Subject: STRATEGIC TAX PLANNING

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  • 20 Marks

STP – Feb 2007 – L3 – Q5 – VAT Apportionment

Explain VAT rules for goods on sale or return and input tax apportionment for taxable and exempt supplies.

a) Tanji Enterprises Ltd. operates a Fuel Filling Station and a huge Supermarket in Tamale within the same premises. A joint tax audit team from the LTU Office visited Tanji and noted that Tanji supplies taxable and non-taxable goods and services to customers but fails to notice the split distinction between these services. The VAT team therefore has disallowed some claims and apportioned others to reflect the true VAT claimable.

Required:
i. Explain the VAT rules for goods supplied on sale or return.
ii. Discuss the apportionment of input tax for taxable and exempt supplies.

(b).Required:

Discuss the VAT rules on the timing of supply for the following:

i. Goods or services applied to own use, gifted, or supplied under hire purchase or finance lease.

ii. Continuous or metered supplies like electricity.

iii. Goods supplied under a hire purchase agreement or finance lease.

iv. Goods or services supplied under rental agreements or periodic payments.

v. Ancillary supplies.

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  • 20 Marks

STP – Feb 2007 – L3 – Q4 – Employee Loan Taxation

Advise on tax implications of a $300M loan and bonus for Dr. Ababio, including relevant Tax Act provisions.

(a). Dr. Ababio discusses an engagement she recently accepted with an investment banker with you for advice. She indicates that one of the recruiting inducements that convinced her to accept the position is a $300M loan from her employer. She will receive the loan proceeds on her first day of work and must sign a note to repay the loan plus accrued interest in five equal annual installments.

The employer will forgive any amount of the unpaid debt if Dr. Ababio dies, becomes disabled, or is terminated from employment through no fault of her own. Dr. Ababio’s contract provides that the employer will pay an annual bonus equal to each loan repayment. The contract stipulates that the bonus must be applied to the repayment of her loan.

Required:
i) Advise Dr. Ababio on the implications, if any, of this engagement provisions.
ii) Discuss any three provisions in the Tax Act which will support the position the Commissioner will take in respect of the taxability or otherwise of this engagement provision.

(b). The Free Zone Act declares a 10-year tax holiday for Free Zone Operators. Sweet Entities Inc. desires to set up in the Free Zone enclave but requires an understanding of the practical tax concessions granted to free operators. To this effect, the Tax Director of Sweet Entities Inc. requires that you do a practical presentation of the flow of the corporate tax-exempt concession as extended to the operator. He therefore provides you with the following business forecast for the first 10-year period as follows.
All figures in $M

Year 1 2 3 4 5 6 7 8 9 10
Adjusted Profit 10 60 150 500 1,000 1,000 1,000 520 600 620
Capital Allowance 1000 600 300 150 50 20 20 600 340 200

Compute the tax position, if any, of Sweet Entities Inc. for the exempt period.

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  • 15 Marks

STP – Feb 2020 – L2 – Q5 – Anti-Avoidance Provisions

Identify and discuss three anti-avoidance provisions in the Income Tax Act, 2015 (Act 896) and their limitations on tax planning.

Although tax planners have the liberty to devise schemes which reduce the tax liability of their clients, the Income Tax Act, 2015 (Act 896) contains provisions which limit tax planning schemes.

Required:
Identify any three (3) anti-avoidance provisions in Act 896 and discuss how each of these provisions places a limitation on the ability of a person to engage in tax planning.

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  • 20 Marks

STP – Feb 2007 – L3 – Q3 – Venture Capital Taxation

Present tax concessions for Venture Capital Operators compared to traditional banks.

As part of the post qualification requirements of The Chartered Institute of Taxation, you have been invited to do a presentation on the topic “Venture Capital Fund” to a select group of business men, tax professionals, financial institutions and students.

Invitation
Members of the Ghana Institute of Taxation and the Institute of Bankers wish to use this opportunity to strengthen the cordial relationship subsisting between them and have therefore invited you to do a presentation on the tax effects of Venture Capital Operators as compared with that of the traditional financial institutions.

