Series: AUG 2016

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STP – Aug 2016 – L2 – Q5 – Corporate Tax and Compliance

Compute corporate tax, capital allowances, tax position, and withholding taxes for SKABY Bank for 2014 and 2015.

Question

Due to the aggressive stance of the GRA in recent times, the urgency and pace of submission of tax returns to the GRA has more than doubled. The Chief Finance Officer of SKABY BANK Ltd. requires to discuss Skaby’s Tax returns for year 2014 and 2015 by close of day today to enable him engage the Finance committee of the Board with the various tax liabilities arising from the two years’ banking activities and also access the Bank’s tax compliance level.

As Tax Consultant to SKABY BANK Ltd., extracts of the 2014 and 2015 financial statement which read as follows, has been deposited on your table for your necessary action.

SKABY COMMERCIAL BANK
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2015

Note	2015 GHC’000	2014 GHC’000
	505,055.00	377,000.00
2	(82,200.00)	(51,300.00)
	422,855.00	325,700.00
	398,444.00	75,555.00
	(10,424.00)	(8,200.00)
	88,020.00	67,355.00
	24,800.00	15,980.00
	45,620.00	8,300.00
	30,420.00	24,280.00
	541,295.00	417,335.00
	9,000.00	7,992.00
	550,295.00	409,343.00
	225,000.00	215,560.00
	325,295.00	193,783.00
	82,000.00	32,000.00
	243,295.00	161,783.00

	2015 GHC’000	2014 GHC’000
	242,000.00	180,600.00
	256,920.00	190,600.00
	6,135.00	5,800.00
	505,055.00	377,000.00

b) Necessary default certificates of GHC20,000.00 have been received on income included in investment return for year 2015.

Note 2: a) Interest Expense paid

	2015 GHC’000	2014 GHC’000
Borrowings	9,900.00	8,900.00
Current and Savings A/c	45,650.00	20,500.00
Time and Other deposits	26,650.00	21,900.00
	82,200.00	51,300.00

b) $20%$ of interest expense payments’ mandatory withholding tax deduction has not been made.

Note 3: Fees and Commission Income

	2015 GHC’000	2014 GHC’000
Commission on letters of credit	3,200.00	2,650.00
Commission on Turnover	39,050.00	34,000.00
Processing fees	5,000.00	4,500.00
Commission of foreign services	2,200.00	3,060.00
Other fees and Commissions	48,994.00	31,345.00
	98,444.00	75,555.00

Note 4: Other Income

	2015 GHC’000	2014 GHC’000
Dividend Income	2,000.00
Bad Debt recovery		3,000.00
Profit on sale of property	2,200.00
Rental Income	2,470.00	2,200.00
Other Income		3,100.00
	8,300.00	8,300.00

Note 5 a). Operating Expenses Include

	2015 GHC’000	2014 GHC’000
Advertising	2,000.00	2,000.00
Rental of premises	45,000.00	40,450.00
Directors fees	2,100.00	3,000.00
Depreciation	16,000.00	15,000.00
Amortization	6,000.00	2,500.00
Donation to MD on death of mother	62,500.00
Purchase of computers	50,000.00	2,000.00
Goodwill paid	20,000.00	25,000.00

b). Tax on rental of premises has not been accrued or paid to the GRA.

Note 6: Income Tax

	2015 GHC’000	2014 GHC’000
Balance b/f	200.00
Paid for year	65,000.00	20,000.00
Deferred Tax	17,000.00	10,000.00
Total	82,000.00	30,200.00

Note 7: Extracts from the Property, Plant and Equipment schedule is as below

2015	Land & Building GHC’000	Equipment Further GHC’000	Computers GHC’000	Motor Vehicles GHC’000	Total GHC’000
Cost as at 1 January 2015	50,000.00	53,000.00	32,000.00	57,000.00	192,000.00
Additions for year	2,500.00	12,200.00	7,500.00	2,550.00	24,750.00
Disposals	–	(250.00)	(350.00)	(2,300.00)	(2,900.00)
Write-off	–	(200.00)	(45.00)	–	(245.00)
At 31 December 2015	52,500.00	64,750.00	39,105.00	57,250.00	213,605.00

Note 8 Extracts from the Intangible Assets (GOODWILL) Register is as below

	2015 GHC’000	2014 GHC’000
Cost as at 1 January 2015	7,500.00
Acquisition	10,500.00	7,500.00
Bal at year end 2015	18,000.00	7,500.00

Management policy for writing off goodwill is 10 years.

