- 20 Marks
Question
Mr Brefo Nimo returned to Ghana after staying in the Netherlands for over 20 years and took up an appointment with Amanfro Limited as the Director of Finance. His gross monthly basic salary for 2016 year of assessment was GH¢10,000.00. He contributed 5.5% to Social Security and National Insurance Trust (SSNIT). Mr Brefo Nimo has investments in the Netherlands, from which he earned a gross dividend of 2,000 Euros in 2016, from which 350 Euros was withheld as dividend tax and the balance remitted to him in Ghana. A double taxation Agreement exists between Ghana and the Netherlands.
The rate of Exchange is GH¢5.2 to 1.00 Euro.
Required:
a) Compute the Tax Credit Relief that will be granted to Mr Brefo Nimo.
b) Compute the tax liability of Mr Brefo Nimo for 2016 Year of assessment.
Answer
(a). Conversion of Dividend earned in to Cedis (2000*5.2)=10,400
__Less: Tax Withheld (350*5.2)=__1,820
Net Dividend Received= 5,580
Netherlands Tax Relief /Credit= 1,820.00
(b). Computation of Annual Tax Payable
Salary per Annum (10,000 x 12)= 120,000
Add Gross Dividend=10,400
Total Income=130,400
Less: SSF=6,600
Chargeable Income=123,400
Tax Charged= 27,282.50
Effective Tax Rate
(Tax Charged/Total Income)%=27,282.50x 100
130,400
=21.81%
Tax Charged=27,282.5
Less Netherlands Tax Relief /Credit= 1,820.00
Net Tax Payable=25,462.50
Computation of Annual Tax
First GH¢ 2,592 Free Nil 2,592.00
Next GH¢ 1,296 5 64.80 3,888.00
Next GH¢ 1,812 10 181.20 5,700.00
Next GH¢ 33,180 17.5 5,806.50 38,880.00
Next GH¢ 84,920 25 21,230.00
27,282.5
Alternative Computation of Annual Tax
6,052.5 +(123,800 – 38,880) x 25%= 27,282.5
- Tags: Dividend tax, Effective Tax Rate, Income Tax, SSNIT Contribution, Tax Liability
- Level: Level 2
- Topic: Income Tax Computation
- Series: AUG 2017
- Uploader: Samuel Duah