Required:
Please prepare a presentation as required under Invitation above clearly distinguishing between Tax concessions granted to a Venture Capital as compared with the Bank.

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  • 20 Marks

STP – Feb 2007 – L3 – Q2 – Employee Taxation

Outline Ghanaian tax and social security implications for a French employee working in Ghana under a Double Tax Treaty.

Mr. Nor Amid, the Human Capital Resource Person of Amanda Inc, an entity registered in France sends a brief note to you in respect of a duty tour of an employee as follows:
“Amanda is sending an employee to Ghana and I am hoping that you could provide guidance for Amanda. Our understanding is as that:

  • The employee is French and may be kept on the French payroll
  • The employee’s remuneration will be cross charged to Amanda in France and Ghana
  • The employee, according to French Tax Law, will be French for tax purposes
  • The employee will spend 40% or less of his time in France
  • The employee will spend between 40 to 60% of his time in Ghana and whilst in Ghana the employee will be accommodated in hotels, will have free use of car with fuel and free meal.
  • The employee will spend his time in Ghana from 7 to 25 days at a time depending on need.

Would you kindly provide us with a brief outline of the Ghanaian tax and social security implications for Amanda and the employee? Kindly note that Ghana has an operating ‘Double Tax Treaty’ with France.

Required:
(a). Please submit a memo to respond to the concerns raised by Mr. Nor Amid.

(b). Ghana has general tax-avoidance rules in the tax acts. Kindly discuss any three practice methods adopted by the Revenue Agencies to regulate transfer pricing between related parties?

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  • 22 Marks

STP – Feb 2020 – L2 – Q4 – Business Entity Tax Implications

Advise on tax implications of establishing a company, partnership, or sole proprietorship and identify which offers the least tax exposure for an investor.

As a renowned tax consultant, a potential investor in the real estate sector in Ghana is seeking your expert opinion on the tax implications of establishing a company, a partnership or a sole proprietorship and which form of the business organisations gives the least tax exposure for an investor.

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  • 20 Marks

STP – Feb 2007 – L3 – Q1 – Strategic Tax Planning

Advise on tax concerns and advantages of capitalizing profits as dividends for JoyCo Ltd.

(a). Mr. Joe Mensah, the MD of JoyCo Ltd is required to submit his company’s financial statement for the year 2006 to the Board next Tuesday. One particular item which Mr. Mensah intends to push for Board approval is a declaration of dividends consisting of a capitalization of profits to firm up member’s confidence in the earnings power of their investment in Joyco Ltd.

Mr. Joe Mensah has approached you with this strategy and requires that you advise on the tax concerns and advantages that capitalization of profits could have under the Internal Revenue.

Required:
Please advise Mr. Mensah as required above on this strategy.

(b). At a tax forum organised by the Chartered Institute of Taxation, a VAT representative submitted that “because of the right to deduct input VAT, VAT should be neutral for persons subject to VAT. A supplier of goods and services charges output VAT on sales and deducts input VAT on purchases, paying the balance to the VAT Service”

Mr. Anamang strongly objected to this simple statement and proposed a modification to it. He proposed “however, there is often a mismatch between theory and reality. VAT administrations for companies pose grave problems, but there are benefits in a VAT grouping scheme.

Required:
Kindly discuss any four VAT imposed problems that could be eliminated where group members are permitted to report a VAT transaction as a group rather than as a single taxable person.

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  • 20 Marks

STP – Aug 2020 – L2 – Q1 – Tax Planning vs. Tax Avoidance

Discuss distinction between tax planning and tax avoidance under Ghanaian tax law with examples and references.

The Council of the Chartered Institute of Taxation, Ghana (CITG) has invited you to speak at a Continuous Development Program (CPD) on the topic “The distinction between tax planning schemes and tax avoidance arrangements under Ghanaian tax laws”.
In the letter of invitation, the Council indicated that you are to submit a detailed write-up of your presentation.

Required
With the aid of appropriate examples and specific references to Ghanaian tax law provisions, write in sufficient detail, the content of your presentation.

