Question Tag: Tax Planning

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  • 5 Marks

SCS – Nov 2024 – L3 – Q4b – International Tax Considerations

Key tax issues for BOGML’s planned international expansion to minimize total group tax payable.

The company is planning to expand its operations to Tanzania and South Africa in 2026. As a result, transactions between the head office in Ghana and the prospective foreign subsidiaries will likely take place, leading to potential international tax implications.

Required:

Briefly identify and explain TWO key issues to consider for the company to minimise total tax payable on the group profits.

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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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  • 15 Marks

AT – May 2024 – L3 – SC – Q7 – Double Taxation Reliefs and Credits

Explain treaty shopping, strategies to mitigate it, ECOWAS common external tariff features, and trade defense measures.

Abakali Limited is a company engaged in the manufacturing of three variants of beverages. The products of the company are well received by consumers, as the company now controls about 55% of the domestic market. The “chocolate” brand is the top earner for the company. According to a recent newspaper review, “it has the same quality as those imported into the country from the western world.”

The Board of the company, at one of its meetings, decided to enter the West African market in 2024 and, by 2026, the European market, through:

  1. Establishment of depots in major cities of four neighboring countries (Republic of Benin, Togo, Ghana, and Niger) with goods transported by road.
  2. Incorporation of a branch in a European country, initially serving as a depot, but within two years, full production will commence.

As emphasized by one of the directors, the main challenge the company must address is the strategy to mitigate the negative impact of high tax rates (in Europe and West African countries) on profits to achieve better returns on investment.

A director, previously employed by an international company, suggested using “treaty shopping” as a tax planning strategy for locating the branch office in Europe. He also pointed out that the Economic Community of West African States (ECOWAS) common external tariff framework provides a solution to different tax regimes in the sub-region.

Most Board members are not familiar with “treaty shopping” or the ECOWAS common external tariff framework, and they have requested professional advice on these matters.

The Managing Director has approached your professional accounting firm for guidance on the key issues raised in the meeting.

Required:

As the officer designated to handle this task, write a report to your Principal Partner for review before sending it to the client. The report should address the following concerns of the client:

a. Explanation of the concept and practice of “treaty shopping” (6 Marks)

b. Discussion on the strategies employed by various countries in curbing treaty shopping in international transactions (2 Marks)

c. Discussion on the features of the ECOWAS common external tariff framework (4 Marks)

d. Comment on the trade defense measures put in place to guide the operations of the common external tariff framework (3 Marks)

(Total 15 Marks)

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  • 20 Marks

AT – May 2020 – L3 – Q3 – Tax Planning

Prepare a report explaining tax planning, its objectives, and tax planning maxims with examples for a manufacturing company's Board of Directors.

“Tax planning involves anticipating a set of circumstances and the identification of opportunities to minimize or defer tax liabilities within the law”.

You have been appointed as a Tax Consultant to Ken Group Ltd, a manufacturing company, having issues with Ghana Revenue Authority on tax evasion and avoidance. Your first assignment is to meet the Board of Directors to brief them on various issues governing tax planning and how to take advantage of the provisions in the taxation laws to avoid the payment of certain taxes and possibly defer certain tax liabilities.

Required: Write a report explaining the following:
a) Tax planning and its intended objectives. (10 marks)
b) Tax planning maxims or variables with appropriate examples. (10 marks)

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  • 4 Marks

AT – NOV 2021 – L3 – Q1c – Tax Planning

Outlines tax planning measures that can be used to reduce tax liability for a sole proprietorship business.

Evaluate FOUR (4) tax planning measures that you can adopt in your desire to form a sole proprietorship business. (4 marks)

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  • 10 Marks

AT – Nov 2020 – L3 – Q2b – Tax planning

Tax implications for a Singaporean investor looking to establish shoe or juice manufacturing companies in Ghana.

Following the government’s commitment to build one factory in each district in Ghana and its desire to ensure food sufficiency through the planting for food and jobs program, an investor from Singapore intends to invest in a shoe manufacturing company to be located at Accra in the Greater Accra Region of Ghana. He also considers starting a juice manufacturing company at Nsawam in the Eastern Region of Ghana in response to the investment drive of the government.

As part of the investment, he intends to incur the following cost and start operations in 2018 on either proposal, which is the shoe manufacturing company or the juice manufacturing company.

Description Amount (GH¢)
Building 7,200,000
Plant and Machinery 11,700,000
Furniture and Fittings 180,000
Computers 180,000

Additionally, he intends to recruit fresh graduates from the All Nations University College of Ghana. It is further projected that in the first three years, 2018, 2019, and 2020, it will incur GH¢36,000, GH¢32,400, and GH¢18,000 losses, respectively. The investor hopes to start making profit from the year 2021. He intends to borrow at 20% interest from his USA associate, amounting to the equivalent of GH¢100,000,000. The equity he intends to start with is GH¢36,000,000.

