Question Tag: Tax Planning

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  • 15 Marks

STP – Feb 2020 – L2 – Q5 – Anti-Avoidance Provisions

Identify and discuss three anti-avoidance provisions in the Income Tax Act, 2015 (Act 896) and their limitations on tax planning.

Although tax planners have the liberty to devise schemes which reduce the tax liability of their clients, the Income Tax Act, 2015 (Act 896) contains provisions which limit tax planning schemes.

Required:
Identify any three (3) anti-avoidance provisions in Act 896 and discuss how each of these provisions places a limitation on the ability of a person to engage in tax planning.

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  • 22 Marks

STP – Feb 2020 – L2 – Q4 – Business Entity Tax Implications

Advise on tax implications of establishing a company, partnership, or sole proprietorship and identify which offers the least tax exposure for an investor.

As a renowned tax consultant, a potential investor in the real estate sector in Ghana is seeking your expert opinion on the tax implications of establishing a company, a partnership or a sole proprietorship and which form of the business organisations gives the least tax exposure for an investor.

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  • 20 Marks

STP – Aug 2020 – L2 – Q3 – Ownership Change Tax Implications

Discuss income tax implications for Obibini Ghana Limited if an investor acquires 51% of its shares.

Obibini Ghana Limited is a wholly owned Ghanaian real estate company. The basis period of the company ends on 31st December each year. In order to raise additional capital to expand its activities, the company is looking for an investor who would acquire at least 51% of the shares of the company. The managers of the company are engaged in negotiations with a potential investor and the parties expect the transaction to be completed on 31st January 2020. The financial statements of the company revealed that the company made a loss of GH₵2,500,000 for the period ended 31st December 2019. The company also had financial cost of GH₵100,000.00
The company also has a parcel of land located at Abokobi which the company purchased three years ago at the cost of GH₵100,000.00. The current value of the land is GH₵500,000.00

Required
The managers of the Obibini Ghana are seeking your opinion on the following:
i. the income tax implications for the company if an investor acquires 51% of the company’s shares.

ii. The tax planning opportunities available which could reduce the income tax exposure of company if an investor acquires 51% of the company’s shares.

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  • 20 Marks

STP – Aug 2020 – L2 – Q2 – Corporate Restructuring

Restructure Mr. Kofi Opoku’s companies to reduce tax exposure and provide cheaper financing for Speed Transport Ghana Limited.

Mr. Kofi Opoku is the direct shareholder of Unique Farms Ghana Limited and Speed Transport Ghana Limited. Unique Farms is engaged in tree crop farming and the company harvested the tree crops for the first time in 2019. In April, 2020, he received a copy of the audited financial statements of the two companies.
An analysis of the audited financial statements of the companies revealed the Unique Farms Ghana Limited is more profitable of the two companies. Speed Transport Ghana Limited however requires a lot of money for its operating activities and it mostly resorts to borrowing from financial institutions to meet its expenditure requirements. The high borrowing costs was affecting the profitability of the company.
Mr. Opoku also noticed that tax exposure on his investments is not ideal. Mr. Kofi Opoku has been informed that you are an expert in strategic tax planning.

Required
You are required to help Mr. Kofi Opoku restructure his companies in a manner that would provide a cheaper financing option for Speed Transport Ghana Limited and reduce his overall tax exposure on the investments.

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  • 20 Marks

STP – Aug 2020 – L2 – Q1 – Tax Planning vs. Tax Avoidance

Discuss distinction between tax planning and tax avoidance under Ghanaian tax law with examples and references.

The Council of the Chartered Institute of Taxation, Ghana (CITG) has invited you to speak at a Continuous Development Program (CPD) on the topic “The distinction between tax planning schemes and tax avoidance arrangements under Ghanaian tax laws”.
In the letter of invitation, the Council indicated that you are to submit a detailed write-up of your presentation.