Required
Kindly present to the Chief Finance Office tax information on;
a) Corporate tax computation for year 2015 and 2014,
(10 marks)
b) Capital Allowance computation for year 2015 and 2014,
(8 marks)
c) Skabi’s Tax Position for year 2015 and 2014,
(2 marks)
d) Withholding taxes payable by Skabi to the GRA.
(2 marks)

Answer

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Tags: Banking, Capital Allowance, Corporate Tax, Tax Compliance, Withholding Tax
Level: Level 2

Topic: Tax Administration and Management
Series: AUG 2016

STP – Aug 2016 – L2 – Q4 – Bonded Warehouses

Discuss advantages and disadvantages of bonded warehouses for tax payments.

Question

(a) Does your country have bonded warehouses in which goods may be stored without triggering a taxable presence?

Required
Discuss three advantages and three disadvantages that the operation of a bonded warehouse will extend to traders in the payment of taxes.

b) Professor Zoel is a visiting professor from the University of South Africa, on sabbaticals in Ghana. He was invited by the head of the Business School, Angella University here in Ghana on 1 January 2016. After a three week closed door brush up, he was persuaded by his host, Prof Mensah, to fill in a vacancy in the department and also to stay in Ghana to the end of his sabbaticals. Prof Zoel has decided to take up the teaching appointment with Angella University.
AngellaUniversity intends to pay Prof Zoel from grants received from Columbia University (USA) marked for a special research work in Ghana. Prof Mensah has assured Prof Zoel that his (Prof Zoel) pay will be paid in USD directly to his bank account in South Africa. Prof Zoel will also receive standard benefit package in cash (relocation allowance, Ghana business travel expense allowance, accommodation, etc.) which will be paid/given to him in Ghana by Angella University.
His salary will be paid by Columbia University on a bimonthly basis and there will be no chargeback of any cost to any other location.

Prof Zoel finds his new working conditions particularly rewarding since he will additionally receive his full Professor’s salary as normally paid by his mother University employer in South Africa.

Prof Zoel is a little disturbed because he was not sure about the tax implications of his combined multiple salaries as he earns allowances in Ghana, is paid by Columbia University for work done in Ghana into his bank account in South Africa and additionally earns his professorial salary in South Africa.

As a Chartered Tax Advisor, Prof Zoel has referred this apparent tax difficulty to you for your advice. Prof Zoel intends to live the full term of his sabbaticals in Ghana which could run for at least 2 years.

Required:
Kindly identify and advise Prof Zoel on the tax implications of his entire earnings for this sabbatical in Ghana.

Answer

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Tags: Double Taxation, Expatriate Income, Ghana, Payroll Tax, Tax residency
Level: Level 2

Topic: Tax Administration and Management
Series: AUG 2016

STP – Aug 2016 – L2 – Q3 – Tax Residency

Determine if Berchem Plc is a tax resident in Ghana.

Question

Berchem Plc UK (Berchem) is a foreign company that provides engineering services to Gritty Electricals Company Ltd (GEC) here in Ghana. Koranten Systems (Koranten) serves as a country representative for Berchem in Ghana and assists Berchem to execute their service contracts. Koranten Systems provides labour and local material support to Berchem when needed on the contract, whereas Berchem provides the prefinancing, expertise and specialized equipment for the execution of work. As compensation, Koranten is paid commission in cash and equipment.
Berchem won its first contract with GECin January 2014. To date, no VAT was ever charged on invoices billed to GEC by Berchem. GEC also failed to withhold taxes on payments made to Berchem. Both GEC and Berchem had the general belief that these taxes were not stated as part of the signed contracts and therefore were not applicable in respect of the contracts. Berchem again saw the VAT charge as rendering pricing of the projects uncompetitive.

