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  • 20 Marks

AT – Nov 2023 – L1 – SB – Q2 – Petroleum Profits Tax

Calculation of hydrocarbon and companies income tax for Brass Petroleum Producing Company Ltd under Petroleum Industry Act and Companies Income Tax Act.

Brass Petroleum Producing Company Limited has been operating as an oil prospecting company in Nigeria for fifteen years. The company operates in both onshore and shallow water in the Koko area of the Niger Delta region.

Following the provisions of the Petroleum Industry Act 2021, the company applied for, and was granted a petroleum prospecting license (PPL) on January 1, 2021.

Extracts from the company’s financial records for the year ended December 31, 2021, revealed the following:

Description N’million
Revenue:
Value of crude oil sold 184,450
Value of condensate from associated gas sold 47,175
Value of natural gas liquid from associated gas sold 41,650
Gross revenue 273,275
Balancing charge 32
Total Gross Revenue 273,307
Deduct:
Production cost 106,470
Cost of gas reinjection wells 600
Drilling cost incurred 4,360
Depreciation of plant, machinery, and fixtures 1,500
Decommissioning and abandonment 1,900
Repairs and maintenance 5,750
Royalty cost paid 40,990
Niger Delta Development Commission charge 250
Finance costs 510
Terminaling cost 1,380
Donations to recognised charity home 130
Concession rentals 20,470
Host community fund 1,000
Local government municipal levy 100
Environmental remediation fund 1,420
Cost incurred in seeking information for oil deposits 370
Total Deductible Expenses 187,200
Net Profit 86,107

Additional Information:

  1. Value of crude oil sold:
    • Type: Forcados
    • Quantity (barrels): 6,200,000
    • Actual Price ($): 70
    • Fiscal Price ($): 72
  2. Value of condensate from associated gas sold:
    • Type: OSO condensate
    • Quantity (barrels): 3,700,000
    • Actual Price ($): 30
    • Fiscal Price ($): 30
  3. Value of gas liquid from associated gas sold:
    • Type: Pennington
    • Quantity (barrels): 2,800,000
    • Actual Price ($): 35
    • Fiscal Price ($): 34
  4. Drilling cost incurred:
    • Tangible drilling cost for first exploration well: N2,800 million
    • Drilling the first two appraisal wells: N1,560 million
    • Total: N4,360 million
  5. Repairs and maintenance:
    • Repairs of plant, machinery, and fixtures: N2,750 million
    • Repairs or alteration of production implement utensils: N3,000 million
    • Total: N5,750 million
  6. Losses brought forward from last year: N655 million
  7. Capital allowances computed:
    • Brought forward: N320 million
    • For the current year: N1,400 million
    • Total: N1,720 million
  8. Production allowances after commencement of the Petroleum Industry Act: N3,300 million
  9. Exchange Rate: Assume N425 is equivalent to US$1.

Required:

As the company’s Tax Manager, you are to prepare a report to the Managing Director, showing in line with the provisions of Petroleum Industry Act 2021 and Companies Income Tax Act 2004 (as amended), the:

a. Hydrocarbon tax (14 Marks)

b. Companies income tax payable (6 Marks)

(Total: 20 Marks)

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  • 30 Marks

TAX – May 2017 – L2 – SA – Q1 – Personal Income Tax

Calculation of income tax payable with additional information and brief explanations on tax-related terms.

Damilola Adewunmi is the Human Resources Manager of Mighty Steel Nigeria Limited. He is married and blessed with three children.

  1. The following details relate to Damilola Adewunmi for the year ended December 31, 2015:
Item Amount (N)
Salary 3,144,000
Commission 525,000
Rent received 1,350,000
Gain from sale of shares 300,000
Pension received from employment 450,000
Benefits-in-kind (all assessable) 225,000
Interest on Fixed Deposit (gross) 180,000
  1. Damilola contributes N22,500 monthly towards the upkeep of his aged mother. His elder brother, Adekunle, also contributes N37,500 monthly.
  2. Damilola took an insurance policy on his life and pays a premium of N15,000 monthly.
  3. The children are University undergraduates and enjoy a scholarship for only tuition from his State Government.
  4. Damilola took a loan to build an owner-occupied house on which he pays N90,000 annual interest.
  5. For an outstanding performance, he was given an end-of-year bonus in the sum of N90,000.
  6. Withholding Tax of N18,000 was deducted in respect of interest on Fixed Deposit.

