Subject: PRINCIPLES OF TAXATION

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PT- Nov 2024 – L2 – Q5d – Data Analytics in Taxation

Explain how data analytics can be used to detect tax evasion and provide examples of how GRA might use data analytics to enhance tax compliance.

Question

GRA’s use of data analytics has become increasingly important in identifying tax evasion and improving compliance.

Required:
i) Explain how data analytics can be used to detect tax evasion.
ii) Provide TWO examples of how GRA might use data analytics to enhance tax compliance.

Answer

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Tags: AI in Taxation, Data Analytics, Fraud Detection, Ghana Revenue Authority, Predictive Analytics, Tax Compliance, Tax Enforcement, Tax Evasion
Level: Level 2

Topic: Application of Information Technology in Taxation
Series: Nov 2024

PT – Nov 2024 – L2 – Q5c – E-Auditing and Tax Compliance

Explain e-auditing, its differences from traditional tax audits, and discuss advantages for taxpayers and tax authorities.

Question

The integration of Information Technology in tax administration has enabled the Ghana Revenue Authority (GRA) to adopt e-auditing processes, allowing for the remote examination of taxpayers’ records. Required:
i) Describe the process of e-auditing and how it differs from traditional tax audits.
ii) Discuss TWO advantages of e-auditing for both the taxpayer and the tax authority.

Answer

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Tags: Data Analytics, Digital Taxation, E-Auditing, Ghana Revenue Authority, Tax Compliance
Level: Level 2

Topic: Application of Information Technology in Taxation
Series: Nov 2024

PT – Nov 2024 – L2 – Q5b – Withholding Tax & VAT Calculation

Compute VAT and direct tax withheld on a taxable supply of medical consumables to a tax withholding agent.

Question

Charley Chemist LTD made a taxable supply of medical consumables amounting to GH¢750,000 exclusive of VAT and levies on 23 November 2023 to the University of Ghana Medical Centre. The University of Ghana Medical Centre is a withholding tax agent for both VAT withholding and Direct Tax withholding.

Required:
i) Compute the amount of VAT withheld by the University of Ghana Medical Center.
ii) Compute the amount of direct tax withheld by the University of Ghana Medical Centre.

Answer

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Tags: Direct Tax, Medical Supplies, Tax Agent, Tax Compliance, Tax computation, Tax deduction, VAT, VAT Withholding, Withholding Tax
Level: Level 2

Topic: Value-Added Tax (VAT), Customs, and Excise Duties, Withholding Tax Administration
Series: Nov 2024

PT – Nov 2024 – L2 – Q5a – Notification to Commissioner-General for Non-Resident Contracts

Requirements for notifying the Commissioner-General when a resident contracts a non-resident.

Question

For the purpose of withholding tax, the Income Tax Act, 2016 (Act 896) requires a resident person who enters into a contract with a non-resident person which gives rise to income from Ghana to notify the Commissioner-General within thirty (30) days.

Required:

State the items that must be detailed in the notification to the Commissioner-General.

Answer

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Tags: Commissioner-General Notification, Income Tax Act, Non-resident taxation, Tax Compliance, Withholding Tax
Level: Level 2

Topic: Tax Administration
Series: Nov 2024

PT – Nov 2024 – L2 – Q4c – Tax Treatment of Repairs and Renovations

Explains the tax treatment of repairs and renovations for businesses.

Question

Question:
Repairs are essential for maintaining the safety of a property, and renovation improves the overall functionality of a property.

Required:
What is the tax treatment of repairs and renovations?

Answer

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Tags: Capital allowances, Depreciation, Renovations, Repairs, Tax Deductibility, Tax Treatment
Level: Level 2

Topic: Corporate Tax Liabilities
Series: Nov 2024

PT – Nov 2024 – L2 – Q4b – Tax Implication of Gift under Income Tax Act

Advise on the tax implications of receiving a gift from a spouse under the Income Tax Act.

Question

Madam Tanaa is an employee of Tapoli Brewery Ghana LTD. Her husband, who is a retired staff of Tapoli Brewery LTD, gifted her a brand-new Toyota Camry costing GH¢270,000 on their 20th wedding anniversary. Madam Tanaa is worried about the tax implication of the gift and has approached you as a student learning tax at the Institute of Chartered Accountants, Ghana.

Required:
Advise Madam Tanaa on the tax implications of the gift of a Toyota Camry she received from her husband on their wedding anniversary, including the various options available to her.

Answer

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Tags: Gift tax, Income Tax, Spousal Gifts, Tax Exemptions, Tax Reliefs
Level: Level 2

Topic: Income Tax Liabilities
Series: Nov 2024

PT – Nov 2024 – L2 – Q4a – Chargeable Income Computation

Compute the chargeable income and tax payable for Amasa Architecture and Building LTD for the 2022 and 2023 years of assessment.