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  • 25 Marks

STP – Feb 2020 – L2 – Q3 – Taxation of Capital Transactions

Advise Ravid Ghana Ltd on tax implications of selling land and office building for GHS200,000.

Ravid Ghana Ltd is a software development company with its registered office located at North Kaneshie in the Greater-Accra Region of Ghana. In March 2016 the company purchased a parcel of land at Oyarifa at a cost of GH¢25,000.00. The company spent GH¢5,000 to construct a fence wall around the property and to complete title registration processes at the Lands Commission. In May 2017, the company also purchased an office building at Madina valued at GH¢100,000.00 as well as a Toyota Hilux pick-up valued at GH¢100,000.00. In February 2018, the board of directors of the company decided to dispose of the parcel of land purchased in March 2016 and the office building in order to raise money to finance the purchase of strategic assets. The company engaged the services of a valuer to determine the market value of the land located at Oyarifa. The company paid the valuer GH¢5,000.00 for services rendered. In August 2019, the company sold the parcel of land and the office building in a single transaction for GH¢200,000.00. At the time of the sale, the market value of the land was GH¢50,000.00 and the office building was GH¢150,000.00. The written down value of the building was GH¢70,000.00 at the time of the sale.

Required: Advise the company on the income tax implications of the realization of the assets.

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  • 20 Marks

STP – Aug 2018 – L2 – Q3 – Tax Strategies for New Business Formation

State and explain four non-tax factors influencing an entrepreneur's decision on business location.

(a). State and explain four (4) non-tax factors which influence the decision of an entrepreneur as to where to establish a business.

(b). A Ghanaian entrepreneur is looking for an ideal location to establish an orange juice processing facility. The initial feasibility studies conducted by consultants for the entrepreneur indicate that Tema, Takoradi and Nsawam have comparable economic conditions which will make an investment in any of these cities financially prudent. With reference to the provisions of the Income Tax Act, 2015 (Act 896) discuss the tax implications of establishing a manufacturing entity in Tema, Takoradi and Nsawam and advise the entrepreneur on the most tax efficient location to establish the entity.

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  • 20 Marks

STP – Feb 2007 – L3 – Q5 – VAT Apportionment

Explain VAT rules for goods on sale or return and input tax apportionment for taxable and exempt supplies.

a) Tanji Enterprises Ltd. operates a Fuel Filling Station and a huge Supermarket in Tamale within the same premises. A joint tax audit team from the LTU Office visited Tanji and noted that Tanji supplies taxable and non-taxable goods and services to customers but fails to notice the split distinction between these services. The VAT team therefore has disallowed some claims and apportioned others to reflect the true VAT claimable.

Required:
i. Explain the VAT rules for goods supplied on sale or return.
ii. Discuss the apportionment of input tax for taxable and exempt supplies.

(b).Required:

Discuss the VAT rules on the timing of supply for the following:

i. Goods or services applied to own use, gifted, or supplied under hire purchase or finance lease.

ii. Continuous or metered supplies like electricity.

iii. Goods supplied under a hire purchase agreement or finance lease.

iv. Goods or services supplied under rental agreements or periodic payments.

v. Ancillary supplies.

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  • 20 Marks

STP – Feb 2007 – L3 – Q4 – Employee Loan Taxation

Advise on tax implications of a $300M loan and bonus for Dr. Ababio, including relevant Tax Act provisions.

(a). Dr. Ababio discusses an engagement she recently accepted with an investment banker with you for advice. She indicates that one of the recruiting inducements that convinced her to accept the position is a $300M loan from her employer. She will receive the loan proceeds on her first day of work and must sign a note to repay the loan plus accrued interest in five equal annual installments.

The employer will forgive any amount of the unpaid debt if Dr. Ababio dies, becomes disabled, or is terminated from employment through no fault of her own. Dr. Ababio’s contract provides that the employer will pay an annual bonus equal to each loan repayment. The contract stipulates that the bonus must be applied to the repayment of her loan.

Required:
i) Advise Dr. Ababio on the implications, if any, of this engagement provisions.
ii) Discuss any three provisions in the Tax Act which will support the position the Commissioner will take in respect of the taxability or otherwise of this engagement provision.

