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

TAX – May 2019 – L2 – Q1a- Taxation of Partnerships and Sole Proprietorships

Compute adjusted income and profit allocation for a civil engineering partnership.

a) Obi Consults is a civil engineering consulting firm of many years. The founding partners are Bibi, Kose, and Fowora. The financial year-end of the firm is December 31 each year. The following information was extracted from the partnership’s financial statements/records for the year ended December 31, 2018:

Details Amount (N)
(i) Net profit for the year 21,575,000
(ii) Provision for depreciation 13,250,000
(iii) Fine paid for traffic offence 25,000
(iv) Donations to “politicians in business” 150,000
(v) Donation to National Library Board 165,000
(vi) Profit from sale of excavator 1,600,000
(vii) Capital allowances 6,575,000
(viii) Balancing allowance 677,000
(ix) Balancing charge 1,315,000

Additional information:

  • Profit sharing ratio: Bibi – 1/2, Kose – 1/4, Fowora – 1/4
  • Bibi and Fowora are entitled to 5% interest per annum on a loan of N10,500,000 each. Fowora’s loan was refunded fully on his retirement.
  • Salaries paid: Bibi – N10,800,000, Kose – N8,250,000, Fowora – N8,250,000
  • Fowora retired on June 30, 2018, and Jaycee was admitted as a new partner on July 1, 2018, with an annual salary of N8,250,000. Jaycee introduced a loan of N7,000,000 on July 1, 2018, entitled to a 5% interest per annum.
  • The profit-sharing ratios after Jaycee’s admission: Bibi – 1/2, Kose – 7/20, Jaycee – 3/20

You are required to:
(i) Compute the adjusted/assessable income of the partnership. (5 Marks)
(ii) Determine the share of profits among the partners. (3 Marks)
(iii) Show relevant workings for prorated salaries and interest on loans, assuming simple interest. (2 Marks)
(iv) Compute the assessable income of each partner. (10 Marks)

 

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  • 5 Marks

PT – April 2022 – L2 – Q3b(i & ii) – Income Tax Liabilities

Compute the tax liability on overtime allowances for Maame Agyeiwaa for January and February 2021.

b) Maame Agyeiwaa is a junior staff member of KayDee Ltd. Her monthly basic salary is GH¢800. She was paid an overtime allowance totalling GH¢100 during the month of January 2021. In February 2021, Maame Agyeiwaa was paid overtime allowance totalling GH¢500.

Required:
i) Compute her tax liability on the overtime allowance for the month of January 2021.
(2 marks)

ii) Compute her tax liability on the overtime allowance payments for the month of February 2021.
(3 marks)

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  • 3 Marks

PT – April 2022 – L2 – Q3d – Income Tax Liabilities

Calculate the tax liability on Eunice Danso's bonus income for 2021.

Eunice Danso works with Gyidi Ltd and earns an annual basic salary of GH¢50,000. She was paid a bonus of GH¢6,000 in 2021.

Required:
Determine the tax liability on the bonus. (3 marks)

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  • 20 Marks

PT – April 2022 – L2 – Q4 – Corporate Tax Liabilities

Calculate the tax payable for Therry Ltd for the 2020 year of assessment using the provided financial data and adjustments.

The following extract relates to the financial data of Therry Ltd, a company resident in Ghana with a basis period from January to December each year. Therry Ltd has submitted its tax returns to GRA for the 2020 year of assessment:

The following additional information is available:

Interest Charges:
a. Interest on loan for MD’s personal housing project GH¢500,000
b. Foreign exchange loss on loan GH¢320,500
c. Bank charges GH¢75,000
Donations:
a. Osu Children Home GH¢10,000
b. Pastor (Azigi Church) GH¢30,000
c. Labone Senior High School GH¢20,000
d. National Disaster Management Organisation GH¢50,000
e. Political Parties Fundraising GH¢90,000
An amount of GH¢200,000 disclosed in the accounts was paid for repairs and improvements of an old machine bought three years ago. It is hoped that the performance of the machine will be enhanced after the improvements.
Creditors of the company agreed to cancel an amount of GH¢120,000 standing as part of the credit balance as incentive to the company. This has not been taken into account by the company in its tax returns to GRA.
An amount of GH¢300,000 being cost price of goods was issued to a related party outside Ghana at cost. The margin on the goods waived was sighted as GH¢40,000 in a correspondence with the related party.
Tax paid on account was GH¢20,000.
The company booked capital allowance unutilised certified by GRA from 2019 year of assessment as GH¢300,000.
Capital allowance agreed with GRA after taking into account all relevant issues was GH¢1,050,000 for 2020 year of assessment.
The machine (Pool 3 asset) had a written down value of GH¢4,000,000 as at 1 January 2020.
An allowable bad debt included in the selling and distribution expenses for 2019 amounted to GH¢100,000. The company recovered the amount in 2020 but no transaction was recorded in 2020.
Therry Ltd disposed off one of its capital assets for GH¢250,000 to the Managing Director. It cost the company GH¢300,000 to acquire the asset some years ago. An investigation revealed that the market value of the asset at the time of the sale was GH¢350,000. The company has already included the loss of the sale of the asset in administration expenses.
Required:
Determine the tax payable for the 2020 year of assessment. (20 marks)

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  • 5 Marks

PT – Nov 2023 – L2 – Q1b – Income Tax Liabilities

Compute tax payable for resident and non-resident individuals for the 2022 year of assessment.