Question

Amasa Architecture and Building LTD has been in business for the past seven years. The following information relates to the company’s operations for the years ending 31 December 2022 and 2023.

DETAILS	2022 (GH¢)	2023 (GH¢)
Profit before tax	795,000	2,110,000
Provision for Depreciation	230,000	115,000
Donation to Manhyia Children Home (Approved by Social Welfare Department)	350,000	210,000
Donation towards 2023 Adae Kese Festival	105,000	150,000
Capital allowance agreed with the Ghana Revenue Authority	1,500,000	1,700,000
Withholding tax paid as contained in certificates received	10,000	25,000

Required:
Using the information provided above, compute the chargeable income and tax payable by Amasa Architecture and Building LTD for the years of assessment 2022 and 2023.

Answer

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Tags: Capital Allowance, chargeable income, Corporate Tax, Financial Statements, Tax adjustments, Tax computation
Level: Level 2

Topic: Corporate Tax Liabilities
Series: Nov 2024

PT – Nov 2024 – L2 – Q3b – Capital Gains Tax and Asset Realization

Tax computation on asset realization and understanding taxable capital assets.

Question

b) Kwamoso LTD sold the following assets to Mr. Badu on 18 May, 2023 for GH¢450,000 to settle a tax liability. Kwamoso LTD is not listed on the Ghana Stock Exchange.

Below are details of the assets:

Name of Asset	Cost (GH¢)	Net Book Value (GH¢)	Market Value (18 May 2023) (GH¢)	Market Value (31 Dec 2023) (GH¢)
Truck vehicle	750,000	480,000	320,000	350,000
Generator	60,000	29,400	8,400	8,000
Laptops	48,000	17,200	8,000	7,200

Required:

i) Compute the consideration received in respect of each asset realised.

ii) What constitutes capital assets in the context of capital gains tax in Ghana?

iii) Under what circumstance would there be a loss in the realization of a liability?

Answer

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Tags: Capital Gains, Market Value, Tax computation, Tax Liability, Taxable Assets
Level: Level 2

Topic: Taxation of Capital Gains
Series: Nov 2024

PT – Nov 2024 – L2 – Q3a – Tax Treatment of Employee Compensation

Explains the tax treatment of various types of employee compensation under the Income Tax Act, 2015 (Act 896).

Question

Describe the tax treatment of the following transactions in the context of the Income Tax Act, 2015 (Act 896).

i) Payment of GH¢2,500 salary for a casual worker in the month of Feb 2024.
ii) Payment of Bonus of GH¢32,000 to an employee with an Annual Basic salary of GH¢180,000.
iii) Payment of GH¢3,200 to a temporary worker in the month of July 2024.
iv) Payment of income to a non-resident employee in Ghana.
v) Redundancy payment to an employee.

Answer

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Tags: Bonus Taxation, Employee Compensation, Income Tax, Non-resident taxation, Redundancy
Level: Level 2

Topic: Income Tax Liabilities
Series: Nov 2024

PT – Nov 2024 – L2 – Q2e – Tax Audit and Under-declaration of Sales

Action to be taken regarding an under-declared sales revenue during a tax audit.

Question

You have been engaged as an Accounts Officer in Abokobi LTD. Sales of GH¢10,000,000 were inadvertently under-declared. A team from the Ghana Revenue Authority (GRA) is at your premises conducting an audit. The GRA Audit Team did not review the sales revenue. After the audit, you noted that the amount constituting the under-declaration of the sales was mistakenly credited to the suppliers’ account in the ledger.

Required:

Detail out your position on the above as to what action to take.

Answer

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Tags: Financial Ethics, Financial Reporting, Ghana Revenue Authority (GRA), Tax Audit, Tax Compliance, Tax Penalty, Tax Regulations, Under-declared Sales
Level: Level 2

Topic: Tax Administration
Series: Nov 2024

PT – July 2023 – L2 – Q3b – Income Tax Liabilities

Explanation of what constitutes employment for the purposes of tax.

Question

What constitutes employment for the purposes of tax? (4 marks)

Answer

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Tags: Employment, Employment Definition, Employment Income, Income Tax, Tax law
Level: Level 2

Topic: Income Tax Liabilities
Series: JULY 2023

PT – July 2023 – L2 – Q3a – Income Tax Liabilities

Calculation of loan benefits for three employees based on their loan details and income.

Question

The table below shows the incomes of three employees of Agana Ltd in 2022 year of assessment.

