Question Tag: Tax Compliance

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  • 10 Marks

AT – Nov 2024 – L3 – Q5a – Transfer Pricing Documentation and Compliance

Explain the required transfer pricing documentation and exemptions under Ghana’s Transfer Pricing Regulations, 2020 (L.I. 2412).

You are a Senior Transfer Pricing Associate of Fameye and Associates. You have received the following email from a former client, Asew LTD, who has received a Transfer Pricing audit assessment from the Ghana Revenue Authority (GRA) for the 2021, 2022, and 2023 years of assessment.

Subject: Transfer Pricing Compliance Assistance

Hello Team,

I came to the office today and received a letter from the GRA regarding a tax assessment on transfer pricing issues. According to the letter, our company owes the GRA some penalties for non-compliance with the transfer pricing regulations. I am confused as to what our compliance obligations are. I would need your assistance on how we can comply with the transfer pricing laws of Ghana.

I hope to hear from you soon.

Kind regards,

Nii Armaah
Managing Director, Asew LTD

Required:

In line with the provisions of the Transfer Pricing Regulations, 2020 (L.I. 2412), draft a response for the review of your Tax Partner, covering the following:

(i) The required transfer pricing documentation that must be maintained by companies in Ghana under the three-tier transfer pricing documentation requirements, including the time by which these must be filed with the GRA, where applicable.                      (ii) TWO conditions or circumstances under which a company may be exempted from compliance with any of the above documentation requirements.

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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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  • 5 Marks

PT- Nov 2024 – L2 – Q5d – Data Analytics in Taxation

Explain how data analytics can be used to detect tax evasion and provide examples of how GRA might use data analytics to enhance tax compliance.

GRA’s use of data analytics has become increasingly important in identifying tax evasion and improving compliance.

Required:
i) Explain how data analytics can be used to detect tax evasion. 
ii) Provide TWO examples of how GRA might use data analytics to enhance tax compliance.

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  • 5 Marks

PT – Nov 2024 – L2 – Q5c – E-Auditing and Tax Compliance

Explain e-auditing, its differences from traditional tax audits, and discuss advantages for taxpayers and tax authorities.

The integration of Information Technology in tax administration has enabled the Ghana Revenue Authority (GRA) to adopt e-auditing processes, allowing for the remote examination of taxpayers’ records.                                                                                                      Required:
i) Describe the process of e-auditing and how it differs from traditional tax audits. 
ii) Discuss TWO advantages of e-auditing for both the taxpayer and the tax authority.

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  • 5 Marks

PT – Nov 2024 – L2 – Q5b – Withholding Tax & VAT Calculation

Compute VAT and direct tax withheld on a taxable supply of medical consumables to a tax withholding agent.

Charley Chemist LTD made a taxable supply of medical consumables amounting to GH¢750,000 exclusive of VAT and levies on 23 November 2023 to the University of Ghana Medical Centre. The University of Ghana Medical Centre is a withholding tax agent for both VAT withholding and Direct Tax withholding.

Required:
i) Compute the amount of VAT withheld by the University of Ghana Medical Center. 
ii) Compute the amount of direct tax withheld by the University of Ghana Medical Centre.

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  • 5 Marks

PT – Nov 2024 – L2 – Q5a – Notification to Commissioner-General for Non-Resident Contracts

Requirements for notifying the Commissioner-General when a resident contracts a non-resident.

For the purpose of withholding tax, the Income Tax Act, 2016 (Act 896) requires a resident person who enters into a contract with a non-resident person which gives rise to income from Ghana to notify the Commissioner-General within thirty (30) days.

Required:

State the items that must be detailed in the notification to the Commissioner-General.

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  • 5 Marks

PT – Nov 2024 – L2 – Q2e – Tax Audit and Under-declaration of Sales

Action to be taken regarding an under-declared sales revenue during a tax audit.

You have been engaged as an Accounts Officer in Abokobi LTD. Sales of GH¢10,000,000 were inadvertently under-declared. A team from the Ghana Revenue Authority (GRA) is at your premises conducting an audit. The GRA Audit Team did not review the sales revenue. After the audit, you noted that the amount constituting the under-declaration of the sales was mistakenly credited to the suppliers’ account in the ledger.

