- 6 Marks
Question
The following relates to payments by Manita Ltd, a company resident in Ghana, to another resident company. Both companies are not exempt from withholding taxes:
| Description | Amount (GH¢) |
|---|---|
| Goods | 3,000,000 |
| Services | 1,200,000 |
| Works | 2,000,000 |
Upon scrutiny of the company’s records, the following additional information emerged:
i) It came to light that the goods above include a dividend payment of 10%.
ii) The services above relate to 50% management and technical services and 50% consultancy services.
Required:
Compute the withholding taxes payable (if any) and state TWO (2) reasons for withholding tax imposition. (6 marks)
Answer
| Description | Amount (GH¢) | Rate | Withholding Tax (GH¢) |
|---|---|---|---|
| Goods (Net of Dividend) | 2,700,000 | 3% | 81,000 |
| Dividend | 300,000 | 8% | 24,000 |
| Consultancy Services (50%) | 600,000 | 7.5% | 45,000 |
| Management & Technical Services | 600,000 | 7.5% | 45,000 |
| Total Withholding Tax Payable | 255,000 |
Reasons for Withholding Tax Imposition:
- To ensure early collection of taxes at the source of payment.
- To enhance tax compliance and reduce tax evasion by collecting taxes upfront.
- Tags: Dividends, Resident Company, Tax computation, Withholding Tax
- Level: Level 2
- Topic: Withholding Tax Administration
- Series: NOV 2020
- Uploader: Kwame Aikins