(b). The Free Zone Act declares a 10-year tax holiday for Free Zone Operators. Sweet Entities Inc. desires to set up in the Free Zone enclave but requires an understanding of the practical tax concessions granted to free operators. To this effect, the Tax Director of Sweet Entities Inc. requires that you do a practical presentation of the flow of the corporate tax-exempt concession as extended to the operator. He therefore provides you with the following business forecast for the first 10-year period as follows.
All figures in $M

Year 1 2 3 4 5 6 7 8 9 10
Adjusted Profit 10 60 150 500 1,000 1,000 1,000 520 600 620
Capital Allowance 1000 600 300 150 50 20 20 600 340 200

Compute the tax position, if any, of Sweet Entities Inc. for the exempt period.

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  • 15 Marks

STP – Feb 2020 – L2 – Q5 – Anti-Avoidance Provisions

Identify and discuss three anti-avoidance provisions in the Income Tax Act, 2015 (Act 896) and their limitations on tax planning.

Although tax planners have the liberty to devise schemes which reduce the tax liability of their clients, the Income Tax Act, 2015 (Act 896) contains provisions which limit tax planning schemes.

Required:
Identify any three (3) anti-avoidance provisions in Act 896 and discuss how each of these provisions places a limitation on the ability of a person to engage in tax planning.

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  • 20 Marks

STP – Feb 2007 – L3 – Q3 – Venture Capital Taxation

Present tax concessions for Venture Capital Operators compared to traditional banks.

As part of the post qualification requirements of The Chartered Institute of Taxation, you have been invited to do a presentation on the topic “Venture Capital Fund” to a select group of business men, tax professionals, financial institutions and students.

Invitation
Members of the Ghana Institute of Taxation and the Institute of Bankers wish to use this opportunity to strengthen the cordial relationship subsisting between them and have therefore invited you to do a presentation on the tax effects of Venture Capital Operators as compared with that of the traditional financial institutions.

Required:
Please prepare a presentation as required under Invitation above clearly distinguishing between Tax concessions granted to a Venture Capital as compared with the Bank.

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  • 20 Marks

STP – Feb 2007 – L3 – Q2 – Employee Taxation

Outline Ghanaian tax and social security implications for a French employee working in Ghana under a Double Tax Treaty.

Mr. Nor Amid, the Human Capital Resource Person of Amanda Inc, an entity registered in France sends a brief note to you in respect of a duty tour of an employee as follows:
“Amanda is sending an employee to Ghana and I am hoping that you could provide guidance for Amanda. Our understanding is as that:

  • The employee is French and may be kept on the French payroll
  • The employee’s remuneration will be cross charged to Amanda in France and Ghana
  • The employee, according to French Tax Law, will be French for tax purposes
  • The employee will spend 40% or less of his time in France
  • The employee will spend between 40 to 60% of his time in Ghana and whilst in Ghana the employee will be accommodated in hotels, will have free use of car with fuel and free meal.
  • The employee will spend his time in Ghana from 7 to 25 days at a time depending on need.

Would you kindly provide us with a brief outline of the Ghanaian tax and social security implications for Amanda and the employee? Kindly note that Ghana has an operating ‘Double Tax Treaty’ with France.

Required:
(a). Please submit a memo to respond to the concerns raised by Mr. Nor Amid.

(b). Ghana has general tax-avoidance rules in the tax acts. Kindly discuss any three practice methods adopted by the Revenue Agencies to regulate transfer pricing between related parties?

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  • 22 Marks

STP – Feb 2020 – L2 – Q4 – Business Entity Tax Implications

Advise on tax implications of establishing a company, partnership, or sole proprietorship and identify which offers the least tax exposure for an investor.

As a renowned tax consultant, a potential investor in the real estate sector in Ghana is seeking your expert opinion on the tax implications of establishing a company, a partnership or a sole proprietorship and which form of the business organisations gives the least tax exposure for an investor.

