Question Tag: Tax computation

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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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  • 5 Marks

ATAX – May 2019 – L3 – Q7b – Corporate Tax Compliance and Reporting

Compute the total tax liabilities for Alaba Trading Limited for the 2018 assessment year, considering its assessable profit, capital allowances, and dividend payable.

For the assessment year 2018, below are the extracts from the tax computations of Alaba Trading Limited:

Item Amount (₦)
Assessable profit 8,200,000
Capital allowances 5,400,000
Dividend payable 6,000,000

Required:
Determine the total tax liabilities of Alaba Trading Limited for the assessment year.

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  • 30 Marks

ATAX – May 2019 – L3 – Q1b – Petroleum Profits Tax (PPT)

Assess and compute the assessable profit, chargeable profit, chargeable tax, and total tax payable for a petroleum company, based on financial data.

b. Priceless Oil Limited commenced crude oil production in Nigeria in 2006. The company has provided the following financial report for the year ended December 31, 2018:

Additional Information:

  1. Posted price for exported crude oil averaged $52/barrel (at an exchange rate of ₦306 to $1).
  2. Included in other income: ₦38,000,000 from crude transportation (cost: ₦16,250,000).
  3. Natural gas contract with Tommy Limited: value ₦655,000,000, load factor 54%.
  4. Depreciation of ₦120,250,000 was included in production costs.
  5. Qualifying capital expenditures:
Type Date Location Amount (₦)
Storage tank March 12, 2018 On-shore 23,500,000
Plant and equipment November 15, 2018 Continental Shelf of 130
metres of water depth		 75,000,000
  1. Capital allowances brought forward: ₦33,700,000; for the year: ₦88,500,000.
  2. Admin expenses include ₦3,500,000 stamp duties for debentures.
  3. Specific bad debts written off: ₦39,500,000.
  4. Donations were wholly expended for petroleum operations.
  5. ₦12,250,000 was paid to retrieve petroleum-related data (included in miscellaneous expenses).
  6. ₦20,500,000 interest was paid to an associate company at market rate.

Prepare and submit a report on the following computations:
i. Assessable profit (12 Marks)
ii. Chargeable profit (6 Marks)
iii. Chargeable tax (6 Marks)
iv. Total tax payable (6 Marks)

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  • 2 Marks

ATAX – May 2019 – L3 – Q1a – Petroleum Profits Tax (PPT)

Assess and compute the assessable profit, chargeable profit, chargeable tax, and total tax payable for a petroleum company, based on financial data.

In line with provisions of the Petroleum Profits Tax Act Cap P13 LFN 2004 (as amended), explain “accounting period” of a petroleum exploration company. (2 Marks)

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  • 10 Marks

PT – Mar 2024 – L2 – Q3c – Income Tax Liabilities

Compute the assessable income for all relevant years for Hajia Bintu after ceasing operations.

Hajia Bintu has been in business from 1 September 2018, preparing accounts to 31 August each year. She ceased to operate the business on 31 May 2023. The agreed profits for the past years of operations are as follows:

Year Agreed Profits (GH¢)
Year to 30/8/2019 18,000,000
Year to 30/8/2020 23,000,000
Year to 30/8/2021 28,000,000
Year to 30/8/2022 33,000,000
Period to 31/5/2023 50,000,000

Required:
Calculate the assessable income for all relevant years.

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  • 4 Marks

PT – Mar 2024 – L2 – Q3a – Income Tax Liabilities

Distinguish between the Year of Assessment and Basis Period as used in income taxation.

The determination of a person’s tax liability is in relation to the concept of “Year of Assessment” and “Basis Period”.

Required:
In relation to the statement above, distinguish between the concept of Year of Assessment and Basis Period as used in income taxation.

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  • 8 Marks

AT – Nov 2018 – L3 – Q5b – Business income – Corporate income tax

Computation of taxes payable by a mining support services company, including adjustments for dividends, tax losses, and investment deductions.

Manla Ltd, since its incorporation, has been providing Mining Support Services (MSS) in line with its mandate, and the following is relevant to its operations for the 2017 year of assessment:

Details GH¢
Chargeable income 240,000,000
Loss from investment deducted in arriving at the chargeable income 700,000
Dividend (gross) received from A Ltd (a mining company) where Manla Ltd has 26% voting power 20,000
Provision for bad debts written off 400,000
Tax loss from 2014 deducted 20,000
Net dividend received from a US-based company after 5% withholding tax 9,500
Items worth GH¢ 60,000 granted to a powerful shareholder were adjusted in arriving at chargeable income 60,000

(Note: Manla Ltd has a basis period from January to December.)