Required: As a tax adviser, evaluate the proposed investment by the Singaporean investor and the tax implication on the various activities highlighted in the scenario.

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  • 8 Marks

AT – Dec 2023 – L3 – Q2b – Tax planning

Discussing tax planning opportunities available to sole proprietorships that are not available to limited liability companies.

Tax planning opportunities are available to all persons. All business units may not have the same tax planning opportunities, hence the need to carefully select a business unit that may provide the intended benefits to the owner or owners.

Required:
Discuss FOUR (4) tax planning opportunities available to sole proprietorships which may not be available to limited liability companies.

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  • 10 Marks

AT – July 2023 – L3 – Q3a – Mergers, amalgamation, and reorganization

Discussing the tax implications of a 51% share acquisition and strategies to mitigate tax exposure.

Exclusif Homes Ghana Ltd is a wholly owned Ghanaian real estate company. The basis period of the company ends on 31 December each year. The company has obtained a government contract to build low-cost houses across the country. In order to raise additional capital to undertake this project, 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 several potential investors, and there is the likelihood of having an investor and agreements signed on 31 January 2022.

The financial statements of Exclusif Homes Ghana Ltd revealed that the company made a loss of GH¢2,500,000 for the period ended 31 December 2021. Included in the expenses of the company are financial costs and bad debt amounting to GH¢100,000 and GH¢150,000 respectively.

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. The current value of the land is GH¢500,000.

Required:
Advise Exclusif Homes Ghana Ltd on the following:

  1. The income tax implications for the company if an investor acquires 51% of the company’s shares and the tax planning opportunities available which could reduce the income tax exposure of the company if an investor acquires 51% of the company’s shares.
  2. Measures the acquirer can adopt to mitigate the tax effects (if any) of the proposed transaction.

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  • 4 Marks

AT – Nov 2017 – L3 – Q3b – Tax planning

Explaining the variables that constitute tax planning.

Tax planning is the act of arranging one’s tax affairs in ways that postpone or avoid taxes. By employing effective tax planning variables, one can have more positive cash flows to save and invest or more money to spend.

Required:
Explain what constitutes the variables of tax planning. (4 marks)

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  • 10 Marks

AT – Nov 2017 – L3 – Q3a – Business income – Corporate income tax, Tax planning

Evaluating the tax implications of an ICT hardware manufacturing business versus a mango plantation investment.

Following the government’s commitment to build one factory in each district in Ghana, an investor from Mauritius intends to invest in an ICT-Hardware manufacturing company to be located at Nsawam in the Eastern region of Ghana or start a mango plantation company at Aburi in the Eastern region of Ghana in response to the government’s investment drive.

As part of the investment, he intends to incur the following costs and start operations in 2018 on either proposal (ICT Hardware or Mango plantation):

Item Cost (GH¢)
Building 4,000,000
Plant and Machinery 6,500,000
Furniture and Fittings 100,000
Computers 100,000

Additionally, he intends to recruit fresh graduates from the Islamic University College of Ghana. It is further projected that in the first 3 years (2018, 2019, and 2020), the business will make losses as follows:

  • Year 2018: (GH¢20,000)
  • Year 2019: (GH¢18,000)
  • Year 2020: (GH¢10,000)

The investor hopes to start making profits from 2021 and intends to borrow a loan at 20% interest from his USA associate, amounting to the equivalent of GH¢80,000,000. The equity he intends to start with is GH¢20,000,000.

Required:
As a tax adviser, evaluate the proposed investment by the Mauritius investor and the tax implication on the various activities highlighted in the scenario.

(10 marks)

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  • 4 Marks

AT – March 2023 – L3 – Q2c – Tax planning

Advise on which housing option is more tax-efficient for the Managing Director in relation to employment and rental income.

The Management of 6Up Ltd has asked for advice on which of the following options is better for their Managing Director in connection with tax planning:

Option 1:
To rent the Managing Director’s personal house for use by the Managing Director as part of his condition of employment while taking a withholding tax at the rate of 8% on the rental payment.

Option 2:
To rent another place for the Managing Director instead of his own place so he may consider renting out his place of residence.

Required:
Advise on which option is better from the standpoint of tax planning implication for the Managing Director.

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  • 4 Marks

PSAF – Nov 2016 – L2 – Q5c – Public sector fiscal planning and budgeting

Explain tax policy and tax planning in the context of tax administration in Ghana.

Explain the following terms used in tax administration in Ghana:
i) Tax Policy
ii) Tax Planning
(4 marks)

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