Question Tag: Tax computation

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  • 20 Marks

STP – Feb 2018 – L2 – Q4- Taxation and Operating Strategies

Calculate Honson Plc's tax liability for Kumasi/Accra, advise on Nsawam, and discuss non-tax factors for facility location.

Honson Pic, a UK-based manufacturing company, is planning to build a new processing facility in Ghana. The Chief Executive Officer in a meeting with Management needs to decide whether to cite the facility in Accra or in Kumasi. Market intelligence has no preference for citing the facility either in Kumasi or Accra since information gathered indicate that business activities would largely be same in Kumasi and Accra for the next 10 years.

The following forecast information is relevant for the decision-making process being considered by management.

Kumasi Accra GH¢ GH¢

Required: i. Calculate Hamson Plc’s income tax liability for each proposed location for the first year. ii. Would you advise Hamson Plc to consider citing the facility in Nsawam, taking into consideration the close proximity of Nsawam to Accra? iii. Discuss three (3) non-tax factors that Hamson UK Plc may consider in the decision-making process to locate the facility either in Kumasi, Accra or elsewhere in the country.

b). With reference to the Income Tax Act, 2015 (Act 896) explain the following: i. Private Ruling issued by the Commissioner-General: (2 marks) ii. Conditions under which a Private Ruling will be binding on the Commissioner-General and on the person to whom the Private Ruling is issued.

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  • 20 Marks

STP – Aug 2012 – L3 – Q1 – Tax Computation

Compute tax liability for Jamaa Mining Company for 2008 and 2009 based on provided financials.

The profit and loss account of Jamaa Mining Company Ltd for the years ended December 2008 and 2009 are as tabled below:

Year Ended 31 December (all amounts in ‘000)
2009 GHC 2008 GHC
Turnover 309,000 430,000
Cost of Sales (164,000)
Gross Profit 145,000
General and Admin Exp (100,000)
Operating Profit 45,000
Other Income 5,300
Net Profit before tax 50,300
Income Tax provision 12,575
Transfer to Income Surplus 37,725
Income Surplus Account
Balance brought forward 46,945
Transfer from profit and loss account 9,220
Surplus carried forward 46,945

Notes:
2. Turnover is made up as follows
For year

2009 2008
Collected for year but included in prior year a/c 291,000
Interest income received for 18 months 0 18,000
309,000
  1. Cost of sales includes:

2009 2008
Withholding taxes paid 1,500 1,000
VAT unclaimed 6,000 8,000
Depreciation 43,000 25,000

4a. Gen and Admin expenses includes

2009 2008
Rent prepaid of 3,000
Rent outstanding 500 500

4b. Includes unrealized foreign exchange gain of but realized in 2009

2009 2008
2,000 2,000

The GRA has agreed a capital allowance of GHC20,000 for year 2009 and GHC15,000 for year 2008.

Required:
Please advise management of Jamaa Mining Company Ltd on the tax due to the GRA for the years 2009 and 2008.

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  • 20 Marks

ATP – Aug 2015 – L2 – Q4 – Income Tax Computation

Compute chargeable income for partners of Zee & Associates for 2012-2014, including capital allowances.

Ace, Brace and Crate have been in partnership since 2006 trading as Zee & Associates dealing in cement and preparing accounts to December 31 each year. Their Partnership Agreement showed that they share profits in the ratio 5:4:3 respectively.

The written-down values of the assets used in their operations as at 31st December, 2011 were as follows:

GH¢
Office Equipment 148,000.00
Pick–up vehicles 95,000.00
Saloon vehicles 80,000.00

Brace resigned from Zee & Associates on 2nd January 2013 and on his exit, Ace and Crate continued the business agreeing to share profits in the ratio 2:1 respectively.

The partnership Firm acquired the following additional assets:

a) A building for office annex costing GH¢430,000.00 on 4th October, 2013.

b) One Toyota Camry for GH¢85,000.00 on 26th March 2012

c) One Toyota Land Cruiser Prado at a cost of GH¢188,000.00 on 3rd July, 2013

Some of the office equipment were sold on 15th June, 2013 for GH¢35,000.00.