The information below relates to individuals who earned income in the 2022 year of assessment:
Resident individuals:
Mr. Agandi and Mr. Yonny are resident employees in Ghana. The chargeable income earned per annum by Mr. Agandi and Mr. Yonny amounts to GH¢300,000 and GH¢650,000 respectively.

Non-Resident individuals:
Mrs. Zindana and Mrs. Maleda are non-resident individuals. Mrs. Zindana and Mrs. Maleda have earned chargeable incomes to the tune of GH¢300,000 and GH¢650,000 per annum respectively.

Required:
Compute their respective taxes payable for the 2022 year of assessment.

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  • 5 Marks

PT – Nov2019 – L2 – Q5a – Taxation of Capital Gains

This question asks to compute the capital gains tax payable on the disposal of a land asset.

Mamavi Dekey (Mamavi) purchased land in Ho in the Volta Region for a cost of GH¢200,000 in 2010. In 2011, she spent GH¢8,000 for grading the land. In March 2019, she spent another GH¢10,000 to reshape the land with the intention to sell it. Mamavi engaged Kobina Ebo, a Valuer, in June 2019 to value the land, and he charged GH¢2,000. In July 2019, she placed an advert at ‘Ho Bankoe FM’ on the sale of the land and paid GH¢1,000. In October 2019, she sold the land through an agent for GH¢300,000 to Kalika, and the agent’s commission was 2% of the sale value. Mamavi also paid GH¢600 for stamp duty and legal permit for conveyance of the land to Kalika.

Required:
Compute any tax payable.
(5 marks)

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  • 3 Marks

PT – Nov 2019 – L2 – Q3b – Income Tax Liabilities

This question asks to calculate the tax implications of overtime payments for a senior staff member.

Amos is a Senior Staff member of Sims Company Limited. His monthly basic salary is GH¢1,490.00. He was paid an overtime totalling GH¢650.00 during the month of January, 2019.

Required:
What is the tax implication? (3 marks)

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  • 5 Marks

PT – May 2020 – L2 – Q5a – Taxation of Capital Gains

Computation of capital gains tax on the sale of a house by Papa Dekey in 2019.

a) Papa Dekey purchased a house in the Madina area of Greater Accra Region in the year 2010 for GH¢400,000. The acquisition expenses incurred by the company amounted to GH¢50,000.

In June 2019, Papa Dekey sold the house for GH¢700,000 while the incidental expenses incurred were as follows:
Description GH¢
Agent’s Commission 10,000
Solicitors Fees 8,000
Advertising 3,000
Accountant’s Fees 10,000
Income Tax on Rent 6,000
Valuation Fees 20,000
Required:
Compute the Capital Gains Tax payable by Papa Dekey.
(5 marks)
Papa Dekey also sold for GH¢1,000,000 in September 2019, Ghana Government Securities
which cost GH¢800,000 in the year 2010. The incidental selling expenses amounted to
GH¢50,000 in respect of Government Securities.

Required:
Compute the Capital Gains Tax payable by Papa Dekey.

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  • 12 Marks

PT – May 2020 – L2 – Q4b – Special considerations for taxation of gifts and capital allowances.

Calculation of the chargeable income for Stella-VD Ltd for the 2018 year of assessment.

The Company’s assets include the following:

Type of Assets Date of Acquisition Cost (GH¢)
Factory Building 01/10/2017 300,000
Plant and Machinery 25/10/2017 171,000
Delivery Van 01/11/2017 50,000
Computers 01/10/2017 40,000
Furniture and Fittings 10/12/2017 150,000
Other Office Equipment 01/10/2017 200,000
Office Building 30/06/2018 500,000
Required:
Required:
a) Compute the appropriate capital allowance for 2017 and 2018 year of assessment. (8 marks)
b) Calculate the chargeable income of the company for assessment year 2018.
(12 marks)

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  • 12 Marks

PT – March 2023 – L2 – Q3a – Income Tax Liabilities

Explain the principles and computation of overtime tax under the Income Tax Act.

Kaakyire, the Finance Director of Dwarf Ltd, is on a monthly basic salary of GH¢1,400. She was paid overtime amounting to GH¢500 during the month of April 2022.

Required:

i) State the principles underpinning the computation of overtime in accordance with the Income Tax Act, 2016 (Act 896).
(6 marks)

ii) State how her overtime will be taxed and compute the tax for the month of April 2022.
(6 marks)

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