Required
With the aid of appropriate examples and specific references to Ghanaian tax law provisions, write in sufficient detail, the content of your presentation.

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  • 20 Marks

STP – Aug 2018 – L2 – Q1 – Taxation of Capital Transactions

Advise Welmount Ghana Ltd on tax implications of selling land and shares, and measures to mitigate tax exposure.

Welmount Ghana Ltd is a construction company with its registered office located at Cantoments in Accra. In February 2007 it purchased a parcel of land at Achimota at the cost of GH₵75,000. The company spent GH₵25,000 to construct a fence wall around the property and to complete title registration processes at the Lands Commission. In March 2008, the company also purchased shares in Barclays bank of Ghana for GH₵20,000. In April 2017, the board of directors of the company decided to purchase another parcel of land at Tse Addo near the Trade Fair at La. The board further resolved to sell off the parcel of land purchased in February 2007 and the shares the company held in Barclays bank to finance the purchase of the parcel of land at Tse Addo. The company engaged the services of a valuer to determine the market value of the land located at Achimota and the shares the company held in Barclays bank. The company paid the valuer GH₵30,000 for his services. A marketing firm was contracted to advertise the sale of the parcel of land and the shares and the firm submitted a bill of GH₵35,000 to the company. In June 2017, the company sold the parcel of land and the shares in a single transaction for GH₵500,000. At the time of the sale, the market value of the parcel of land was GH₵400,000 and that of the shares was GH₵100,000. The company paid GH₵40,000 to a law firm to conduct due diligence on the parcel of land the company intended to purchase. In February 2018, the Managing Director of the company signed the purchase agreement and an amount of GH₵600,000 was paid to the owners of the property.

Required:

I. Advise on the company on the income tax implications of the realization of the assets. (20 marks) II. Advise on measures the company could have adopted to mitigate its tax exposure (if any) on the realization of the assets.

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  • 18 Marks

STP – Feb 2021 – L2 – Q5 – Non-tax Factors for Investment Location

State and explain three non-tax factors influencing the choice of investment location.

a) State and explain three (3) non-tax factors which may inform the choice of a particular location for an investment.

b) Discuss three (3) tax incentives available to investors who register under the Free Zone Act, 1995 (Act 504).

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  • 12 Marks

STP – Feb 2021 – L2 – Q4 – Taxation and Operating Strategies

Explain three anti-avoidance provisions in Ghana's Income Tax laws and their impact on tax planning.

State and explain three (3) anti-avoidance provisions found in the Income Tax laws of Ghana and how these provisions place a limitation on the tax planning opportunities available to taxpayers.

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  • 25 Marks

STP – Feb 2021 – L2 – Q3 – Taxation of Capital Transactions

Advise Tremor Ghana Ltd on tax implications of asset disposals and tax planning opportunities.

Tremor Ghana Ltd is a trading company with its registered office located at North Legon. The basis period of the company ends on $31^{\text {st }}$ December of every year. In August 2018, the company acquired the following assets.

ASSET COST (GHc)
Computers $50,000.00$
Motor Vehicles $150,000.00$
Land $350,000.00$

In November 2019, the company disposed of the assets for the following amounts:

ASSET COST (GHc)
Computers $70,000.00$
Motor Vehicles $160,000.00$
Land $450,000.00$

In January 2020, the company acquired a new office building at the cost of GHc600,000.

Required: (i) Advise the company on the income tax implications of the realization of the assets in November 2019. 20 marks (ii) Identify the tax planning opportunities the company could have employed to mitigate its tax exposure on the realization of the assets.

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  • 25 Marks

STP – Feb 2021 – L2 – Q1 – Strategic Tax Planning

Advise on tax implications of AIG acquiring 55% stake in Fluid Logistics Ghana and providing a GH₵6.5M loan, plus tax planning options.

