at Joke Oil & Gas in Rivers State and
Dabiri Hotels & Suite in Lagos State.
She has been called by the two companies to assume office on April 1, 2021. The
following salaries and allowances were offered by the two companies:

Additional information:

  1. If Miss Opeyemi accepts the offer from Joke Oil & Gas, she will rent out her Lagos apartment for N20,000,000 per annum but will need a loan of N12,000,000 at 20% interest to modify the apartment.
  2. She will pay rent of N5,000,000 in Port Harcourt if she relocates.
  3. She maintains her child, a student at St. John University,
  4. She also supports her parents.
  5. She pays a life assurance premium of N5,000,000 annually.
  6. Her employers will deduct contributions for the National Housing Fund (N5,000,000) and Pension Fund (N3,000,000).
  7. She also pays National Health Insurance Premium (N1,000,000).

Required:

a. Compute Miss Opeyemi’s personal income tax liability for the relevant year of assessment for both offers.
b. Advise her on which employment will give her a higher income after tax.

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  • 20 Marks

TAX – May 2021 – L1 – SB – Q3 – Personal Income Tax (PIT)

Definitions and explanations related to the taxation of employment income as per the Personal Income Tax Act.

The Personal Income Tax Act Cap P8 LFN 2004 (as amended) defines employment to include any appointment or office whether public or otherwise for which remuneration is payable. An employer shall register with the relevant tax authority for the purposes of deducting income tax from its employees with or without formal notification or direction by the relevant tax authority.

Required:
a. Define an “itinerant worker”. (2 Marks)
b. Explain the conditions for taxation of income from employment. (10 Marks)
c. State the penalties payable by employers who failed to file returns of emoluments paid to employees in the preceding year on January 31, of each year, with the relevant tax authority. (8 Marks)

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  • 8 Marks

TAX – May 2019 – L2 – Q3b – Personal Income Tax (PIT)

Identify the tax authority for Mr. Muhammed and calculate his income tax liability based on salary and deductions.

In 2016, Mr. James Muhammed lived at Ojodu Abiodun village, Ogun State and worked for the Federal High Court, Ikeja, Lagos State, on an annual salary of N1,600,000. Mr. Muhammed contributes to an approved pension scheme at the appropriate rate of 8% and also pays a life assurance premium equivalent to 5% of his annual salary.

Required:
(i) Identify the relevant tax authority to which he will be subjected to tax. (2 Marks)
(ii) Compute his personal income tax liability for the relevant assessment year. (6 Marks)

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  • 20 Marks

TAX – Nov 2018 – L2 – SA – Q1a – Personal Income Tax (PIT)

Calculate the personal income tax payable by Dr. Ogungbemi for the relevant year of assessment.

Dr. Alade Ogungbemi retired from the service of Oyo State Government after attaining 60 years of age on July 31, 2017. He secured an employment with TUC Foods Limited as human resources manager, effective August 1, 2017.

The following details were provided:

  1. Salary: January 1 – July 31, 2017: N420,000 per month
  2. New employment: N4,800,000 per annum
  3. Pension income, effective August 1, 2017: N840,000 per annum
  4. Transport allowance (new employment): N120,000 per annum
  5. Rent allowance (new employment): N720,000 per annum
  6. Contributions to national housing fund and contributory pension fund scheme at 2½% and 7½% of gross income, respectively
  7. Rental income received (gross):
    • July 19, 2015: N240,000
    • December 1, 2015: N120,000
    • July 4, 2016: N360,000
    • December 4, 2016: N420,000
  8. Dr. Ogungbemi is married and has four children. All except one, aged 20 years, are still in school.
  9. Dr. Ogungbemi has a life assurance policy with a sum assured of N7,500,000 and an annual premium of N460,000. His aged parents live with him, and neither of them has an income.

Required:
Compute the personal income tax payable by Dr. Ogungbemi for the relevant year of assessment.

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  • 14 Marks

AT – NOV 2018 – L3 – Q2C – Business income – Corporate income tax, Tax administration in Ghana

Calculate taxable income and tax payable for an individual with multiple income sources, and identify tax compliance issues for a private practice.

c) Kate Oppong, a physically challenged, works for the Ministry of Health as an eye surgeon and optician based at Komfo Anokye Teaching hospital in Kumasi. She dedicates most of her free time to her private practice, as well as writing books and articles for the Ghana Medical Journal. Kate is also part of the medical team for the local NGO and Sight Restoration, which is involved in cataract surgery for the disadvantaged members of society in remote rural areas.

Kate’s private practice is located in Kumasi and has a staff complement of six employees who are all full time workers. Kate only attends to the patients at her private practice strictly by appointment and her patient base has been steadily growing due to her experience and dedication.

