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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  • 8 Marks

AT – April 2022 – L3 – Q1c – International taxation

Calculate chargeable income, tax payable, and foreign tax credit for Lawaaba Guo.

Lawaaba Guo is a Ghanaian born in Nigeria and has lived all his life there. He got an opportunity to relocate to Ghana and took up an appointment as a lecturer in one of the prestigious universities within the first three months of his arrival in Ghana in 2018.

He took up employment with ABB Ltd as a procurement officer. The following relates to his employment details for 2020 year of assessment:

  • Salary: GH¢200,000
  • Commission from employers: GH¢10,000
  • Interest on savings from a Bank in Ghana (Gross): GH¢1,000

His investment income and other returns received from Nigeria are as follows:

  • Dividend of US$ 12,000 net of tax. Tax of US$ 1,000 was paid.
  • Rental Income of USD 6,000 gross with tax at the rate of 10%.
  • On-line consultancy fee USD 20,000 net of tax. Tax of USD1,500 was paid.

Additional information:

  • He is married.
  • Children (2): both schooling in Nigeria.
  • Contributes to Social Security at 5.5%.
  • Exchange Rate USD1 = GH¢5.2.

Required:
Determine the following:
i) Chargeable Income
ii) Tax Payable
iii) Amount of foreign credit relief granted

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  • 8 Marks

AT – May 2021 – L3 – Q1c – International Taxation | Business Income – Corporate Income Tax

Compute the tax payable by Kaeka Ltd considering both foreign and domestic income.

Kaeka Ltd is a resident company providing cleaning services in Ghana. For the first time in the history of the entity, it launched operations as an external company in January 2020 in Lusaka, Zambia. It came to light that the entity earned the equivalent of GH¢2,500,000, which was evenly made for the 2020 year of assessment. On the home front, it earned GH¢16,000,000 in the 2020 year of assessment as income in Ghana. Assume that allowable costs of GH¢12,000,000 were incurred. It received a dividend net of tax from a company in Israel it acquired shares from, amounting to GH¢20,000 in December 2020. Tax of GH¢5,000 was paid on the dividend received.

Required:
i) Compute the tax payable by Kaeka Ltd.
ii) Explain the tax implication if the company made the income from Zambia in the last quarter of 2020.

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  • 10 Marks

AT – Aug 2022 – L3 – Q5a – Petroleum operations

Compute the tax payable by Alpha Ltd for the 2020 year of assessment in the upstream petroleum sector.

a) Alpha Ltd is a company operating in the upstream petroleum sector and commenced
production in 2020. The Accountant who is new to the industry provided the following extract
for the 2020 year of assessment with basis period 1 January to 31 December, 2020.

Additional information:
i) Production in barrels is 120,000,000.
ii) Finance Lease:
Principal Repayment is GH¢15,000,000.
Finance cost is GH¢1,200,000.
Lease is over 6 years starting from 1/1/2020.

Required:
Compute the tax payable for Alpha Ltd for 2020 year of assessment. (10 marks)

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  • 12 Marks

AT – Aug 2022 – L3 – Q1b – Business income – Corporate income tax | Tax planning

Discuss tax implications of holding voting power and tax payments made abroad by resident companies.

The following relates to information of two companies, both resident in Ghana, for 2021 year of assessment with the basis period January to December each year:

Company A (GH¢) Company B (GH¢)
Income 10,000,000 12,000,000
Cost of Sales (4,200,000) (4,400,000)
Gross Profit 5,800,000 7,600,000
Less: Operating Costs (4,900,000) (3,000,000)
Chargeable Income 900,000 4,600,000

Additional information:

  1. Dividend paid to each company by Company C, another resident company in Ghana, is as follows:
    • Company A: GH¢200,000
    • Company B: GH¢230,000
      Both companies hold shares in Company C:
    • Company A holds 25%
    • Company B holds 30%
  2. Contribution towards Kanzo Football Club, a local football club, amounted to GH¢80,000 (Company A) and GH¢100,000 (Company B). Both companies could not show government approval for the contribution.
  3. Two vehicle engines, each costing GH¢80,000, were purchased by both companies. Pool 2 had a written down value of GH¢200,000.
  4. Company B paid foreign employees’ tax to the UK, as the employees were from the UK.

Required:
i) What is the tax implication of holding 25% or more of the voting power of another resident company? (1.5 marks)
ii) What is the position of the tax law on tax payment made by Company B to the UK? (1.5 marks)
iii) What is the total tax payable by both companies? (8 marks)
iv) What is the total tax expenditure? (1 mark)
(12 marks)

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  • 20 Marks

AT – Nov 2021 – L3 – Q4 – Business income – Corporate income tax | Minerals and mining

Compute the chargeable income and tax payable for Akwatia Gold Mines for 2020 and identify tax optimization opportunities.