The President of America Is Great (AIG) Group, a US Corporation, is exploring the possibility of acquiring a fifty-five percent stake in Fluid Logistics Ghana Limited. The stated capital of Fluid Logistics Ghana Limited is GH₵1,500,000. AIG Corporation intends providing a loan of GH₵6,500,000 to Fluid Logistics Ghana Limited when the transaction for the acquisition of the fifty-five percent stake is completed. The President of AIG Corporation is seeking your advice on the tax implications of the proposed transactions.

Required: Advise the President on: i. The income tax implications of the acquisition of a fifty-five percent stake in Fluid Logistics Ghana Limited. 9 marks ii. The income tax implications of providing the loan of GH₵6,500,000. 9 marks iii. The tax planning options available to minimize the tax effects of the proposed transactions.

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  • 20 Marks

ATP – Feb 2016 – L2 – Q5 – Employment Income Exceptions

List exceptions to the general rule that employment income, including allowances and benefits, is taxable under Act 592.

a). Under the provisions of the Internal Revenue Act, 2000 (Act 592), as amended a person’s income from an employment, as a general rule, is taxable. A person’s income from an employment is that person’s gains or profits from that employment. The gains or profits from an employment of a person include the allowances or benefits paid in cash or given in kind to, or on behalf of, that person from that employment.

As the Head of Tax Department of your company, you are required to indicate exceptions, if any, to the above general rule in your advisory capacity to your Managing Director, who is scheduled to make a presentation to strategic investors of your company. (10 Marks)

b). The Ghana Revenue Authority is in the process of abolishing the Provisional Assessments under section 76 of the Internal Revenue Act, 2000, (Act 592), as amended and instead, fully roll out the Self-assessment under section 78 of the Internal Revenue Act, 2000, (Act 592), as amended to all taxpayers (at the Large Taxpayer Office, Medium Taxpayer Offices, and Small Taxpayer Offices). As a tax consultant, you have been invited by the Association of Ghana Industries to speak to its members on the topic “The Merits of Self-assessment”.

You are required to state briefly only five (5) of the benefits or importance of Self-assessment. (10 Marks)

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  • 20 Marks

AT – Mar 2025 – L3 – Q3 – Tax Planning and Ethical Issues

Explain differences between tax planning and aggressive tax avoidance, manage conflict of interest, and benefits of foreign debt over domestic debt.

a) It has been said that there is a thin line between tax planning and tax avoidance. The line is a little thinner when one compares tax planning to aggressive tax avoidance. Required: Explain the areas of divergence between tax planning and aggressive tax avoidance. Do you however think the two may be similar in any way? (10 marks)

b) A conflict of interest occurs when an individual’s personal interests – family, friendships, financial or social factors such as serving two or more competing clients could compromise his or her judgement, decisions or actions in the performance of his/her duties. You are a tax expert at Pompor & Associates, a firm of Chartered Accountants and Tax Practitioners. Your third assignment is to carry out a tax health check into the affairs of one of the clients of your firm where your interest is likely to conflict. Required: Explain how you are likely to manage the actual or potential conflict of interest situation. (5 marks)

c) The Bank of Ghana’s summary of Economic and Financial data has over the years shown the escalating nature of Ghana’s public debt. Successive governments keep blaming themselves that despite the huge debts contracted over the years there is little development across the country. Published statistics also show that the total foreign debts mostly contracted outstrip the total domestic debt. You are the head of the Policy Unit of the Ministry of Finance who work closely with the Chief Director of the Ministry. Required: Draft a report for the perusal of the Chief Director for onward submission to the Minister to be tabled for cabinet discussion on FOUR benefits of foreign debt over domestic debt. (5 marks)

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  • 12 Marks

AT – Nov 2024 – L3 – Q3a – Tax Planning and Objection to Tax Assessment

Advise Poyooyo LTD on provisions in tax laws to challenge a disputed tax liability.

The Directors of Poyooyo LTD have heard of the Maxims of Tax Planning, which outline strategies for minimizing tax liabilities legally.

