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Yaa Baby acquired shares in Adom Ltd as follows:
| Date | Transaction | No. of shares | Share price | Value (GH¢) |
|---|---|---|---|---|
| 01/02/19 | Bought 1,000 shares | 1,000 | 2.00 | 2,000 |
| 01/03/19 | Bought 1,500 shares | 1,500 | 2.50 | 3,750 |
| 01/06/20 | Bought 2,000 shares | 2,000 | 3.00 | 6,000 |
| 01/04/21 | Bought 1,750 shares | 1,750 | 4.00 | 7,000 |
| 01/12/21 | Received rights issue (1 share for every 10 shares) | 625 | 1.50 | 937.50 |
| 31/12/21 | Sold 3,800 shares | 6.00 | 22,800 |
Required:
Compute the capital gain on the realization and the tax payable. (5 marks)
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The provisions of the Income Tax Act, 2015 (Act 896) require a resident person who pays an amount for works or the supply of goods and services to another resident or non-resident person with a source in Ghana to withhold tax from the payment at the rate specified under Paragraph 8 of the First Schedule of the Act and pay same to the Commissioner-General.
Required:
Explain with examples the following:
i) Final withholding tax. (2.5 marks)
ii) Withholding tax on account. (2.5 marks)
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Find Related Questions by Tags, levels, etc.
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A Nigerian investor (Niger Ltd) in Ghana has the following information relating to its business:
| Year | Revaluation Reserves (GH¢) | Share Capital (GH¢) | Retained Earnings (GH¢) |
|---|---|---|---|
| 2021 | 250,000 | 1,000,000 | 1,200,000 |
| 2020 | 100,000 | 600,000 | 1,350,000 |
Required:
With relevant computations, comment on the tax implication of the transfer from Retained Earnings to Share Capital. (8 marks)
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Abotsi has been in employment at Asempa Ltd since 1 August 2019 as Finance Manager on a salary scale of GH¢32,000 by GH¢8,000 to GH¢48,000.
His service conditions include the following:
i) Responsibility allowance of 18% of basic salary
ii) Utilities allowance per annum of 10% of basic salary
iii) Risk allowance of 20% on basic salary and car maintenance allowance of 5% of basic salary
iv) Leave allowance of GH¢1,900 per annum
v) Medical allowance per annum of GH¢3,500
vi) Meals allowance of GH¢700 per month
vii) Two house helps on GH¢500 wages per month each. The amount is paid to Abotsi in cash directly by the company
viii) Bonus of 25% of annual basic salary
ix) Annual Overtime allowance of GH¢18,000
x) Unaccountable entertainment allowance of GH¢2,000 a year
xi) Provision of a well-furnished bungalow in respect of which he pays GH¢400 per month as rent by way of deduction at source
xii) Provision of a vehicle with driver and fuel for both official and private purposes
xiii) Special retirement package by way of a provident fund of which he contributes 9% of his basic salary, while the company contributes 11%. (The scheme is approved by the regulatory body)
xiv) Social Security and National Insurance Trust contribution of 5.5% and the employer contributes 13% of basic salary
xv) On 1 January 2021, he was given a car loan of GH¢20,000 to purchase a car for his mother at a simple interest rate of 15% per annum. The institution gives similar facilities to other customers at the rate of 28% but the statutory rate (Bank of Ghana rate) is 25%. The loan is to be paid within the period of 24 months
xvi) He is married to Abotsiwaa and Abotsimaa who are unemployed and contribute little or no financial support to their husband. Their responsibilities are limited to the management of the house
xvii) He has six (6) children, four (4) of whom are in Silicon Valley International School, Accra-Ghana, while the rest are working
xviii) He is also responsible for the upkeep of four (4) aged relatives of his
xix) He is currently pursuing MPHIL in Finance at UPSA where he incurred GH¢25,000 by way of educational expenses in 2021
xx) He is a director of Adwoa Mansa Ltd and receives a director’s emolument of GH¢24,450 (net of taxes)
xxi) He received a dividend of GH¢20,000 (net of taxes) from the Afia Manu Bank. The dividend was taxed at 8%.
Required:
Calculate his chargeable income for the 2021 Year of Assessment. (20 marks)
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Mr. John Romeski worked for Aligidon Company Ltd for 25 years and retired at the age of 60. In the last 3 years of his working life, he earned annual salary as follows:
| Year | Annual Salary (GH¢) |
|---|---|
| 58th | 93,000 |
| 59th | 96,000 |
| 60th | 99,000 |
He has 300 months’ contribution to his credit.
Required:
Assuming he retired under the National Pension Act, 2008 (Act 766), compute his pension benefit and his monthly pension pay. (5 marks)
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Section (33) of the Value Added Tax Act, 2013 (Act 870) states that; “Except as otherwise provided in this Act or Regulations, a taxable supply is a supply of goods or services made by a taxable person for consideration, other than an exempt supply, in the course of, or as part of taxable activity carried on by that taxable person”.