In terms of her service contract with Sight Restoration, Kate is required to participate in all the cataract operations scheduled for the year. Her service contract is for a year, subject to renewal as and when donor support is available.Sight Restoration’s field staff, of which Kate is one, are paid a predetermined monthly salary plus an attendance allowance which is paid only after each cataract operation. The field staff is also entitled to a one-off representation allowance for participating in scheduled seminars.

Kate Oppong’s earnings and deductions for the year ended 31 December 2017 were:

Notes:

  1. This amount is part repayment of the interest free personal loan of GH¢12,000 advanced to Kate on 1 January, 2017, repayable over two years. The Bank of Ghana interest rate for the year ended 31 December 2017 was constant at 20%.
  2. This amount was fully expended towards the travelling costs for Kate and her minor son for his medical treatment in South Africa.
  3. No employees tax (PAYE) or corporate income tax was paid in respect of the amounts paid to the employees of the private practice (including Kate) or the profits from the practice. This was because in Kate’s opinion her operations were ‘private’ and as such not subject to tax and also because she believed that she was already contributing her fair tax share from her other two employers.
  4. Kate is a single parent and takes care of her single son in the senior high school. She also takes full responsibility of her aged mother.

Required:

i) State the Ghana Revenue Authority’s (GRA) requirements which have been breached by Kate Oppong and consequences of the breach based on the information given in note (3). (5 marks)

ii) Calculate the taxable income of and income tax payable by Kate Oppong for the year ended 31 December 2017. Note: All computations should be rounded to a whole cedi. (9 marks)

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  • 30 Marks

TAX – Nov 2023 – L2 – Q1 – Personal Income Tax (PIT)

Compute the personal income tax payable by a proprietor with specific adjustments for disallowable expenses and capital allowances.

Alhaji Nura Imam, having spent over 20 years as an employee of Apex Limited, retired on November 1, 2020. On January 2, 2021, he registered a business under the name of Nura Imam Enterprises. The profit or loss account of the enterprise for the year ended December 31, 2021, is as follows:

You were provided with the following additional information:

(v) Agreed capital allowance on qualifying capital expenditure was N1,240,000.
(vi) Alhaji Imam received a gratuity of N4,000,000 during the year.
(vii) Alhaji Imam is blessed with five children, all within the ranges of 10 to 21 years.
(viii) The proprietor has a life assurance policy on which he pays a premium of N1,200,000 annually.

Required: Compute the personal income tax payable by Alhaji Nura Imam for the relevant assessment year. (30 Marks)

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  • 20 Marks

TAX – Nov 2014 – L2 – Q4 – Personal Income Tax

Calculate annual and monthly tax liabilities for Mr. David Olaleye.

Mr. David Olaleye retired from the Ministry of Water Resources, Ogun State, on 31 December 2012 and was paid a gratuity of ₦4,000,000. He secured employment with OLAK Limited on 1 January 2013 as a Senior Marketing Manager, with a salary of ₦8,400,000 per annum. He is married with a wife and six children.

His records at the end of his first year of employment revealed:

  1. He was given an official car with a market value of ₦2,500,000.
  2. The company pays ₦820,000 annually for his official accommodation.
  3. He has a life assurance policy with Okonkwo Assurance Plc. (Sum assured: ₦480,000; Monthly premium: ₦4,200).
  4. He contributes ₦20,000 monthly to an approved pension scheme.
  5. He spent ₦17,000 annually for the upkeep of his two aged parents.
  6. He contributes ₦15,000 per month to the National Health Insurance Fund and ₦20,000 per month to the National Housing Fund.

Requirements:

a. Compute the annual and monthly tax liabilities of Mr. David Olaleye for the relevant tax year. (12 Marks)
b. Explain what constitutes Gross Emoluments under the Personal Income Tax (Amendment) Act 2011. (3 Marks)
c. List the benefits of applying computer models in tax administration. (5 Marks)

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  • 20 Marks

TAX – Nov 2015 – L2 – Q3 – Personal Income Tax (PIT)

This question involves computing the personal income tax liability of an employee for two consecutive years.

Mr. Babangida Muhammed was employed as General Manager by Casio Nigeria Limited, a subsidiary of a United Kingdom-based holding company. He commenced the employment on 1 January 2013. He has provided the following details:

2013 (₦’000) 2014 (₦’000)
Basic salary 5,400 6,000
Rent subsidy 1,800 1,800
Furniture grant 600 600
Entertainment allowance 660 660
Other benefits
– Brand new car (valued at) 3,800,000
– Scholarship for children 500 500

Mr. Babangida Muhammed has approached your firm to assist him in determining his personal income tax liability for the last two years and assist in obtaining a current Tax Clearance Certificate on his behalf from his relevant tax authority. Your firm is also to determine whether he had underpaid his tax for the previous two years and if so, how much additional tax he may be required to pay.