Required:

a. Calculate the income tax payable for the relevant year of assessment.
b. Calculate the income tax payable for the relevant year of assessment, assuming 2015 is the year of assessment with the following additional information:

  • Contribution to National Housing Fund: N78,600
  • Contribution to National Health Insurance Scheme: N210,000
  • Contribution to Pension Scheme: N235,800

c. Explain briefly the following:

  • Itinerant worker
  • Non-resident individual
  • Earned income
  • Resident individual
  • Unearned income

d. List FIVE dividends exempted from tax.

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  • 30 Marks

AX – Nov 2021 – L2 – Q1 – Personal Income Tax (PIT)

Calculation of personal income tax liability for two job offers and providing advice on the offer that yields a higher income after tax.

Miss Opeyemi Olunba is a young engineer who has been working in an oil sector for
over 5 years. She currently earns a gross salary of N10,000,000 per annum. She
recently attended two interviews for a new job at Joke Oil & Gas in Rivers State and
Dabiri Hotels & Suite in Lagos State.
She has been called by the two companies to assume office on April 1, 2021. The
following salaries and allowances were offered by the two companies:

Additional information:

  1. If Miss Opeyemi accepts the offer from Joke Oil & Gas, she will rent out her Lagos apartment for N20,000,000 per annum but will need a loan of N12,000,000 at 20% interest to modify the apartment.
  2. She will pay rent of N5,000,000 in Port Harcourt if she relocates.
  3. She maintains her child, a student at St. John University,
  4. She also supports her parents.
  5. She pays a life assurance premium of N5,000,000 annually.
  6. Her employers will deduct contributions for the National Housing Fund (N5,000,000) and Pension Fund (N3,000,000).
  7. She also pays National Health Insurance Premium (N1,000,000).

Required:

a. Compute Miss Opeyemi’s personal income tax liability for the relevant year of assessment for both offers.
b. Advise her on which employment will give her a higher income after tax.

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  • 5 Marks

TAX – May 2018 – L2 – Q5b – Tax Administration and Enforcement

Explain briefly conditions for granting capital allowances.

Explain briefly THREE conditions for granting capital allowances.

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  • 10 Marks

TAX – May 2018 – L2 – Q5a – Tax Administration and Enforcement

Explain rules that guide the determination of residence for individuals.

Identify and explain FIVE rules that guide the determination of residence for different categories of individuals.

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  • 5 Marks

PT – Nov 2019 – L2 – Q2c – Withholding Tax Administration

Calculates withholding tax due from various contracts awarded to KPP Books & Stationery Ltd. by Ghana Water Company.

c) Below are the various contracts awarded to KPP Books and Stationery Limited by the Ghana Water Company for the 2018 year of assessment:

1st contract: supply of stationery costing GH¢1,000 in January 2018.
2nd contract: supply of Station Diaries costing GH¢900 in March 2018.
3rd contract: supply of additional stationery costing GH¢900 on August 16, 2018.
Required:
What amount of withholding tax is due to the Ghana Revenue Authority in the year 2018 from Ghana Water Company? (5 marks)

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  • 3 Marks

PT – July 2023 – L2 – Q2b – Value-Added Tax (VAT), Customs, and Excise Duties

Explanation of three situations where a taxpayer cannot claim an input tax under VAT rules.

State THREE (3) situations under which a taxpayer cannot claim an input tax. (3 marks)

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  • 12 Marks

PT – May 2021 – L2 – Q4a – Income Tax Liabilities

Explain the financial costs from derivatives and the tax treatment of such costs.

The following details were taken from the records of KK Company Limited for the 2020 year of assessment.

Item GH¢
Profit before tax 132,000
Total Financial Gain from derivatives 42,000
Total Financial Cost from derivatives 300,000

Required:
i) State what constitutes financial cost from derivatives? (3 marks)
ii) Explain the tax treatment of financial cost from derivatives under a company such as KK Company Limited that is neither a mining nor petroleum company. (2 marks)
iii) Compute and explain the allowable financial cost from derivatives. (3 marks)
iv) Assume all facts are the same except that Financial gain from derivatives is GH¢60,000 and Financial Cost from derivatives is GH¢30,000. Compute and explain the allowable financial cost from derivatives.

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  • 2 Marks

AT – Nov 2018 – L3 – Q3d – Mergers, amalgamation and reorganisation

Conditions under which research and development expenditure should be capitalized for tax purposes.

Under what condition should Research and Development (R&D) Expenditure be capitalized?

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  • 3 Marks

AT – Nov 2018 – L3 – Q2b – Tax administration in Ghana

Explaining three worthwhile causes and their approval by the Commissioner-General.

The Income Tax Act, 2015 (Act 896), provides under subsection (2) of section 100 a list of worthwhile causes approved by the Government that a person can deduct in the course of doing business.
Required:
Explain THREE (3) worthwhile causes and the basis of approval by the Commissioner-General of GRA? (3 marks)

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  • 20 Marks

AT – Nov 2023 – L1 – SB – Q2 – Petroleum Profits Tax

Calculation of hydrocarbon and companies income tax for Brass Petroleum Producing Company Ltd under Petroleum Industry Act and Companies Income Tax Act.