In a recent visit by the Domestic Tax Revenue Division of the Ghana Revenue Authority (GRA), the Large Taxpayers Office (LTO) in Accra conducted a tax audit on the company, resulting in tax assessments raised against Poyooyo LTD for settlement.

Management of the company, in their last meeting with the directors, presented the outcome of the tax audit and strongly argued that the assessment was erroneous. They claimed that the liabilities raised were based on legitimate tax planning strategies the company employed.

They believe that the company is in full compliance with the tax laws and should not be required to settle the tax liabilities assessed. However, payment of the liability would significantly impact the company’s cash flow and disrupt its operations.

Poyooyo LTD has approached your tax consulting firm for assistance and guidance.

Required:

Advise Poyooyo LTD on the provisions of the tax laws that could be taken advantage of to avert the payment of the liability.

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  • 7 Marks

ATAX – May 2016 – L3 – Q7a – Tax Planning and Management

List seven essential documents/information required for effective tax planning strategies.

Tax planning involves making conscious efforts to arrange a taxpayer’s affairs in ways that will minimize tax liabilities. It requires detailed knowledge of tax legislation and the application of the same to particular circumstances, identifying and taking advantage of loopholes, if any.

The tax-conscious taxpayer and the expert tax adviser working together can often significantly reduce the tax liability that would have otherwise been payable.

You are required to:
Provide an adequate checklist of any SEVEN documents/information to be considered for effective tax planning strategies. (7 marks)

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  • 15 Marks

AT – Nov 2016 – L3 – SC – Q7 – Tax Planning and Management

Explain tax planning and anti-avoidance legislation, summarize tax evasion and double taxation provisions, and highlight non-tax investment factors.

You were invited as the Chairman of a Tax Summit at Ikeja, Lagos State. The topics for discussion were as follows:

i. Tax Planning, an Effective Method of Tax Avoidance
ii. Tax Evasion in a Growing Economy
iii. Double Taxation – The Provisions and the Impact
iv. Jurisdiction for Investment – Non-Tax Factors

As the Chairman, you had the opportunity to summarize the papers presented by the four paper presenters in just ten minutes.

You are required to:

a. Explain briefly, Tax Planning and Anti-Avoidance Legislations put in place by the Government (3 Marks).

b. Summarize situations that may involve Tax Evasion (4 Marks).

c. Explain Double Taxation Agreement – Provisions and the Main Objectives (4 Marks).

d. Summarize Non-tax factors that attract investors in choosing a business jurisdiction (4 Marks).

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  • 7 Marks

ATAX – May 2017 – L3 – Q6a – Tax Planning and Management

Explain thin capitalization and non-tax factors in tax planning with examples.

Tax planning encompasses many different considerations, including the timing of income, purchases and other expenditure, the selection of investments, and the taxpayer’s filing status. Put differently, tax planning is the analysis of a financial situation or plan from a tax perspective.

Given the current government’s drive to boost revenue, there is the compelling need for companies to adopt vigorous tax planning strategies.

You are required to briefly explain with examples the following:
i. Thin Capitalization (4 Marks)
ii. Non-Tax Factors (3 Marks)

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  • 20 Marks

ATAX – May 2019 – L3 – Q2 – Tax Administration and Dispute Resolution

Discuss the distinction between tax evasion and avoidance, provide solutions, and evaluate Nigeria’s anti-avoidance legislation.

You have been approached by the managing director of a manufacturing company, Ojieaga Integrated Limited, for professional advice on tax evasion and tax avoidance and their challenges to an equitable tax system in Nigeria. Your report is expected to guide the operation of the business, having been subjected in the last three years to various forms of fines and penalties by the Federal Inland Revenue Service on confirmed cases of sharp business practices with their attendant loss of tax revenue to the government.