The Firm’s adjusted profits for tax purposes but before grant of capital allowance were as follows:

Year to 31/12/2012 GH¢315,000.00
Year to 31/12/2013 GH¢298,000.00
Year to 31/12/2014 GH¢328,000.00

You are required to compute the chargeable income, if any, of each partner for the relevant years of assessment on the assumption that no other incomes accrued to any of the partners.

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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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  • 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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  • 10 Marks

PT – Nov 2024 – L2 – Q3b – Capital Gains Tax and Asset Realization

Tax computation on asset realization and understanding taxable capital assets.

b) Kwamoso LTD sold the following assets to Mr. Badu on 18 May, 2023 for GH¢450,000 to settle a tax liability. Kwamoso LTD is not listed on the Ghana Stock Exchange.

Below are details of the assets:

Name of Asset Cost (GH¢) Net Book Value (GH¢) Market Value (18 May 2023) (GH¢) Market Value (31 Dec 2023) (GH¢)
Truck vehicle 750,000 480,000 320,000 350,000
Generator 60,000 29,400 8,400 8,000
Laptops 48,000 17,200 8,000 7,200

Required:

i) Compute the consideration received in respect of each asset realised.

ii) What constitutes capital assets in the context of capital gains tax in Ghana?

iii) Under what circumstance would there be a loss in the realization of a liability?

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  • 9 Marks

PT – Nov 2024 – L2 – Q2d – Withholding VAT Computation

Compute GETFund Levy, NHIL, COVID-19 Levy, output VAT, withholding VAT, and tax payable for a firm under the VAT scheme

N&L Associates, an accounting firm, issued an invoice to a withholding VAT agent for GH¢250,000 (including VAT, GETFund Levy, NHIL, and COVID-19 Levy) for assurance services provided to a client in March 2024. These were the only services provided by the firm during the period, and payments are to be made within the same period.

Required:

i) Calculate the portion of the GETFund Levy, NHIL, and COVID-19 Levy that the agent must compute for the payment of the services rendered. (3 marks)
ii) Determine the output VAT to be reported on the accounting firm’s monthly VAT return. 
iii) Compute the withholding VAT to be withheld if N&L Associates are VAT withholding agents. 
iv) Calculate the tax payable by the accounting firm if the total input tax for the period amounts to GH¢7,200.

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  • 7 Marks

ATAX – May 2017 – L3 – Q7b – Petroleum Profits Tax (PPT)

Explain "Memorandum of Understanding" in PPT computation and highlight the Year 2000 MOU details.

i. Describe briefly your understanding of the term “Memorandum of Understanding” as it applies to Petroleum Profits Tax computation. (3 Marks)

ii. State FOUR highlights of the Year 2000 Memorandum of Understanding. (4 Marks)

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  • 8 Marks

ATAX – May 2017 – L3 – Q6b – Corporate Tax Compliance and Reporting

Compute the Companies Income Tax liability for small businesses using the small business rate and explain the computations.

You have been provided with the following information in respect of THREE small businesses:

You are required to:
i. Compute the Companies Income Tax liability for each of the companies for the relevant assessment year, using the small business rate. (3 Marks)
ii. Give reasons for your computations. (5 Marks)

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  • 16 Marks

ATAX – May 2017 – L3 – Q3a – Capital Gains Tax (CGT)

Compute Capital Gains Tax for hire purchase transactions and explain the implications of hire purchase interest on CGT.

Global Company Nigeria Limited, a construction company based in Abuja, commenced business on January 7, 2009. The company has struggled to acquire necessary equipment due to poor financial results.

At a directors’ meeting on November 6, 2012, the company decided to approach a finance house for assistance. They provided the following information:

  • The company purchased an excavator on hire purchase on March 1, 2013, and paid a deposit of N32,000,000.
  • The excavator’s cost price was N55,000,000, with the balance payable in 25 monthly installments of N1,200,000 starting April 1, 2013.

The excavator was sold as follows:

  1. For N65,000,000 after installment payments on January 1, 2014.
  2. For N69,000,000 after installment payments on November 1, 2014.