Brass Petroleum Producing Company Limited has been operating as an oil prospecting company in Nigeria for fifteen years. The company operates in both onshore and shallow water in the Koko area of the Niger Delta region.

Following the provisions of the Petroleum Industry Act 2021, the company applied for, and was granted a petroleum prospecting license (PPL) on January 1, 2021.

Extracts from the company’s financial records for the year ended December 31, 2021, revealed the following:

Description N’million
Revenue:
Value of crude oil sold 184,450
Value of condensate from associated gas sold 47,175
Value of natural gas liquid from associated gas sold 41,650
Gross revenue 273,275
Balancing charge 32
Total Gross Revenue 273,307
Deduct:
Production cost 106,470
Cost of gas reinjection wells 600
Drilling cost incurred 4,360
Depreciation of plant, machinery, and fixtures 1,500
Decommissioning and abandonment 1,900
Repairs and maintenance 5,750
Royalty cost paid 40,990
Niger Delta Development Commission charge 250
Finance costs 510
Terminaling cost 1,380
Donations to recognised charity home 130
Concession rentals 20,470
Host community fund 1,000
Local government municipal levy 100
Environmental remediation fund 1,420
Cost incurred in seeking information for oil deposits 370
Total Deductible Expenses 187,200
Net Profit 86,107

Additional Information:

  1. Value of crude oil sold:
    • Type: Forcados
    • Quantity (barrels): 6,200,000
    • Actual Price ($): 70
    • Fiscal Price ($): 72
  2. Value of condensate from associated gas sold:
    • Type: OSO condensate
    • Quantity (barrels): 3,700,000
    • Actual Price ($): 30
    • Fiscal Price ($): 30
  3. Value of gas liquid from associated gas sold:
    • Type: Pennington
    • Quantity (barrels): 2,800,000
    • Actual Price ($): 35
    • Fiscal Price ($): 34
  4. Drilling cost incurred:
    • Tangible drilling cost for first exploration well: N2,800 million
    • Drilling the first two appraisal wells: N1,560 million
    • Total: N4,360 million
  5. Repairs and maintenance:
    • Repairs of plant, machinery, and fixtures: N2,750 million
    • Repairs or alteration of production implement utensils: N3,000 million
    • Total: N5,750 million
  6. Losses brought forward from last year: N655 million
  7. Capital allowances computed:
    • Brought forward: N320 million
    • For the current year: N1,400 million
    • Total: N1,720 million
  8. Production allowances after commencement of the Petroleum Industry Act: N3,300 million
  9. Exchange Rate: Assume N425 is equivalent to US$1.

Required:

As the company’s Tax Manager, you are to prepare a report to the Managing Director, showing in line with the provisions of Petroleum Industry Act 2021 and Companies Income Tax Act 2004 (as amended), the:

a. Hydrocarbon tax (14 Marks)

b. Companies income tax payable (6 Marks)

(Total: 20 Marks)

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  • 30 Marks

TAX – May 2017 – L2 – SA – Q1 – Personal Income Tax

Calculation of income tax payable with additional information and brief explanations on tax-related terms.

Damilola Adewunmi is the Human Resources Manager of Mighty Steel Nigeria Limited. He is married and blessed with three children.

  1. The following details relate to Damilola Adewunmi for the year ended December 31, 2015:
Item Amount (N)
Salary 3,144,000
Commission 525,000
Rent received 1,350,000
Gain from sale of shares 300,000
Pension received from employment 450,000
Benefits-in-kind (all assessable) 225,000
Interest on Fixed Deposit (gross) 180,000
  1. Damilola contributes N22,500 monthly towards the upkeep of his aged mother. His elder brother, Adekunle, also contributes N37,500 monthly.
  2. Damilola took an insurance policy on his life and pays a premium of N15,000 monthly.
  3. The children are University undergraduates and enjoy a scholarship for only tuition from his State Government.
  4. Damilola took a loan to build an owner-occupied house on which he pays N90,000 annual interest.
  5. For an outstanding performance, he was given an end-of-year bonus in the sum of N90,000.
  6. Withholding Tax of N18,000 was deducted in respect of interest on Fixed Deposit.