Required:

Detail out your position on the above as to what action to take.

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  • 2 Marks

PT – Nov 2024 – L2 – Q2a – Integration of Revenue Agencies into GRA

Explanation of the benefits resulting from the consolidation of revenue agencies into GRA.

In 2009, the former revenue agencies (VAT, IRS, and CEPS) were consolidated into the Ghana Revenue Authority (GRA). This integration was anticipated to provide certain benefits to both taxpayers and the overall tax administration.

Required:

State FOUR benefits resulting from the integration of the revenue agencies into the GRA

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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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  • 20 Marks

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

Analyze tax implications for Jones Addoteye and Maame Abrefa's company Addofa Ltd, including working time sharing, export activities, and tax planning opportunities.

Jones Addoteye is a Ghanaian Citizen by birth but has also acquired a British Citizenship. He has lived in Britain for several years and relocated to Ghana in January 2015. He decided to invest his life-long savings in Ghana by incorporating a company limited by shares with his wife, Maame Abrefa who also happens to be a Ghanaian/British. Jones and his wife are the only shareholders of the company called Addofa Ltd which was registered with the Registrar Generals Department in January 2016.

Jones and his wife Maame Abrefa continue to maintain links with Britain even though they have relocated to Ghana. This is because they still have some economic interest in Britain. In view of this, they decided to share their working time in both Ghana and Britain following an advice from a Junior Tax Consultant of one of the Ghanaian Tax Firms. The junior tax consultant informed them they will be tax efficient if they share their working time.

Part of their object for setting up Addofa Ltd was to produce poultry for sale to the Ghanaian market in the first few years and later export the poultry products to other countries. It is also part of Addofa Ltd’s growth strategies that after five (5) years, it will process and package the poultry in an edible manner for export to other African markets. This poultry processing business will be carried out in a new company which they intend to set up. Both companies will be located at Cape Coast, the Central Regional Capital. Business for Addofa Ltd is expected to grow significantly in 2021.

Addofa Ltd also invested 37% equity in another Ghanaian company from which they received dividend of GH¢50,000 in 2018.

Mr. Jones Addoteye intimated to you that even though he had some initial advice, he was still not sure if his wife and himself were making optimal tax decisions for themselves and for the company. He has therefore approached you as an experienced Tax Consultant for advice. They wish to take advantage of the beneficial provisions of the Income Tax Laws to arrange their personal and company affairs to be tax efficient.

Required:

a) Evaluate the tax implications on Jones Addotey and Maame Abrefa sharing their working time between Ghana and Britain. (8 marks)

b) Explain the tax implications available to Addofa Ltd if it goes into export or sell in the local market. (4 marks)

c) Explain the tax planning opportunities available to the new company to be set up. (4 marks)

d) Discuss the tax compliance obligations for Addofa Ltd at the time of commencement of operations in Ghana. (4 marks)

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  • 10 Marks

AT – Mar 2024 – L3 – Q3c – Anti-avoidance measures

Explaining the difference between tax avoidance and tax evasion, examples of both, and limitations to tax planning.

According to the Organisation for Economic Co-operation and Development (OECD), tax avoidance and tax evasion are terms which are difficult to define but are generally used to describe the arrangement of a taxpayer’s affairs intended to reduce their tax liability.

Required:

i) Explain the differences between tax avoidance and tax evasion.
(3 marks)

ii) Enumerate THREE (3) examples of tax avoidance activities firms and individuals are likely to engage in.
(3 marks)

iii) Identify FOUR (4) examples of activities that are likely to be classified as tax evasion and not tax avoidance.
(2 marks)

iv) Explain TWO (2) limitations to effective tax planning.
(2 marks)

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  • 8 Marks

AT – Mar 2024 – L3 – Q1b – International taxation

Discussing the challenges posed by double taxation agreements and the methods of granting double taxation relief.