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  • 20 Marks

STP – Feb 2007 – L3 – Q1 – Strategic Tax Planning

Advise on tax concerns and advantages of capitalizing profits as dividends for JoyCo Ltd.

(a). Mr. Joe Mensah, the MD of JoyCo Ltd is required to submit his company’s financial statement for the year 2006 to the Board next Tuesday. One particular item which Mr. Mensah intends to push for Board approval is a declaration of dividends consisting of a capitalization of profits to firm up member’s confidence in the earnings power of their investment in Joyco Ltd.

Mr. Joe Mensah has approached you with this strategy and requires that you advise on the tax concerns and advantages that capitalization of profits could have under the Internal Revenue.

Required:
Please advise Mr. Mensah as required above on this strategy.

(b). At a tax forum organised by the Chartered Institute of Taxation, a VAT representative submitted that “because of the right to deduct input VAT, VAT should be neutral for persons subject to VAT. A supplier of goods and services charges output VAT on sales and deducts input VAT on purchases, paying the balance to the VAT Service”

Mr. Anamang strongly objected to this simple statement and proposed a modification to it. He proposed “however, there is often a mismatch between theory and reality. VAT administrations for companies pose grave problems, but there are benefits in a VAT grouping scheme.

Required:
Kindly discuss any four VAT imposed problems that could be eliminated where group members are permitted to report a VAT transaction as a group rather than as a single taxable person.

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  • 20 Marks

STP – Aug 2020 – L2 – Q1 – Tax Planning vs. Tax Avoidance

Discuss distinction between tax planning and tax avoidance under Ghanaian tax law with examples and references.

The Council of the Chartered Institute of Taxation, Ghana (CITG) has invited you to speak at a Continuous Development Program (CPD) on the topic “The distinction between tax planning schemes and tax avoidance arrangements under Ghanaian tax laws”.
In the letter of invitation, the Council indicated that you are to submit a detailed write-up of your presentation.

Required
With the aid of appropriate examples and specific references to Ghanaian tax law provisions, write in sufficient detail, the content of your presentation.

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  • 25 Marks

STP – Feb 2020 – L2 – Q3 – Taxation of Capital Transactions

Advise Ravid Ghana Ltd on tax implications of selling land and office building for GHS200,000.

Ravid Ghana Ltd is a software development company with its registered office located at North Kaneshie in the Greater-Accra Region of Ghana. In March 2016 the company purchased a parcel of land at Oyarifa at a cost of GH¢25,000.00. The company spent GH¢5,000 to construct a fence wall around the property and to complete title registration processes at the Lands Commission. In May 2017, the company also purchased an office building at Madina valued at GH¢100,000.00 as well as a Toyota Hilux pick-up valued at GH¢100,000.00. In February 2018, the board of directors of the company decided to dispose of the parcel of land purchased in March 2016 and the office building in order to raise money to finance the purchase of strategic assets. The company engaged the services of a valuer to determine the market value of the land located at Oyarifa. The company paid the valuer GH¢5,000.00 for services rendered. In August 2019, the company sold the parcel of land and the office building in a single transaction for GH¢200,000.00. At the time of the sale, the market value of the land was GH¢50,000.00 and the office building was GH¢150,000.00. The written down value of the building was GH¢70,000.00 at the time of the sale.

Required: Advise the company on the income tax implications of the realization of the assets.

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  • 20 Marks

STP – Aug 2018 – L2 – Q3 – Tax Strategies for New Business Formation

State and explain four non-tax factors influencing an entrepreneur's decision on business location.

(a). State and explain four (4) non-tax factors which influence the decision of an entrepreneur as to where to establish a business.

(b). A Ghanaian entrepreneur is looking for an ideal location to establish an orange juice processing facility. The initial feasibility studies conducted by consultants for the entrepreneur indicate that Tema, Takoradi and Nsawam have comparable economic conditions which will make an investment in any of these cities financially prudent. With reference to the provisions of the Income Tax Act, 2015 (Act 896) discuss the tax implications of establishing a manufacturing entity in Tema, Takoradi and Nsawam and advise the entrepreneur on the most tax efficient location to establish the entity.

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