Additional information provided:

Income/Expense Category 2013 (₦’000) 2014 (₦’000)
Gratuity from former employment 240 –
Rental income (Gross) 600 600
Interest on Fixed Deposit 75 90
Life Assurance Premium 100 100
Contribution to NHF (2.5% of Basic Salary) 2.5% 2.5%
Contribution to National Pension Scheme (7.5% of Total Emoluments) 7.5% 7.5%
Repair expenses for property – 45
Maintenance of aged parents 480 –
Personal Income Tax paid 850 960

Required:
a. The Personal Income Tax payable in 2013 and 2014 Years of Assessment.
(16 Marks)
b. The effect of previous payments on the tax payable.
(4 Marks)
(Total: 20 Marks)

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  • 1 Marks

TAX – Nov 2020 – L1 – SA – Q17 – Personal Income Tax (PIT)

Identify which tax subject is not covered under the Personal Income Tax Act.

Which of the following does NOT relate to the provision of the Personal Income Tax Act Cap P8 LFN 2004 (as amended)?
A. Taxation of employees
B. Taxation of estates, trusts, and settlements
C. Taxation of partners
D. Taxation of sole traders
E. Taxation of limited liability companies

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  • 20 Marks

TAX – May 2022 – L2 – SA – Q2 – Personal Income Tax (PIT)

Compute the personal income tax assessable for each partner in a partnership, considering legal fees, capital allowances, and profit-sharing.

You attended an interview for employment as Assistant Manager (Tax) in a professional firm. The following were presented to you to proffer solutions:

Mariam, Ola, Jude and Co., a firm of quantity surveyors, makes up its accounts to December 31 of each year. The following details were extracted from the firm’s accounting books in respect of the year ended December 31, 2019:

Item Amount (N)
Net profit for the year 1,540,000
Legal expenses for successfully defending one of the partners for alleged professional misconduct 100,000
Depreciation 360,000
Profit on sale of property, plant and equipment 4,220
Balancing charge 10,400
Balancing allowance 6,900
Capital allowances for the year 300,000

Additional information:

  1. Profit sharing ratio agreed by the partners: Mariam 2, Ola 3, Jude 5
  2. Mariam, Ola, and Jude received N7,400 each per annum as interest on loan to the firm
  3. Salaries paid to each of the partners are:
    • Mariam: N240,000
    • Ola: N200,000
    • Jude: N220,000

Required:
Compute the personal income tax assessable for each partner for the relevant year of assessment.

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  • 30 Marks

AX – Nov 2021 – L2 – Q1 – Personal Income Tax (PIT)

Calculation of personal income tax liability for two job offers and providing advice on the offer that yields a higher income after tax.

Miss Opeyemi Olunba is a young engineer who has been working in an oil sector for
over 5 years. She currently earns a gross salary of N10,000,000 per annum. She
recently attended two interviews for a new job at Joke Oil & Gas in Rivers State and
Dabiri Hotels & Suite in Lagos State.
She has been called by the two companies to assume office on April 1, 2021. The
following salaries and allowances were offered by the two companies:

Additional information:

  1. If Miss Opeyemi accepts the offer from Joke Oil & Gas, she will rent out her Lagos apartment for N20,000,000 per annum but will need a loan of N12,000,000 at 20% interest to modify the apartment.
  2. She will pay rent of N5,000,000 in Port Harcourt if she relocates.
  3. She maintains her child, a student at St. John University,
  4. She also supports her parents.
  5. She pays a life assurance premium of N5,000,000 annually.
  6. Her employers will deduct contributions for the National Housing Fund (N5,000,000) and Pension Fund (N3,000,000).
  7. She also pays National Health Insurance Premium (N1,000,000).

Required:

a. Compute Miss Opeyemi’s personal income tax liability for the relevant year of assessment for both offers.
b. Advise her on which employment will give her a higher income after tax.

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  • 20 Marks

TAX – May 2021 – L1 – SB – Q3 – Personal Income Tax (PIT)

Definitions and explanations related to the taxation of employment income as per the Personal Income Tax Act.

The Personal Income Tax Act Cap P8 LFN 2004 (as amended) defines employment to include any appointment or office whether public or otherwise for which remuneration is payable. An employer shall register with the relevant tax authority for the purposes of deducting income tax from its employees with or without formal notification or direction by the relevant tax authority.

