The tax treatment differs depending on whether the asset is provided as capital or a loan:

1. Loan Contribution:

• If Mr. Konto provides the GH¢1,000,000 as a loan, the company can deduct interest payments on the loan from its taxable income, thereby reducing its tax liability.
• Interest payments made to Mr. Konto will be subject to a withholding tax of 8%.
• The company may be subject to thin capitalization rules. If the debt-to-equity ratio exceeds 3:1, the excess interest paid on the loan will not be deductible for tax purposes. In this case, the share capital is GH¢400,000, and the loan would be GH¢1,000,000, which is within the allowable limit (3 times the share capital = GH¢1,200,000). Therefore, no thin capitalization issue arises.

2. Capital Contribution:

• If Mr. Konto provides the GH¢1,000,000 as capital, the return on the capital is in the form of dividends.
• Dividends paid to shareholders are not deductible by the company for tax purposes.
• Dividends distributed to Mr. Konto will be subject to withholding tax at 8%.
• If the company retains profits without distributing dividends, the Commissioner-General may treat part of the company’s undistributed profit as a deemed dividend subject to tax.

Conclusion:
It is more tax-efficient for Mr. Konto to finance the acquisition of the plant through a loan, as the company can benefit from tax-deductible interest payments, while dividends from capital contributions are not tax-deductible.
(6 marks)