Income Details	Adom	Aseda	Ayeyie
Basic Salary (GH¢)	120,000	160,000	180,000
Medical Allowance (5% of Basic Salary)	6,000	8,000	9,000
Rent Allowance (10% of Basic Salary)	12,000	16,000	18,000
Fuel Allowance (15% of Basic Salary)	18,000	24,000	27,000
Total Cash Emoluments	156,000	208,000	234,000

Besides the cash emoluments stated above, the employees received loans from the employer as follows:

i) Adom received a loan of GH¢24,000 at a rate of 5% payable within 12 months.
ii) Aseda received a loan of GH¢48,000 at a rate of 8% payable within 24 months.
iii) Ayeyie received a loan of GH¢100,000 at a rate of 10% payable within 36 months. This loan is in addition to an outstanding loan of GH¢50,000 with the same terms and conditions during the previous twelve months. (Assume that the statutory rate is 30% per annum).

Required:
Determine the loan benefits applicable to each of the three employees for the 2022 year of assessment. (16 marks)

Answer

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Tags: Employee Benefits, Employment Income, Income Tax, Loan Benefits, Tax computation
Level: Level 2

Topic: Income Tax Liabilities
Series: JULY 2023

PT – July 2023 – L2 – Q2d – Income Tax Liabilities

Explanation of the basis for calculating pension benefits under the National Pensions Act, 2008 (Act 766).

Question

Explain the basis for calculating pension benefits under the National Pensions Act, 2008 (Act 766). (5 marks)

Answer

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Tags: Defined Benefit Scheme, National Pensions Act, Pension benefits, Pension Right, Retirement
Level: Level 2

Topic: Income Tax Liabilities
Series: JULY 2023

PT – May 2021 – L2 – Q5c – Income Tax Liabilities

Compute the gift tax payable by Madam Gifty Kums based on gifts received during her vetting.

Question

Madam Gifty Kums was appointed a Minister of State in 2018. On the occasion of her vetting by Parliament, she received the following gifts:

Cash donation amounting to GH¢80,000 from her party foot soldiers within her constituency.
A Toyota Land Cruiser worth GH¢1,000,000 from the Chief of her village.
Cash of US$20,000 from her mother-in-law in Afghanistan (GH¢1 = US$5).

Required:
Compute the gift tax payable by Madam Gifty Kums.

Answer

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Tags: Foreign Currency, Gift tax, Minister of State, Tax computation
Level: Level 2

Series: MAY 2021

PT – May 2021 – L2 – Q5b – Taxation of Capital Gains

Explain the taxation rules for asset transfers to a spouse or former spouse during a divorce settlement or upon death.

Question

On the death or as part of a divorce settlement or bona fide separation agreement, an individual may transfer an asset to a spouse or former spouse.

Required:
What are the taxation rules on this arrangement?

Answer

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Tags: Asset Transfer, Capital gains tax, Death, Divorce, Separation
Level: Level 2

Topic: Taxation of Capital Gains
Series: MAY 2021

PT – July 2023 – L2 – Q2c – Value-Added Tax (VAT), Customs, and Excise Duties

Breakdown of VAT and other taxes included in a phone bill using a given total amount.

Question

Kingsly Atakora is a postpaid customer of MTN Ghana Ltd. He received his July 2022 billing from MTN Ghana Ltd amounting to GH¢3,121 inclusive of all taxes and levies. He is worried about the amount charged for his telephone usage for the month and wants to know the tax composition in the charge.

Required:
Compute the amounts of the following taxes included in the bill for July 2022:
i) VAT
ii) National Health Insurance Levy (NHIL)
iii) Ghana Education Trust Fund Levy (GETL)
iv) Covid-19 Levy
v) Communication Service Tax (CST)

Answer

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Tags: Covid-19 Levy, CST, GETFund Levy, NHIL, Tax computation, VAT
Level: Level 2

Topic: Value-Added Tax (VAT), Customs, and Excise Duties
Series: JULY 2023

PT – July 2023 – L2 – Q2b – Value-Added Tax (VAT), Customs, and Excise Duties

Explanation of three situations where a taxpayer cannot claim an input tax under VAT rules.

Question

State THREE (3) situations under which a taxpayer cannot claim an input tax. (3 marks)

Answer

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Tags: Input Tax, Tax Administration, Tax deductions, VAT, VAT Claim
Level: Level 2

Topic: Value-Added Tax (VAT), Customs, and Excise Duties
Series: JULY 2023

PT – May 2021 – L2 – Q5a – Withholding Tax Administration

Explain the withholding tax rates and treatment for rental income for residential and non-residential premises.

Question

A resident person who makes a payment to another resident person in respect of the rental of residential or non-residential premises is required to withhold tax in accordance with the Income Tax Act, 2015 (Act 896) as amended.

Required:
i) State the taxation principle applicable to rental income and the relevant rates. (5 marks)
ii) Given i) above, how will you treat this transaction, where a resident person makes a payment to another resident person conducting a business of sale or renting of residential or non-residential premises?