Required:
i) Compute the taxes payable by Manla Ltd. (6 marks)
ii) Comment on the treatment of the investment loss of GH¢700,000. (2 marks)

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  • 8 Marks

AT – Nov 2018 – L3 – Q5a – Petroleum operations, Capital allowance

Computation of tax payable for a petroleum company, including adjustments for financial gains, costs, and capital allowances.

The following is relevant for the operation of AB Ltd, operating in the upstream petroleum sector for the 2017 year of assessment:

Details $
Revenue 100,000,000
Cost 80,000,000
Profit 20,000,000

The following additional information forms part of the above:

  • The revenue includes financial gain from swaps of $1,000,000.
  • The financial cost of $1,200,000 was added to the cost.
  • The cost includes depreciation of $200,000.
  • Research and development (R&D) of $100,000 was added to the cost of operation.
  • Revenue on 20,000 barrels of oil sold was added to revenue. The price used on the 20,000 barrels was $70 in its tax returns, but the agreed price is now $67, certified by the Petroleum Unit of the Ghana Revenue Authority.
  • Written down value (WDV) as of 31/12/2016 was $1,800,000 after granting capital allowance the second time as of 2016 year-end. This information is yet to be adjusted.

Required:
i) Compute the tax payable. (6 marks)
ii) Comment on the deductibility of financial cost in petroleum operations. (2 marks)

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  • 5 Marks

AT – Nov 2018 – L3 – Q3b – Business Income, Corporate Income Tax

Analysis of tax payable for a company planning to operate in a regional capital vs. a district capital based on projected financial performance.

The following information is an extract of projected financial performance of YZ Ltd, a manufacturing company that intends to go into operation with a basis period from January to December. Management is contemplating operating in either Kumasi or Konongo, but the results are expected to be the same irrespective of the location. The following projected results from January to December Year 1 are worth analyzing:

Kumasi (Regional Capital) Konongo (District Capital)
Revenue GH¢ 3,000,000 GH¢ 3,000,000
Cost GH¢ 1,200,000 GH¢ 1,200,000
Gross Profit GH¢ 1,800,000 GH¢ 1,800,000
Expenses GH¢ 1,000,000 GH¢ 1,000,000
Net Profit GH¢ 800,000 GH¢ 800,000

The following additional information is relevant:
A building to be bought on 1 March Year 1 for GH¢400,000 has been granted full year’s depreciation at the rate of 20%, and the same has been added to the projected cost above.

Required:
i) Compute the projected tax payable based on the information above and recommend where management is likely to site the entity and why.
ii) What other TWO (2) factors, apart from what has been identified in (i) above, may dictate siting a manufacturing business in a regional capital?

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  • 6 Marks

TX – May 2019 – L3 – Q3A – Capital Gains Tax

Compute the tax on capital gains from a property sale and explain the concept of realisation of capital assets.

a)
i) Anthony purchased a house in Koforidua at a cost of GH¢480,000 in the year 2011. In 2011, he spent GH¢24,000 to repair and renovate the house. In March 2018, he spent extra GH¢18,000 on renovation with the intention to sell the house. Anthony engaged a Valuer in June 2018, to value the building and the Valuer charged GH¢5,400.

In July 2018, he placed an advert on ‘Zuria FM’ for the sale of the building and paid GH¢1,800. During the same period, he sold the house through an agent for GH¢660,000 to Kwame Burger and the agent’s commission was 3% of the sale value. Anthony also paid GH¢1,500 for stamp duty and legal permit for conveyance of the building to Kwame Burger.

Required: i) Compute any tax payable. (4 marks)

ii) What constitutes realisation of capital assets? (2 marks)
i) Compute any tax payable. (4 marks)
ii) What constitutes realisation of capital assets? (2 marks)

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  • 8 Marks

TX – May 2019 – L3 – Q5a – Minerals and mining

Tax computation for a mining company including the treatment of financial costs, depreciation, and mineral royalty, followed by the tax implications.

a) Kaato Mining Company Ltd (Kaato) has been operating in the mining sector for some time now. The following data is relevant to the company’s operations for the 2017 year of assessment:

GH¢

Adjusted profit: 100,000,000
The following additional information is relevant:

Financial cost of GH¢900,000 inclusive of interest on working capital loan of GH¢20,000 was adjusted in arriving at the adjusted profit.
Financial gain from derivatives of GH¢600,000 was adjusted in arriving at the adjusted profit above.
Depreciation of GH¢125,000 was adjusted to the profit above.
Written down value brought forward from 2016 after 1-year capital allowance was granted stood at GH¢1,000,000. This was accordingly certified by the Audit Unit of the Ghana Revenue Authority.
Revenue of GH¢1,200,000,000 was realized on a quantity of gold production of 80,000,000 ounces. A review of the tax returns of Kaato Ltd revealed that Mineral Royalty was not calculated for 2017. Kaato applied for a waiver of penalty and interest on the mineral royalty to which GRA obliged.
Required: i) Compute the taxes payable. (6 marks)

ii) What is the tax treatment of financial cost under mineral operations? (2 marks)

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  • 20 Marks

AT – April 2022 – L3 – Q5 – Business income – Corporate income tax | Tax planning

A trainee accountant is tasked with correcting errors in the tax computation of Prime Shea Ltd. The tasks include determining allowable financial costs, preparing a revised tax computation, calculating the tax payable, and recommending a process for appeal against a tax audit assessment.

a) You are a Trainee Accountant, and your manager has asked you to correct a company tax
computation which has been prepared by the Managing Director of Prime Shea Ltd, a
manufacturing company located in Batanyili, a suburb of Tamale in the Northern Region.
The company commenced business on 1 January 2014. The company tax computation is
for the year ended 31 March 2020 and contains a significant number of errors:

Required:
i) Determine the allowable financial cost for the year ended 31 December 2020. (4 marks)
ii) Prepare a revised tax computation to determine the chargeable income for the year ended
31 December 2020. (4 marks)
iii) Calculate the tax payable by Prime Shea Ltd under the Income Tax Act 2015 (Act 896) as
amended. (2 marks)

 

b) You are a final level CA student who has been helping Naagode Ltd on tax issues. Naagode Ltd has been doing business in the international space, importing and exporting products. You have been told that when you qualify, you would manage their Tax Department.

What has baffled the company lately is an audit outcome by the Ghana Revenue Authority. The audit was done in two-folds. One by the Post Clearance Audit Department of the Customs Division and the other by Tax Audit and Quality Assurance (TAQA) Department of Domestic Tax Revenue Division.

The audit findings are as follows:

Post Clearance Audit Department of the Custom Division:
Import Duties GH¢10,000,000
Value Added Tax (VAT) GH¢12,000,000
National Health Insurance Levy (NHIL) GH¢4,000,000
Ghana Education Trust Fund (GET/Fund) GH¢4,000,000

TAQA Department of Domestic Tax Revenue Division:
Corporate Tax GH¢230,000,000
VAT GH¢29,000,000
NHIL GH¢29,000,000
Withholding Tax (WHT) GH¢105,000,000

The management of Naagode Ltd has asked you to assess the chances of the Company if an objection to the assessment is raised as it considers the assessment quite excessive.

Required:
Recommend the process that the management should adopt to ensure success in its appeal.

 

 

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  • 5 Marks

TF – May 2018 – L3 – Q5b – Minerals and mining

Computation of corporate tax payable for AB Ltd in the mining sector.

AB Ltd is a mining company operating at Kyebi in the Eastern Region. The following data is relevant for the last quarter of 2017 year of assessment:


The following additional information is relevant:
i) Royalty has not been computed and paid on the above yet.
ii) Depreciation of an amount of GH¢1,000,000 was part of the cost of operation above.
iii) Proceeds from sale of depreciable assets amounting to GH¢500,000 were added to
revenue above.
iv) Capital allowance agreed with the Mining Unit of Ghana Revenue Authority was agreed
to be GH¢800,000.
Required:
Compute the taxes payable by AB Ltd to Ghana Revenue Authority and comment on any
TWO items as to why you allowed or disallowed it in the tax computation. (5 marks)

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  • 5 Marks

TF – May 2018 – L3 – Q4d – Business income – Corporate income tax

Calculate taxes for CST, VAT, and NHIL from scratch card sales data.

XYZ Ltd is into mobile telecommunication and manufactures scratch cards among other products for sale. In October 2017, it sold scratch cards amounting to GH¢3,000,000 to the public. XYZ Ltd intends to appoint you as acting assistant accountant pending confirmation after successfully completing your ICAG examinations. As part of the engagement, you are to assist the Company file its returns with the Ghana Revenue Authority.

Required:
Compute the following taxes from the above data to aid the filing.

i) Communication Service Tax (CST)
ii) Value Added Tax (VAT)
iii) National Health Insurance Levy (NHIL)

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