Required:
a. Define an “itinerant worker”. (2 Marks)
b. Explain the conditions for taxation of income from employment. (10 Marks)
c. State the penalties payable by employers who failed to file returns of emoluments paid to employees in the preceding year on January 31, of each year, with the relevant tax authority. (8 Marks)

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  • 8 Marks

TAX – May 2019 – L2 – Q3b – Personal Income Tax (PIT)

Identify the tax authority for Mr. Muhammed and calculate his income tax liability based on salary and deductions.

In 2016, Mr. James Muhammed lived at Ojodu Abiodun village, Ogun State and worked for the Federal High Court, Ikeja, Lagos State, on an annual salary of N1,600,000. Mr. Muhammed contributes to an approved pension scheme at the appropriate rate of 8% and also pays a life assurance premium equivalent to 5% of his annual salary.

Required:
(i) Identify the relevant tax authority to which he will be subjected to tax. (2 Marks)
(ii) Compute his personal income tax liability for the relevant assessment year. (6 Marks)

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  • 20 Marks

TAX – Nov 2018 – L2 – SA – Q1a – Personal Income Tax (PIT)

Calculate the personal income tax payable by Dr. Ogungbemi for the relevant year of assessment.

Dr. Alade Ogungbemi retired from the service of Oyo State Government after attaining 60 years of age on July 31, 2017. He secured an employment with TUC Foods Limited as human resources manager, effective August 1, 2017.

The following details were provided:

  1. Salary: January 1 – July 31, 2017: N420,000 per month
  2. New employment: N4,800,000 per annum
  3. Pension income, effective August 1, 2017: N840,000 per annum
  4. Transport allowance (new employment): N120,000 per annum
  5. Rent allowance (new employment): N720,000 per annum
  6. Contributions to national housing fund and contributory pension fund scheme at 2½% and 7½% of gross income, respectively
  7. Rental income received (gross):
    • July 19, 2015: N240,000
    • December 1, 2015: N120,000
    • July 4, 2016: N360,000
    • December 4, 2016: N420,000
  8. Dr. Ogungbemi is married and has four children. All except one, aged 20 years, are still in school.
  9. Dr. Ogungbemi has a life assurance policy with a sum assured of N7,500,000 and an annual premium of N460,000. His aged parents live with him, and neither of them has an income.

Required:
Compute the personal income tax payable by Dr. Ogungbemi for the relevant year of assessment.

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  • 14 Marks

AT – NOV 2018 – L3 – Q2C – Business income – Corporate income tax, Tax administration in Ghana

Calculate taxable income and tax payable for an individual with multiple income sources, and identify tax compliance issues for a private practice.

c) Kate Oppong, a physically challenged, works for the Ministry of Health as an eye surgeon and optician based at Komfo Anokye Teaching hospital in Kumasi. She dedicates most of her free time to her private practice, as well as writing books and articles for the Ghana Medical Journal. Kate is also part of the medical team for the local NGO and Sight Restoration, which is involved in cataract surgery for the disadvantaged members of society in remote rural areas.

Kate’s private practice is located in Kumasi and has a staff complement of six employees who are all full time workers. Kate only attends to the patients at her private practice strictly by appointment and her patient base has been steadily growing due to her experience and dedication.

In terms of her service contract with Sight Restoration, Kate is required to participate in all the cataract operations scheduled for the year. Her service contract is for a year, subject to renewal as and when donor support is available.Sight Restoration’s field staff, of which Kate is one, are paid a predetermined monthly salary plus an attendance allowance which is paid only after each cataract operation. The field staff is also entitled to a one-off representation allowance for participating in scheduled seminars.

Kate Oppong’s earnings and deductions for the year ended 31 December 2017 were:

Notes:

  1. This amount is part repayment of the interest free personal loan of GH¢12,000 advanced to Kate on 1 January, 2017, repayable over two years. The Bank of Ghana interest rate for the year ended 31 December 2017 was constant at 20%.
  2. This amount was fully expended towards the travelling costs for Kate and her minor son for his medical treatment in South Africa.
  3. No employees tax (PAYE) or corporate income tax was paid in respect of the amounts paid to the employees of the private practice (including Kate) or the profits from the practice. This was because in Kate’s opinion her operations were ‘private’ and as such not subject to tax and also because she believed that she was already contributing her fair tax share from her other two employers.
  4. Kate is a single parent and takes care of her single son in the senior high school. She also takes full responsibility of her aged mother.

Required:

i) State the Ghana Revenue Authority’s (GRA) requirements which have been breached by Kate Oppong and consequences of the breach based on the information given in note (3). (5 marks)

ii) Calculate the taxable income of and income tax payable by Kate Oppong for the year ended 31 December 2017. Note: All computations should be rounded to a whole cedi. (9 marks)

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