There is growing attention on the question of tax treaties signed by developing countries. The costs of tax treaties to developing countries have been highlighted in recent years by NGOs such as ActionAid and SOMO (Lewis, 2013). During 2014, an influential IMF paper warned that developing countries “would be well-advised to sign treaties only with considerable caution” (IMF, Spillovers on International Corporate Taxation, 2014) and the OECD, as part of its Base Erosion and Profit Shifting (BEPS) project, proposes to add text to the commentary of its model treaty to help countries decide “whether a treaty should be concluded with a State but also whether a State should seek to modify or replace an existing treaty or even, as a last resort, terminate a treaty” (OECD, Preventing the Granting of Treaty Benefits in Inappropriate Circumstances, 2014).

Required:

i) Examine the challenges double taxation agreements pose to Ghana.
(4 marks)

ii) Explain the methods of granting double taxation reliefs.
(4 marks)

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  • 5 Marks

AT – Nov 2015 – L3 – Q4b – Tax administration in Ghana

Outlining the conditions under which VAT registration can be canceled by the Commissioner General.

Nangodi Enterprise, in its bid to be tax compliant, has sought your opinion on the circumstances under which its registration under Value Added Tax (VAT) can be canceled by the Commissioner General.

Required:
What are the conditions under which Nangodi Enterprise’s VAT registration can be canceled?

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  • 3 Marks

AT – Nov 2015 – L3 – Q3d – Ethical principles in taxation

Explanation of who qualifies as incapacitated persons under tax law.

Who are incapacitated persons?

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  • 5 Marks

AT – Nov 2015 – L3 – Q3b – Anti-avoidance measures

Explaining the difference between tax evasion and tax avoidance with examples.

Distinguish between Tax Evasion and Tax Avoidance and give one example of each.

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  • 10 Marks

AT – Nov 2015 – L3 – Q2c – Tax administration in Ghana

Explaining the self-assessment tax regime and benefits to taxpayers under Ghana’s tax administration system.

Ghana Revenue Authority has embarked on comprehensive reforms geared towards “Voluntary Tax Compliance.” Among the reforms is requesting taxpayers to determine their tax liabilities and consequently the tax payable. This has been criticized by some taxpayers as increasing the cost of compliance or doing business. You have been engaged by the Ministry of Finance to help Ghana Revenue Authority educate taxpayers on these reforms.

You are required to explain to taxpayers:

i. Self-Assessment Tax Regime.
(4 marks)

ii. Critically examine the benefits taxpayers stand to derive from the Self-Assessment Regime that has become part of tax administration in Ghana.
(6 marks)

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  • 5 Marks

AT – Nov 2017 – L3 – Q1d – Tax planning, Anti-avoidance measures

Explaining tax evasion and identifying ways companies evade taxes.

The Presidential Commission on Revenue Mobilization has indicated that tax evasion activities of some companies deny the state of its required revenue for development.

Required:

  1. Explain what tax evasion is, and
  2. Identify THREE ways by which companies evade tax. (5 marks)

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  • 4 Marks

AT – Nov 2016 – L3 – Q3c – Business income – Corporate income tax

Explain the arm’s length principle and its application in tax transactions between related parties.

c) The Commissioner-General of the Ghana Revenue Authority expects persons conducting business with related parties to ensure that the transaction is at arm’s length.

Required:
Explain the arm’s length principle in tax transactions. (4 marks)

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  • 10 Marks

AT – Nov 2023 – L3 – Q5c – Tax planning

Explain the residual deduction rule and state four conditions under which repairs and improvements are considered allowable deductions.

Repairs and improvements are not mutually exclusive in tax administration because one leads to the other, and one cannot happen without the other. The Commissioner-General ensures that certain conditions are met before an amount of repairs and improvements is taken as an allowable deduction under the deductibility principles in tax administration.

You are the Tax Manager for Akwaaba and Associates, a firm of tax consultants. The Finance Manager of APC Ltd, a client of your firm, is contemplating how to treat major repair works being undertaken on their warehouse.

Required:
Write a memo to the Finance Manager of APC Ltd explaining what constitutes the residual deduction rule and state FOUR (4) conditions under which repairs and improvements are considered allowable deductions. (10 marks)

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