You are required to:

i. Calculate the Capital Gains Tax (CGT) for the relevant Assessment Year, assuming the sales values above. (14 Marks)
ii. Explain the implications of hire purchase interest on Capital Gains Tax computations. (2 Marks)

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  • 20 Marks

STP – Feb 2018 – L2 – Q4- Taxation and Operating Strategies

Calculate Honson Plc's tax liability for Kumasi/Accra, advise on Nsawam, and discuss non-tax factors for facility location.

Honson Pic, a UK-based manufacturing company, is planning to build a new processing facility in Ghana. The Chief Executive Officer in a meeting with Management needs to decide whether to cite the facility in Accra or in Kumasi. Market intelligence has no preference for citing the facility either in Kumasi or Accra since information gathered indicate that business activities would largely be same in Kumasi and Accra for the next 10 years.

The following forecast information is relevant for the decision-making process being considered by management.

Kumasi Accra GH¢ GH¢

Required: i. Calculate Hamson Plc’s income tax liability for each proposed location for the first year. ii. Would you advise Hamson Plc to consider citing the facility in Nsawam, taking into consideration the close proximity of Nsawam to Accra? iii. Discuss three (3) non-tax factors that Hamson UK Plc may consider in the decision-making process to locate the facility either in Kumasi, Accra or elsewhere in the country.

b). With reference to the Income Tax Act, 2015 (Act 896) explain the following: i. Private Ruling issued by the Commissioner-General: (2 marks) ii. Conditions under which a Private Ruling will be binding on the Commissioner-General and on the person to whom the Private Ruling is issued.

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  • 20 Marks

STP – Aug 2012 – L3 – Q1 – Tax Computation

Compute tax liability for Jamaa Mining Company for 2008 and 2009 based on provided financials.

The profit and loss account of Jamaa Mining Company Ltd for the years ended December 2008 and 2009 are as tabled below:

Year Ended 31 December (all amounts in ‘000)
2009 GHC 2008 GHC
Turnover 309,000 430,000
Cost of Sales (164,000)
Gross Profit 145,000
General and Admin Exp (100,000)
Operating Profit 45,000
Other Income 5,300
Net Profit before tax 50,300
Income Tax provision 12,575
Transfer to Income Surplus 37,725
Income Surplus Account
Balance brought forward 46,945
Transfer from profit and loss account 9,220
Surplus carried forward 46,945

Notes:
2. Turnover is made up as follows
For year

2009 2008
Collected for year but included in prior year a/c 291,000
Interest income received for 18 months 0 18,000
309,000
  1. Cost of sales includes:

2009 2008
Withholding taxes paid 1,500 1,000
VAT unclaimed 6,000 8,000
Depreciation 43,000 25,000

4a. Gen and Admin expenses includes

2009 2008
Rent prepaid of 3,000
Rent outstanding 500 500

4b. Includes unrealized foreign exchange gain of but realized in 2009

2009 2008
2,000 2,000

The GRA has agreed a capital allowance of GHC20,000 for year 2009 and GHC15,000 for year 2008.

Required:
Please advise management of Jamaa Mining Company Ltd on the tax due to the GRA for the years 2009 and 2008.

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  • 20 Marks

ATP – Aug 2015 – L2 – Q4 – Income Tax Computation

Compute chargeable income for partners of Zee & Associates for 2012-2014, including capital allowances.

Ace, Brace and Crate have been in partnership since 2006 trading as Zee & Associates dealing in cement and preparing accounts to December 31 each year. Their Partnership Agreement showed that they share profits in the ratio 5:4:3 respectively.

The written-down values of the assets used in their operations as at 31st December, 2011 were as follows:

GH¢
Office Equipment 148,000.00
Pick–up vehicles 95,000.00
Saloon vehicles 80,000.00

Brace resigned from Zee & Associates on 2nd January 2013 and on his exit, Ace and Crate continued the business agreeing to share profits in the ratio 2:1 respectively.

The partnership Firm acquired the following additional assets:

a) A building for office annex costing GH¢430,000.00 on 4th October, 2013.

b) One Toyota Camry for GH¢85,000.00 on 26th March 2012

c) One Toyota Land Cruiser Prado at a cost of GH¢188,000.00 on 3rd July, 2013

Some of the office equipment were sold on 15th June, 2013 for GH¢35,000.00.