Required:

a. Calculate the income tax payable for the relevant year of assessment.
b. Calculate the income tax payable for the relevant year of assessment, assuming 2015 is the year of assessment with the following additional information:

  • Contribution to National Housing Fund: N78,600
  • Contribution to National Health Insurance Scheme: N210,000
  • Contribution to Pension Scheme: N235,800

c. Explain briefly the following:

  • Itinerant worker
  • Non-resident individual
  • Earned income
  • Resident individual
  • Unearned income

d. List FIVE dividends exempted from tax.

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  • 30 Marks

AX – Nov 2021 – L2 – Q1 – Personal Income Tax (PIT)

Calculation of personal income tax liability for two job offers and providing advice on the offer that yields a higher income after tax.

Miss Opeyemi Olunba is a young engineer who has been working in an oil sector for
over 5 years. She currently earns a gross salary of N10,000,000 per annum. She
recently attended two interviews for a new job at Joke Oil & Gas in Rivers State and
Dabiri Hotels & Suite in Lagos State.
She has been called by the two companies to assume office on April 1, 2021. The
following salaries and allowances were offered by the two companies:

Additional information:

  1. If Miss Opeyemi accepts the offer from Joke Oil & Gas, she will rent out her Lagos apartment for N20,000,000 per annum but will need a loan of N12,000,000 at 20% interest to modify the apartment.
  2. She will pay rent of N5,000,000 in Port Harcourt if she relocates.
  3. She maintains her child, a student at St. John University,
  4. She also supports her parents.
  5. She pays a life assurance premium of N5,000,000 annually.
  6. Her employers will deduct contributions for the National Housing Fund (N5,000,000) and Pension Fund (N3,000,000).
  7. She also pays National Health Insurance Premium (N1,000,000).

Required:

a. Compute Miss Opeyemi’s personal income tax liability for the relevant year of assessment for both offers.
b. Advise her on which employment will give her a higher income after tax.

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  • 5 Marks

TAX – May 2018 – L2 – Q5b – Tax Administration and Enforcement

Explain briefly conditions for granting capital allowances.

Explain briefly THREE conditions for granting capital allowances.

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  • 10 Marks

TAX – May 2018 – L2 – Q5a – Tax Administration and Enforcement

Explain rules that guide the determination of residence for individuals.

Identify and explain FIVE rules that guide the determination of residence for different categories of individuals.

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  • 5 Marks

PT – Nov 2019 – L2 – Q2c – Withholding Tax Administration

Calculates withholding tax due from various contracts awarded to KPP Books & Stationery Ltd. by Ghana Water Company.

c) Below are the various contracts awarded to KPP Books and Stationery Limited by the Ghana Water Company for the 2018 year of assessment:

1st contract: supply of stationery costing GH¢1,000 in January 2018.
2nd contract: supply of Station Diaries costing GH¢900 in March 2018.
3rd contract: supply of additional stationery costing GH¢900 on August 16, 2018.
Required:
What amount of withholding tax is due to the Ghana Revenue Authority in the year 2018 from Ghana Water Company? (5 marks)

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  • 3 Marks

PT – July 2023 – L2 – Q2b – Value-Added Tax (VAT), Customs, and Excise Duties

Explanation of three situations where a taxpayer cannot claim an input tax under VAT rules.

State THREE (3) situations under which a taxpayer cannot claim an input tax. (3 marks)

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  • 12 Marks

PT – May 2021 – L2 – Q4a – Income Tax Liabilities

Explain the financial costs from derivatives and the tax treatment of such costs.

The following details were taken from the records of KK Company Limited for the 2020 year of assessment.

Item GH¢
Profit before tax 132,000
Total Financial Gain from derivatives 42,000
Total Financial Cost from derivatives 300,000

Required:
i) State what constitutes financial cost from derivatives? (3 marks)
ii) Explain the tax treatment of financial cost from derivatives under a company such as KK Company Limited that is neither a mining nor petroleum company. (2 marks)
iii) Compute and explain the allowable financial cost from derivatives. (3 marks)
iv) Assume all facts are the same except that Financial gain from derivatives is GH¢60,000 and Financial Cost from derivatives is GH¢30,000. Compute and explain the allowable financial cost from derivatives.

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  • 2 Marks

AT – Nov 2018 – L3 – Q3d – Mergers, amalgamation and reorganisation

Conditions under which research and development expenditure should be capitalized for tax purposes.

Under what condition should Research and Development (R&D) Expenditure be capitalized?

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  • 3 Marks

AT – Nov 2018 – L3 – Q2b – Tax administration in Ghana

Explaining three worthwhile causes and their approval by the Commissioner-General.

The Income Tax Act, 2015 (Act 896), provides under subsection (2) of section 100 a list of worthwhile causes approved by the Government that a person can deduct in the course of doing business.
Required:
Explain THREE (3) worthwhile causes and the basis of approval by the Commissioner-General of GRA? (3 marks)

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