- 20 Marks
Question
Tosese Limited is a company registered in Ghana under the Companies Act 1963, Act 179 and has been in operation for several years. The company has been noted by the Tax Authorities for being non tax compliant and no returns were submitted and paid for direct taxes in the 2015 year of assessment. However, after much Tax Education with the support of his Tax Practitioner, the Finance Manager presented the financial statement to the GRA.
The summarised Income Statement for the year ended 31st December 2015 showed the following.
Tosese Limited Income Statement
| Description | GH¢ |
|---|---|
| Turnover | 5,640,000.00 |
| Direct Costs | 4,840,000.00 |
| Gross Profit | 800,000.00 |
| Administration and General Expenses | 560,000.00 |
| Profit before Tax | 240,000.00 |
| Taxation | 60,000.00 |
| Profit after Tax | 180,000.00 |
| Net Profit Transferred to Income Surplus | 180,000.00 |
Income Surplus Account
| Description | GH¢ |
|---|---|
| Balance brought forward | 1,575,000.00 |
| Add Profit for the year | 180,000.00 |
| Balance carried forward | 1,755,000.00 |
The details of the notes are shown below. Note 1. The company is registered for VAT and has not been submitting its returns regularly. The turnover per the VAT Returns submitted to the Commissioner-General during the period under review was GH¢5,080,000.00
Note 2. Direct Costs
| Description | GH¢ |
|---|---|
| Imports | 3,684,000.00 |
| Freight and Insurance | 368,400.00 |
| Import Duties | 736,800.00 |
| Transport | 50,800.00 |
| Total | 4,840,000.00 |
Note 3. Administration and General Expenses included
| Description | GH¢ |
|---|---|
| Consultancy Fees | 25,000.00 |
| Printing and Stationery | 84,000.00 |
| Rent (Commercial Property) | 61,280.00 |
| Equipment Rentals | 15,000.00 |
| Directors Fees | 60,000.00 |
Note 4. The Company since incorporation has never declared and paid any dividend to its four shareholders even though the company has consistently been declaring profit. The Commissioner-General has therefore decided to invoke Section 59 (8) of the Income Tax Act, 2015 Act 896 by notice in writing to apply 40% of the balance on the Income Surplus Account to Dividend Tax.
Required: You are to determine the tax liability due from the company in respect of direct and Indirect Taxes for 2015 year of assessment, including any relevant penalties that are applicable. Ignore Corporate Tax. Total 20 Marks.
Answer
TOSESE LIMITED
COMPUTATION OF THE L
i. Indirect Tax
VAT
GH ¢
Turnover as per Financial Statement = 5,640,000
Less: Turnover per the Returns = 5,080,000
Difference (Under Declaration) = 560,000
VAT Payable at 17.5% x 560,000 = 98,000
Penalty (98,000 * 3) = 294,000
j. WITH HOLDING TAX
Transport 50,800 @ 5% = 2,540.00
Consultancy 25,000 @ 5% = 1,250.00
Printing and Stationery 84,000 @ 5% = 4,200.00
Equipment Rental 15,000 @ 8% = 1,200.00
Directors’ Fees 60,000 @ 10% = 6,000.00
Rent (Commercial) 61,280 @ 15% = 9,120.00
Total = 24,310.00
Add: 30% Penalty (24,310 x 30%) = 7,293.00
Direct Tax = 31,603.00
k. DIVIDEND TAX
Balance per Income Surplus A/C = 1,575,000
40% Dividend Tax = 630,000
Dividend Tax @ 8% of 630,000 = 50,400
SUMMARY OF TAX LIABILTY
Total Direct Tax Payable (31,603.00 + 50,400) = 82,003.00
Less Tax already Paid = 60,000.00
Direct Tax Due = 22,003.00
Add Indirect Tax Payable = 294,000.00
Total Direct and Indirect Taxes Due = 316,003.00
- Tags: Dividend tax, Income Surplus, Penalty, VAT, Withholding Tax
- Level: Level 2
- Topic: Indirect Taxes
- Series: AUG 2017
- Uploader: Samuel Duah