Consultants to GEC have recently advised GEC to start withholding taxes from payments made to Berchem as required by the Income Tax Act, since Berchem has been providing service in Ghana for “at least 2 years”.

Required:
On behalf of Berchem Plc, The Chief Executive of Koranten requests you to provide tax advisory service on the new development. Koranten requests for a documented Tax expert advice to submit to Berchem in respect of
a) Whether Berchem Plc is tax resident in Ghana,

b) The relevance, the basis and application of VAT, withholding, and corporate taxes on the business dealings between Berchem and GEC.

Answer

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Tags: Corporate Tax, Non-resident, Permanent Establishment, VAT, Withholding Tax
Level: Level 2

Topic: Strategic Indirect Tax Management
Series: AUG 2016

STP – Aug 2016 – L2 – Q2 – VAT on Imports

Discuss taxable value for VAT on imported goods and services.

Question

VAT is chargeable on imports. The basic information required to facilitate the VAT charge on imported goods and services is the value of the goods or services. At a recent meeting organized by the Ghana National Chamber of Commerce and Industry to educate members on the taxable value for determining the VAT on imported goods and services you, as a renowned tax consultant, were invited to discuss this issue.

The topic you are to speak on is “What is the taxable value for determining the VAT on imported goods and services.

Required
a) As the preferred consultant, please present to the Chamber a discussion paper on the taxable value for determining the VAT on imported goods and services.

b). Also indicate in your presentation the procedures that must be followed before payment of VAT on the import of services is made.

Answer

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Tags: GRA, Import Services, Payment Procedures, Tax Compliance, VAT
Level: Level 2

Topic: Strategic Indirect Tax Management
Series: AUG 2016

STP – Aug 2016 – L2 – Q1 – Duty Drawback Management

Discuss duty drawback regime, eligibility, export conditions, competitiveness, and mismanagement advantages.

Question

In recent times the most topical tax issue confronting the export business community is the issue of duty drawback management. The concerns expressed has non-payment of the duty by the GRA as accrued over the years.
As an expert tax consultant with the special port duty portfolio, the Ghana National Chamber of Commerce has invited you to speak to the business community on the duty drawback regime.
You are required to present a paper to the business community covering the following areas:

Generally what a duty drawback as prescribed by the Customs Act, Act 891 is
(2 Marks)
When does an importer/exporter qualify to claim duty drawback?
(4 marks)
Indicate the circumstance as prescribed by Act 981, when goods are deemed to have been exported.
(5 marks)
How is the duty drawback regime expected to make Ghanaian exports competitive?
(5 marks)
Discuss three advantages which good mismanagement of the duty drawback regime could bring to claimants.
(4 marks)
(Total: 20 marks)

Answer

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Tags: Customs Act, Duty Drawback, Export Competitiveness, Indirect Taxes, Tax Refunds
Level: Level 2

Topic: Strategic Indirect Tax Management
Series: AUG 2016

STP – Aug 2016 – L2 – Q5 – Corporate Tax and Compliance

Compute corporate tax, capital allowances, tax position, and withholding taxes for SKABY Bank for 2014 and 2015.

Question

As Tax Consultant to SKABY BANK Ltd., extracts of the 2014 and 2015 financial statement which read as follows, has been deposited on your table for your necessary action.

SKABY COMMERCIAL BANK
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2015

Note	2015 GHC’000	2014 GHC’000
	505,055.00	377,000.00
2	(82,200.00)	(51,300.00)
	422,855.00	325,700.00
	398,444.00	75,555.00
	(10,424.00)	(8,200.00)
	88,020.00	67,355.00
	24,800.00	15,980.00
	45,620.00	8,300.00
	30,420.00	24,280.00
	541,295.00	417,335.00
	9,000.00	7,992.00
	550,295.00	409,343.00
	225,000.00	215,560.00
	325,295.00	193,783.00
	82,000.00	32,000.00
	243,295.00	161,783.00

	2015 GHC’000	2014 GHC’000
	242,000.00	180,600.00
	256,920.00	190,600.00
	6,135.00	5,800.00
	505,055.00	377,000.00

b) Necessary default certificates of GHC20,000.00 have been received on income included in investment return for year 2015.