Required:
Having accepted the terms of engagement, you are to write a report to management for consideration at its next meeting, dealing with the following areas of concern:

a. Distinction between tax evasion and tax avoidance, highlighting THREE examples of each case. (6 Marks)
b. Seven solutions to the problem of tax evasion and tax avoidance. (7 Marks)
c. Comment on anti-avoidance legislations in Nigeria. (7 Marks)

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  • 5 Marks

ATAX – Nov 2016 – L3 – Q4a – Tax Planning and Management

Lists essential considerations for tax planning using a standard checklist.

Tax Planning is anticipatory and requires an understanding of tax laws. A Tax Consultant should be versed in these two areas to render excellent advisory services to clients, government, and other institutions.

Requirements:

a) State any FIVE matters that should be considered in Tax Planning, using a standard Tax Planning Checklist. (5 Marks)

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  • 30 Marks

ATAX – Nov 2016 – L3 – Q1 – Taxation of Companies

Discusses tax planning concepts, anti-avoidance measures, tax evasion, double taxation, and non-tax factors influencing investor choices.

Zezee Nigeria Limited was incorporated on September 7, 2012, but did not commence business until July 1, 2013. Based on its Memorandum and Articles of Association, the company was established to carry on distributorship and general contracting.

Extracts from Statements of Profit or Loss and Other Comprehensive Income:

Additional information:

(i) Other Income comprises:

(ii) Administrative expenses include:

(iii) Details of Property, Plant and Equipment are as follows:

(iv) On January 2, 2015, the company bought another Motor
vehicle for N1,800,000

(v) Extracts of the Statements of Financial Position are given below:

You were recently appointed the Tax Consultant to the company. The directors sought your advice on whether or not to exercise the company’s right of election for the relevant years of assessment.
For all the relevant years of assessment, you are required to:
a. Compute the Adjusted Profit/Loss. (9 Marks)
b. Determine the Assessable Profit/Loss and advise the Company on whether or not to exercise its right of election. (6 Marks)
c. Compute the capital allowances. (4½ Marks)
d. Compute the tax liabilities. (10½ Marks)

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  • 20 Marks

ATAX – Nov 2021 – L3 – Q3 – Tax Planning and Management

Analysis of tax planning, avoidance, thin capitalisation concepts, and strategies for Dragbat Limited to improve tax efficiency.

The board of directors of Dragbat Limited, Lagos, a medium-sized company, at its last meeting, deliberated on the company’s tax-related issues vis-à-vis one of its major competitors in the same line of business. The Managing Director presented the audited accounts of the two companies for the previous three years. He affirmed that their company has been paying more corporate and tertiary education taxes than their competitors, while returning lower profit before tax in each of the years under review. The board has since directed the Managing Director to do a thorough investigation on how competitors, according to the Chairman of the board, are having it easy with the tax authorities.

With the assistance of a former course-mate in the university, who works in the Finance unit of a competitor’s organisation, the Managing Director was informed that the competitor was involved in tax planning and tax avoidance activities, which have helped in reducing the company’s tax liabilities over the years.

Being an engineer with sparse knowledge of accounting and taxation, the Managing Director has contacted you as the company’s tax consultant to help explain some fundamental issues in tax planning and tax avoidance. To assist with this assignment, the Managing Director of Dragbat Limited provided you with the audited financial statements of the two competing companies for the last three years. He also informed you that the major difference between the two companies is that Dragbat Limited is servicing a loan facility of ₦120 million obtained five years ago, and the company is not finding it comfortable in implementing the terms of the loan, despite its increased profitability over the last three years.

The board will be meeting in a fortnight to consider the report on the preliminary investigation, and the Managing Director expects you to submit your report to him next week.

Required:

As the company’s tax consultant, you are expected to address and advise on the following issues in your report:

a. The concepts of tax planning, tax avoidance, and thin capitalisation. (9 Marks)
b. Tax planning activities and strategies. (6 Marks)
c. Tax implications for companies that practice tax planning, tax avoidance, and thin capitalisation. (5 Marks)

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