Answer

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Tags: Non-Residential Premises, Rental Income, Residential, Withholding Tax
Level: Level 2

Topic: Withholding Tax Administration
Series: MAY 2021

PT – July 2023 – L2 – Q2a – Value-Added Tax (VAT), Customs, and Excise Duties

Explanation of five circumstances under which the Commissioner-General may cancel a VAT registration.

Question

State FIVE (5) circumstances under which the Commissioner-General may cancel a VAT registration of a taxable person. (5 marks)

Answer

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Tags: Commissioner-General, Tax Administration, VAT, VAT Cancellation, VAT Registration
Level: Level 2

Topic: Value-Added Tax (VAT), Customs, and Excise Duties
Series: JULY 2023

PT – May 2021 – L2 – Q4b – Corporate Tax Liabilities

Compute the tax payable by Fridays Ltd and explain the treatment of rental income and dividends.

Question

Fridays Ltd is a resident company. It provides cleaning services across the country. The following is available from its tax returns for the 2020 year of assessment.

Other relevant information:

The dividend was received from Z Ltd, a resident company where Fridays Ltd has 27% shares.

Required:
i) Compute the tax payable assuming its tax rate is 25%. (6 marks)
ii) Explain the treatment of the following:

Rental income (1 mark)
Dividend (1 mark)

Answer

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Tags: Corporate Tax, Dividend, Rental Income, Treasury bills
Level: Level 2

Topic: Corporate Tax Liabilities
Series: MAY 2021

Subject: PRINCIPLES OF TAXATION

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PT- Nov 2024 – L2 – Q5d – Data Analytics in Taxation

Explain how data analytics can be used to detect tax evasion and provide examples of how GRA might use data analytics to enhance tax compliance.

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PT – Nov 2024 – L2 – Q5c – E-Auditing and Tax Compliance

Explain e-auditing, its differences from traditional tax audits, and discuss advantages for taxpayers and tax authorities.

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PT – Nov 2024 – L2 – Q5b – Withholding Tax & VAT Calculation

Compute VAT and direct tax withheld on a taxable supply of medical consumables to a tax withholding agent.

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PT – Nov 2024 – L2 – Q5a – Notification to Commissioner-General for Non-Resident Contracts

Requirements for notifying the Commissioner-General when a resident contracts a non-resident.

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PT – Nov 2024 – L2 – Q4c – Tax Treatment of Repairs and Renovations

Explains the tax treatment of repairs and renovations for businesses.

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PT – Nov 2024 – L2 – Q4b – Tax Implication of Gift under Income Tax Act

Advise on the tax implications of receiving a gift from a spouse under the Income Tax Act.

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PT – Nov 2024 – L2 – Q4a – Chargeable Income Computation

Compute the chargeable income and tax payable for Amasa Architecture and Building LTD for the 2022 and 2023 years of assessment.

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PT – Nov 2024 – L2 – Q3b – Capital Gains Tax and Asset Realization

Tax computation on asset realization and understanding taxable capital assets.

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PT – Nov 2024 – L2 – Q3a – Tax Treatment of Employee Compensation

Explains the tax treatment of various types of employee compensation under the Income Tax Act, 2015 (Act 896).

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PT – Nov 2024 – L2 – Q2e – Tax Audit and Under-declaration of Sales

Action to be taken regarding an under-declared sales revenue during a tax audit.

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PT – July 2023 – L2 – Q3b – Income Tax Liabilities

Explanation of what constitutes employment for the purposes of tax.

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PT – July 2023 – L2 – Q3a – Income Tax Liabilities

Calculation of loan benefits for three employees based on their loan details and income.

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PT – July 2023 – L2 – Q2d – Income Tax Liabilities

Explanation of the basis for calculating pension benefits under the National Pensions Act, 2008 (Act 766).

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PT – May 2021 – L2 – Q5c – Income Tax Liabilities

Compute the gift tax payable by Madam Gifty Kums based on gifts received during her vetting.

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PT – May 2021 – L2 – Q5b – Taxation of Capital Gains

Explain the taxation rules for asset transfers to a spouse or former spouse during a divorce settlement or upon death.

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PT – July 2023 – L2 – Q2c – Value-Added Tax (VAT), Customs, and Excise Duties

Breakdown of VAT and other taxes included in a phone bill using a given total amount.

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PT – July 2023 – L2 – Q2b – Value-Added Tax (VAT), Customs, and Excise Duties

Explanation of three situations where a taxpayer cannot claim an input tax under VAT rules.

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PT – May 2021 – L2 – Q5a – Withholding Tax Administration

Explain the withholding tax rates and treatment for rental income for residential and non-residential premises.

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PT – July 2023 – L2 – Q2a – Value-Added Tax (VAT), Customs, and Excise Duties

Explanation of five circumstances under which the Commissioner-General may cancel a VAT registration.

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PT – May 2021 – L2 – Q4b – Corporate Tax Liabilities

Compute the tax payable by Fridays Ltd and explain the treatment of rental income and dividends.

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