Akwatia Gold Mines was established ten years ago. For the year ended 31 December 2020, the following income statement was prepared and submitted to the Ghana Revenue Authority as part of its financial statement.

Akwatia Gold Mines
Income Statement for the Year Ended 31/12/2020

1.

2.

3.

4.

5.

6.

7.

The capital allowance agreed for the period was GH¢24,320,500.

Required:
a) Compute the chargeable income of the company and the tax payable. (15 marks)

b) Advise Akwatia Gold Mines on how to identify opportunities within the tax laws to optimise tax payable for the year ended 31 December 2020.  (5 marks)

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  • 6 Marks

AT – NOV 2021 – L3 – Q1a – Business income – Corporate income tax | International taxation

Compute tax payable for a Free Zone Enterprise based on income from local and export sales and determine the treatment of certain adjustments.

Orga Ltd has the following information relating to its operation as a Free Zone Enterprise for the 2020 year of assessment with a basis period from January to December each year:

Description Amount (GH¢)
Revenue 35,000,000
Cost (21,000,000)
Profit 14,000,000

Additional information:

  • Depreciation of GH¢200,000 has been added to the cost above.
  • Revenue: Local sales GH¢25,000,000; Exports GH¢10,000,000.
  • The Managing Director was provided with a mini bar and a swimming pool as part of his employment package costing GH¢1,200,000 in his private residence. The employer added only GH¢200,000 as part of the employment income for tax purposes. The total cost has been adjusted to the cost above.
  • The dividend received from the United States of America net of taxes of 10% was GH¢22,500. This income has not yet been recorded, although it has been credited in the bank statement.
  • The excess proceeds from the sale of a depreciable asset over the written down value amount to GH¢300,000. This has not yet been recorded in the company’s accounts.

Required:
i) Compute the tax payable. (6 marks)
ii) Explain the tax treatment of the cost of the swimming pool and mini bar. (2 marks)

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  • 20 Marks

AT – MAR 2024 – L3 – Q4 – Business Income – Corporate Income Tax | Capital Allowance

Covers capital allowance computation, tax rules on long-term contracts, and chargeable income calculation.

Finstruct Ltd has been awarded an airport terminal project. The project started on 1 January 2022 for a contract sum of GH¢60,000,000. The construction of the airport is to be completed on 31 December 2023.

Finstruct Ltd has a financial year ending on 31 December each year. On 31 December 2022, the accounts appropriate to the airport contract contained the following:

Cost Item GH¢
Cost of construction materials 25,500,000
Direct wages of construction staff 22,100,000
Hire of special equipment 300,000
Cost of soil test 100,000
Purchase of fuel and lubricants 750,000
Consultancy services 135,000

Additional information:
i) Materials costing GH¢340,000 sent to the site were returned to the company’s warehouse.
ii) Materials sent to the site worth GH¢675,000 were still unused at the construction site as of 31 December 2022.
iii) Finstruct Ltd pays some of its workers the first week of the ensuing month after the end of the current month. GH¢57,000 is still owed for wages as of the close of the year 2022, and this was not included in the accounts.
iv) A bill amounting to GH¢45,000 was submitted late by Finstruct Ltd, and as of 31 December 2022, the bill had not yet been paid. This was not included in the accounts.
v) It is estimated that the cost to complete the project as of 31 December 2022 should be GH¢8,265,180.
vi) The following details are available on assets of Finstruct Ltd:

Required:
a) Compute the capital allowance for Finstruct Ltd for the year 2022. (6 marks)
b) Explain the tax rules on long-term contracts and compute the percentage of contract completion of the project. (4 marks)
c) Compute the chargeable income of Finstruct Ltd for the year ended 31 December 2022. (10 marks)

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  • 20 Marks

AT – July 2023 – L3 – Q4 – Business income – Corporate income tax

Computing chargeable income and identifying relevant assumptions for a retail company.

The following relates to the financial records of Konadu Yiadom Company Ltd submitted to the Ghana Revenue Authority for the year ended 31 December 2021. The company is into retail operations.