Required:
State THREE (3) activities that do not constitute supply of goods or services under the Value Added Tax Act, 2013 (Act 870). (5 marks)
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According to section (38) of the Value Added Tax Act, 2013 (Act 870), the Minister may by legislative instrument make regulations to grant relief from tax on taxable imports of goods or taxable supplies of goods acquired in the country to the persons specified in the Third Schedule.
Required:
State FOUR (4) conditions that must be satisfied by VAT-registered manufacturing companies before they are granted upfront relief of VAT and levies on imported raw materials. (10 marks)
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Where the Commissioner-General makes an assessment under a tax law, the Commissioner-General shall serve a written notice of the assessment on the taxpayer.
Required:
State EIGHT (8) elements contained in Commissioner-General’s notice of tax assessment. (5 marks)
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The Commissioner-General may, in the circumstances specified in section 28 (3) of the Revenue Administration Act, 2016 (Act 915), make a pre-emptive assessment of tax payable or to become payable by a person under a tax law whether or not the person is required to file a tax return.
Required:
Under what circumstance will the Commissioner-General make a pre-emptive assessment? (5 marks)
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Taxation is a mechanism through which the government seeks to realize some of its economic objectives. It is one of the oldest means by which the government expenditure is funded. Taxation plays a central and significant role in developing countries over the world.
Required:
Explain FIVE (5) economic roles of taxation. (5 marks)
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In order to generate more revenue for national development in Ghana, tax experts often suggest the need to “deepen as well as widen” the tax system of Ghana.
Required:
Explain the difference between “Deepening the Tax System” and “Widening the Tax System” and suggest how the Ghana Revenue Authority can deepen and widen the tax system of Ghana. (5 marks)
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Find Related Questions by Tags, levels, etc.
Lakeside Exploration Ghana Ltd and Gasoil Energy Extraction Ltd are joint venture
partners who have 50% and 35% interest respectively in the Volta Offshore Field Ghana
Ltd. The agreement between the joint venture partners and the Government of Ghana
provides for Royalty of 5%, Initial Carried Interest of 10%, Additional Participating
Interest of 5%, and corporate tax rate of 35%.
Production commenced in the Volta Offshore Field Ghana Ltd in 2021. Information
available on the Volta Offshore Field Ghana Ltd is as follows:
Exploration Costs GH¢500,000,000
Development Cost GH¢4,000,000,000
Average production cost per barrel GH¢10
Average Price of crude oil per barrel GH¢50
Actual oil Production in 2021 100,000,000 barrels
Required:
i) State FOUR (4) payments or transactions on which withholding tax is applicable.
ii) Identify FOUR (4) payments or transactions that are exempt from withholding tax.
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STE Ltd was incorporated in 2020 and commenced business operations on 1 January 2021, specializing in manufacturing and distributing solar panels and related products. The company secured a two-year loan of GH¢750,000 with an interest rate of 15% per annum from a local financial institution. The loan was applied as follows:
| Loan Application | Amount (GH¢) |
|---|---|
| Showroom construction at Tema | 100,000 |
| Procurement of plant and machinery | 250,000 |
| Procurement of raw materials | 300,000 |
| Procurement of commercial vehicles | 70,000 |
| Amount applied towards 2021 consultancy fees | 30,000 |
| Total | 750,000 |
The company’s fixed asset register as at 31 December 2021 is as follows:
| Fixed Assets | Cost (GH¢) | Depreciation (GH¢) | Net Book Value (GH¢) |
|---|---|---|---|
| Head office building | 150,000 | 3,750 | 146,250 |
| Factory building | 120,000 | 6,000 | 114,000 |
| Furniture and fittings | 65,000 | 6,500 | 58,500 |
| Office computers | 80,000 | 16,000 | 64,000 |
| Total | 415,000 | 32,250 | 382,750 |
STE’s statement of comprehensive income for the year ended 31 December 2021 is as follows:
Additional information:
Required:
a) Calculate the maximum capital allowances claimable by STE Ltd for the year ended 31 December 2021.
b) Calculate the chargeable income and tax payable by STE Ltd for the year ended 31 December 2021.
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Expenditures that are considered domestic in character may be converted or treated as allowable deductions under certain conditions in line with Section 130 of the Income Tax Act, 2015 (Act 896).
Required:
What constitutes domestic expenditure, and how does such expenditure become allowable for tax purposes?
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Conti Ltd has been in the business of buying and selling baskets. The company’s chargeable income for the 2021 year of assessment is GH¢7,000,000.
The chargeable income includes the following adjustments:
Additional information:
Required:
i) Compute the tax payable.
ii) What are the tax implications of the lunch for staff, interest paid, and the dividend received?
iii) Identify tax planning measures to reduce the tax liability related to the dividend.
iv) What is the tax implication of the financial cost from derivative transactions, and what is its impact on the company?
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