Note 2: a) Interest Expense paid

	2015 GHC’000	2014 GHC’000
Borrowings	9,900.00	8,900.00
Current and Savings A/c	45,650.00	20,500.00
Time and Other deposits	26,650.00	21,900.00
	82,200.00	51,300.00

b) $20%$ of interest expense payments’ mandatory withholding tax deduction has not been made.

Note 3: Fees and Commission Income

	2015 GHC’000	2014 GHC’000
Commission on letters of credit	3,200.00	2,650.00
Commission on Turnover	39,050.00	34,000.00
Processing fees	5,000.00	4,500.00
Commission of foreign services	2,200.00	3,060.00
Other fees and Commissions	48,994.00	31,345.00
	98,444.00	75,555.00

Note 4: Other Income

	2015 GHC’000	2014 GHC’000
Dividend Income	2,000.00
Bad Debt recovery		3,000.00
Profit on sale of property	2,200.00
Rental Income	2,470.00	2,200.00
Other Income		3,100.00
	8,300.00	8,300.00

Note 5 a). Operating Expenses Include

	2015 GHC’000	2014 GHC’000
Advertising	2,000.00	2,000.00
Rental of premises	45,000.00	40,450.00
Directors fees	2,100.00	3,000.00
Depreciation	16,000.00	15,000.00
Amortization	6,000.00	2,500.00
Donation to MD on death of mother	62,500.00
Purchase of computers	50,000.00	2,000.00
Goodwill paid	20,000.00	25,000.00

b). Tax on rental of premises has not been accrued or paid to the GRA.

Note 6: Income Tax

	2015 GHC’000	2014 GHC’000
Balance b/f	200.00
Paid for year	65,000.00	20,000.00
Deferred Tax	17,000.00	10,000.00
Total	82,000.00	30,200.00

Note 7: Extracts from the Property, Plant and Equipment schedule is as below

2015	Land & Building GHC’000	Equipment Further GHC’000	Computers GHC’000	Motor Vehicles GHC’000	Total GHC’000
Cost as at 1 January 2015	50,000.00	53,000.00	32,000.00	57,000.00	192,000.00
Additions for year	2,500.00	12,200.00	7,500.00	2,550.00	24,750.00
Disposals	–	(250.00)	(350.00)	(2,300.00)	(2,900.00)
Write-off	–	(200.00)	(45.00)	–	(245.00)
At 31 December 2015	52,500.00	64,750.00	39,105.00	57,250.00	213,605.00

Note 8 Extracts from the Intangible Assets (GOODWILL) Register is as below

	2015 GHC’000	2014 GHC’000
Cost as at 1 January 2015	7,500.00
Acquisition	10,500.00	7,500.00
Bal at year end 2015	18,000.00	7,500.00

Management policy for writing off goodwill is 10 years.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Banking, Capital Allowance, Corporate Tax, Tax Compliance, Withholding Tax
Level: Level 2

Topic: Tax Administration and Management
Series: AUG 2016

STP – Aug 2016 – L2 – Q4 – Bonded Warehouses

Discuss advantages and disadvantages of bonded warehouses for tax payments.

Question

(a) Does your country have bonded warehouses in which goods may be stored without triggering a taxable presence?

Required
Discuss three advantages and three disadvantages that the operation of a bonded warehouse will extend to traders in the payment of taxes.

Prof Zoel finds his new working conditions particularly rewarding since he will additionally receive his full Professor’s salary as normally paid by his mother University employer in South Africa.

Required:
Kindly identify and advise Prof Zoel on the tax implications of his entire earnings for this sabbatical in Ghana.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Double Taxation, Expatriate Income, Ghana, Payroll Tax, Tax residency
Level: Level 2

Topic: Tax Administration and Management
Series: AUG 2016

STP – Aug 2016 – L2 – Q3 – Tax Residency

Determine if Berchem Plc is a tax resident in Ghana.

Question

b) The relevance, the basis and application of VAT, withholding, and corporate taxes on the business dealings between Berchem and GEC.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Tax, Non-resident, Permanent Establishment, VAT, Withholding Tax
Level: Level 2

Topic: Strategic Indirect Tax Management
Series: AUG 2016

STP – Aug 2016 – L2 – Q2 – VAT on Imports

Discuss taxable value for VAT on imported goods and services.