Notes:

  1. The sales figure includes GH¢21,500 from the sale of old shop fittings which were replaced by new fittings during the year. The profit on the sale of the shop fittings was GH¢3,770.
  2. Following completion of the accounts, the accountant received an invoice dated 14 December 2021 in respect of goods for resale, which were delivered in late December. This invoice was not recorded, and you have been informed that the total amount on the invoice, including VAT, was GH¢15,110. VAT included on the invoice was GH¢440. All levies are inclusive.
  3. In June 2021, the company recognized the need to offer a special after-sales service to its customers. The company hired a new staff member and purchased a machine costing GH¢3,500 for the purpose. The local district assembly provided a grant to aid the purchase of the machine to the tune of GH¢1,250. The company included the cost of the machine in the purchases figure.
  4. Staff cost is the total wages and salaries paid to the staff. GH¢37,000 was paid to fresh graduates employed during the year. They constitute 4% of the total workforce for the year 2021.
  5. Promotion and Advertising is made up of:
    • Managing Director’s wedding reception: GH¢2,800
    • Refreshment during the opening of a new shop: GH¢5,000
    • Sample product to invited guests during the opening of the new shop: GH¢3,510
  6. Interest and Bank Payments are made up of:
    • Interest on loan used to purchase stock for the business: GH¢3,020
    • Overdraft interest on the business account: GH¢7,100
  7. Legal Fees are made up of:
    • Court fine resulting from traffic accident: GH¢3,950
    • Defense of company driver for careless driving: GH¢3,830
    • Litigation on business plot of land (90% chance of success): GH¢5,130
  8. Bad Debts are made up of:
    • Debt collection (Pursuing bad debts): GH¢455
    • Decrease in general bad debts provision: (GH¢1,250)
    • Increase in specific bad debts provision: GH¢1,800
  9. Motor Expenses are made up of:
    • Lease of a delivery van: GH¢11,500
    • Van running expenses: GH¢6,910
  10. Sundry Expenses are made up of:
  • Trade subscriptions: GH¢16,000
  • Support to elect a local Assembly Member: GH¢8,000
  • Provision for replacement of windows in the office: GH¢4,000
  • Gifts to customers during Christmas: GH¢6,000
  • Customer’s claim on defective goods: GH¢27,240
  • Provision for staff redundancy cost: GH¢25,000
  • Cost of investigating cash fraud: GH¢5,600
  • Investigation to acquire a new company: GH¢22,000

Additional Information:
The Ghana Revenue Authority has assessed and granted capital allowance of GH¢57,000 for the 2021 year of assessment.

Required:
You are required to compute the chargeable income for Konadu Yiadom Company Ltd for the 2021 year of assessment. Indicate clearly all necessary assumptions.

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  • 8 Marks

AT – July 2023 – L3 – Q1b – International taxation

Calculating the tax payable for a resident company with cross-border income from Ghana and Nigeria.

Libir Ltd is a resident company incorporated in Ghana. Its trading partners have been customers and suppliers from Ghana and also from Nigeria. The company supplies animal feed.

Its operation for 2021 year of assessment is as follows:
Income from Ghana: GH¢10,000,000
Income from Nigeria: ₦1,000,000,000

Additional information:

  1. Allowable expense granted by the Ghana Revenue Authority is GH¢6,000,000.
  2. The allowable expense in 1 does not include capital allowance of GH¢1,200,000 which was legitimately claimable by the company.
  3. The tax paid in Nigeria amounted to ₦40,000,000. The withholding taxes paid in Ghana with evidence of tax credit certificates amounted to GH¢1,000,000.
  4. The taxpayer has written to the Commissioner-General to relinquish its right under the double taxation arrangement.
  5. Exchange rate is GH¢1 = ₦60.

Required:
Compute the tax payable.

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  • 10 Marks

AT – Nov 2017 – L3 – Q4b – International taxation

Calculating the CIF and VAT/NHIL for imported goods.

Obiba JK Enterprise imports component parts from China and assembles them into various forms of office equipment. On 1 January 2016, component parts were imported with the following details:

Item Cost ($)
Cost of containers 2,200
Cost of packing for labor and materials 550
Cost of materials used in production 15,600
Cost of tools inserted in the components 3,750
Development and design costs 630
Royalties and licenses 330
Cost of labor and others in China 7,400
Shipping and transport to Tema Harbour GH¢16,200
Loading, unloading, and handling charges GH¢5,400
Cost of marine insurance GH¢2,958.30
Assembling overhead cost GH¢23,400
Fees for freight services to Tema Harbour GH¢3,700

Additional Information:

  • Trade discount of 2% on the cost of goods (not yet accounted for).
  • Excise duty of $560 paid in China (included in the labor cost).
  • Contingent discounts and rebates of 1% (already accounted for).
  • Technical assistance of GH¢3,000 after the goods arrived at the factory.
  • Average exchange rate was $1 = GH¢3.11.
  • Import duty is 20%.

Required:
i) Compute the Cost, Insurance, and Freight (CIF), clearly showing workings of each component.

(9marks)

ii) Compute the VAT/NHIL. (1 mark)

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