The Firm’s adjusted profits for tax purposes but before grant of capital allowance were as follows:

Year to 31/12/2012 GH¢315,000.00
Year to 31/12/2013 GH¢298,000.00
Year to 31/12/2014 GH¢328,000.00

You are required to compute the chargeable income, if any, of each partner for the relevant years of assessment on the assumption that no other incomes accrued to any of the partners.

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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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  • 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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  • 10 Marks

PT – Nov 2024 – L2 – Q3b – Capital Gains Tax and Asset Realization

Tax computation on asset realization and understanding taxable capital assets.

b) Kwamoso LTD sold the following assets to Mr. Badu on 18 May, 2023 for GH¢450,000 to settle a tax liability. Kwamoso LTD is not listed on the Ghana Stock Exchange.

Below are details of the assets:

Name of Asset Cost (GH¢) Net Book Value (GH¢) Market Value (18 May 2023) (GH¢) Market Value (31 Dec 2023) (GH¢)
Truck vehicle 750,000 480,000 320,000 350,000
Generator 60,000 29,400 8,400 8,000
Laptops 48,000 17,200 8,000 7,200

Required:

i) Compute the consideration received in respect of each asset realised.

ii) What constitutes capital assets in the context of capital gains tax in Ghana?

iii) Under what circumstance would there be a loss in the realization of a liability?

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  • 9 Marks

PT – Nov 2024 – L2 – Q2d – Withholding VAT Computation

Compute GETFund Levy, NHIL, COVID-19 Levy, output VAT, withholding VAT, and tax payable for a firm under the VAT scheme

N&L Associates, an accounting firm, issued an invoice to a withholding VAT agent for GH¢250,000 (including VAT, GETFund Levy, NHIL, and COVID-19 Levy) for assurance services provided to a client in March 2024. These were the only services provided by the firm during the period, and payments are to be made within the same period.

Required:

i) Calculate the portion of the GETFund Levy, NHIL, and COVID-19 Levy that the agent must compute for the payment of the services rendered. (3 marks)
ii) Determine the output VAT to be reported on the accounting firm’s monthly VAT return. 
iii) Compute the withholding VAT to be withheld if N&L Associates are VAT withholding agents. 
iv) Calculate the tax payable by the accounting firm if the total input tax for the period amounts to GH¢7,200.

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  • 7 Marks

ATAX – May 2017 – L3 – Q7b – Petroleum Profits Tax (PPT)

Explain "Memorandum of Understanding" in PPT computation and highlight the Year 2000 MOU details.

i. Describe briefly your understanding of the term “Memorandum of Understanding” as it applies to Petroleum Profits Tax computation. (3 Marks)

ii. State FOUR highlights of the Year 2000 Memorandum of Understanding. (4 Marks)

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  • 8 Marks

ATAX – May 2017 – L3 – Q6b – Corporate Tax Compliance and Reporting

Compute the Companies Income Tax liability for small businesses using the small business rate and explain the computations.

You have been provided with the following information in respect of THREE small businesses:

You are required to:
i. Compute the Companies Income Tax liability for each of the companies for the relevant assessment year, using the small business rate. (3 Marks)
ii. Give reasons for your computations. (5 Marks)

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  • 16 Marks

ATAX – May 2017 – L3 – Q3a – Capital Gains Tax (CGT)

Compute Capital Gains Tax for hire purchase transactions and explain the implications of hire purchase interest on CGT.

Global Company Nigeria Limited, a construction company based in Abuja, commenced business on January 7, 2009. The company has struggled to acquire necessary equipment due to poor financial results.

At a directors’ meeting on November 6, 2012, the company decided to approach a finance house for assistance. They provided the following information:

  • The company purchased an excavator on hire purchase on March 1, 2013, and paid a deposit of N32,000,000.
  • The excavator’s cost price was N55,000,000, with the balance payable in 25 monthly installments of N1,200,000 starting April 1, 2013.

The excavator was sold as follows:

  1. For N65,000,000 after installment payments on January 1, 2014.
  2. For N69,000,000 after installment payments on November 1, 2014.

You are required to:

i. Calculate the Capital Gains Tax (CGT) for the relevant Assessment Year, assuming the sales values above. (14 Marks)
ii. Explain the implications of hire purchase interest on Capital Gains Tax computations. (2 Marks)

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