Question

The topic you are to speak on is “What is the taxable value for determining the VAT on imported goods and services.

Required
a) As the preferred consultant, please present to the Chamber a discussion paper on the taxable value for determining the VAT on imported goods and services.

b). Also indicate in your presentation the procedures that must be followed before payment of VAT on the import of services is made.

Answer

Find Related Questions by Tags, levels, etc.

Tags: GRA, Import Services, Payment Procedures, Tax Compliance, VAT
Level: Level 2

Topic: Strategic Indirect Tax Management
Series: AUG 2016

STP – Aug 2016 – L2 – Q1 – Duty Drawback Management

Discuss duty drawback regime, eligibility, export conditions, competitiveness, and mismanagement advantages.

Question

Generally what a duty drawback as prescribed by the Customs Act, Act 891 is
(2 Marks)
When does an importer/exporter qualify to claim duty drawback?
(4 marks)
Indicate the circumstance as prescribed by Act 981, when goods are deemed to have been exported.
(5 marks)
How is the duty drawback regime expected to make Ghanaian exports competitive?
(5 marks)
Discuss three advantages which good mismanagement of the duty drawback regime could bring to claimants.
(4 marks)
(Total: 20 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Customs Act, Duty Drawback, Export Competitiveness, Indirect Taxes, Tax Refunds
Level: Level 2

Topic: Strategic Indirect Tax Management
Series: AUG 2016

Series: AUG 2016

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STP – Aug 2016 – L2 – Q5 – Corporate Tax and Compliance

Compute corporate tax, capital allowances, tax position, and withholding taxes for SKABY Bank for 2014 and 2015.

STP – Aug 2016 – L2 – Q4 – Bonded Warehouses

Discuss advantages and disadvantages of bonded warehouses for tax payments.

STP – Aug 2016 – L2 – Q3 – Tax Residency

Determine if Berchem Plc is a tax resident in Ghana.

STP – Aug 2016 – L2 – Q2 – VAT on Imports

Discuss taxable value for VAT on imported goods and services.

STP – Aug 2016 – L2 – Q1 – Duty Drawback Management

Discuss duty drawback regime, eligibility, export conditions, competitiveness, and mismanagement advantages.

STP – Aug 2016 – L2 – Q5 – Corporate Tax and Compliance

Compute corporate tax, capital allowances, tax position, and withholding taxes for SKABY Bank for 2014 and 2015.

STP – Aug 2016 – L2 – Q4 – Bonded Warehouses

Discuss advantages and disadvantages of bonded warehouses for tax payments.

STP – Aug 2016 – L2 – Q3 – Tax Residency

Determine if Berchem Plc is a tax resident in Ghana.

STP – Aug 2016 – L2 – Q2 – VAT on Imports

Discuss taxable value for VAT on imported goods and services.

STP – Aug 2016 – L2 – Q1 – Duty Drawback Management

Discuss duty drawback regime, eligibility, export conditions, competitiveness, and mismanagement advantages.

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STP – Aug 2016 – L2 – Q5 – Corporate Tax and Compliance

Compute corporate tax, capital allowances, tax position, and withholding taxes for SKABY Bank for 2014 and 2015.

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Discuss advantages and disadvantages of bonded warehouses for tax payments.

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Determine if Berchem Plc is a tax resident in Ghana.

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Discuss taxable value for VAT on imported goods and services.

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Discuss duty drawback regime, eligibility, export conditions, competitiveness, and mismanagement advantages.

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STP – Aug 2016 – L2 – Q5 – Corporate Tax and Compliance

Compute corporate tax, capital allowances, tax position, and withholding taxes for SKABY Bank for 2014 and 2015.

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Discuss advantages and disadvantages of bonded warehouses for tax payments.

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Determine if Berchem Plc is a tax resident in Ghana.

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Discuss taxable value for VAT on imported goods and services.

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Discuss duty drawback regime, eligibility, export conditions, competitiveness, and mismanagement advantages.

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