Topic: Business income - Corporate income tax

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AT – Nov 2024 – L3 – Q5b – Tax Implications of Foreign Acquisition

Evaluate the tax implications of a 70% equity acquisition by a foreign company and the proposed funding option

Question

Baimbil LTD, based in Australia, has decided to acquire a company in Ghana instead of starting a new one.

The shareholders of Borketey LTD, a resident company in Ghana, have decided to sell the company due to cash flow challenges. As a result, Baimbil LTD approached the management of Borketey LTD and engaged a consultancy firm to perform due diligence checks. Following this, Baimbil LTD acquired 70% of the equity of Borketey LTD.

Below is an extract from the books of Borketey LTD for the 2023 year of assessment:

Description	Amount (GH¢)
Share Capital	1,000,000
Retained Earnings	(500,000)
Shared Deals	50,000
Bad Debts (Sold to MN LTD, now bankrupt)	1,000,000

Proposed Financing by Baimbil LTD:

The following proposals have been tabled for consideration after the acquisition:

Baimbil LTD to provide GH¢100 million as debt with 2% interest above the market rate.
Baimbil LTD to provide GH¢100 million as additional equity capital.
Baimbil LTD to provide collateral for a bank facility of GH¢100 million in Ghana.

Required:

(i) Evaluate the tax implications of the 70% equity acquisition.

(ii) Evaluate the tax implications of the three proposed financing options.

Answer

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Tags: Capital Allowance, Corporate Restructuring, Equity Acquisition, Foreign Investment, Thin Capitalization, Withholding Tax
Level: Level 3

Topic: Business income - Corporate income tax
Series: Nov 2024

AT – Nov 2024 – L3 – Q1a – Computation of Partnership Chargeable Income

Compute the partnership's chargeable income for the 2023 year of assessment.

Question

Takyi and Kuro commenced a retail business in Goaso, Ghana on 1 January 2020, under the partnership name Ntaafo LTD, sharing profits and losses equally. On 1 January 2023, Tawia was admitted as a new partner. Takyi, Kuro, and Tawia then shared profits and losses in the ratio of 3:2:1 respectively. The partnership prepares its accounts to 31 December annually.

The partnership’s profit and loss account for the year ended 31 December 2023 is as follows:

Note	GH¢	GH¢
Gross Trading Profit		4,365,000
Compensation	(1)	50,000
Total Revenue		4,415,000
Less: Operating Expenses
Audit Fees		25,000
Rent and Rates	(2)	348,000
Wages and Salaries	(3)	1,410,000
Interest on Capital	(4)	205,000
Contribution towards National Insurance Scheme		111,000
Trade Debts Written Off (Bad Debts)		92,000
Legal Fees	(5)	43,000
Entertainment	(6)	270,000
Motor Expenses	(7)	87,000
Repairs and Maintenance	(8)	190,000
Commission	(9)	310,000
Printing and Stationery		82,000
Electricity and Telephone		51,000
Depreciation		123,000
Sundry Expenses		270,000
Total Expenses		3,617,000
Net Profit		798,000

Notes:

Compensation:
- Compensation received from suppliers for delays in supplies: GH¢70,000
- Court fines paid to client for negligence: (GH¢20,000)
Rent and Rates:
- Rent for business premises: GH¢180,000
- Rent for Takyi’s private residence: GH¢156,000 (Disallowed)
- Business operating permit paid to Goaso Municipal Assembly: GH¢12,000
Wages and Salaries:
- Takyi: GH¢180,000
- Kuro: GH¢240,000
- Tawia: GH¢66,000
- Mrs. Takyi (staff): GH¢120,000
- Mrs. Tawia (staff): GH¢144,000
- Other staff: GH¢660,000
Interest on Capital:
- Takyi: GH¢30,000
- Kuro: GH¢40,000
- Tawia: GH¢10,000
- Bank interest: GH¢125,000
Legal Fees:
- Renewal of annual tenancy agreements: GH¢8,000
- Collection of trade debts: GH¢10,000
- Preparing contract documents (suppliers and contractors): GH¢5,000
- Preparing contract documents to acquire a new company: GH¢20,000 (Disallowed)
Entertainment:
- The entertainment expenses relate to the partners’ private enjoyment (Disallowed).
Motor Car Expenses:
- Petrol: GH¢52,000
- Repairs: GH¢30,000
- Fines for late renewal of vehicle license: GH¢5,000 (Disallowed)
Repairs and Maintenance:
- Replacement of bolts and nuts on Plant and Machinery: GH¢10,000
- Major expenditure on Landscaping and Renovation: GH¢180,000 (Capitalized)
Commission:
- Takyi (for introducing a new customer to the business): GH¢20,000 (Disallowed)
- Salesmen and Saleswomen: GH¢230,000
- Unidentified recipient: GH¢60,000 (Disallowed)

Other Information:

Capital allowance agreed with the Ghana Revenue Authority (GRA) was GH¢234,000 for the 2023 year of assessment.

Required:
Compute the partnership’s chargeable income for the 2023 year of assessment.

Answer

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Tags: Adjusted Profit Computation, Capital Allowance, chargeable income, Disallowed Expenses, Partnership Taxation, Tax adjustments
Level: Level 3

Topic: Business income - Corporate income tax
Series: Nov 2024

AT – Nov 2018 – L3 – Q5b – Business income – Corporate income tax

Computation of taxes payable by a mining support services company, including adjustments for dividends, tax losses, and investment deductions.

Question

Manla Ltd, since its incorporation, has been providing Mining Support Services (MSS) in line with its mandate, and the following is relevant to its operations for the 2017 year of assessment:

Details	GH¢
Chargeable income	240,000,000
Loss from investment deducted in arriving at the chargeable income	700,000
Dividend (gross) received from A Ltd (a mining company) where Manla Ltd has 26% voting power	20,000
Provision for bad debts written off	400,000
Tax loss from 2014 deducted	20,000
Net dividend received from a US-based company after 5% withholding tax	9,500
Items worth GH¢ 60,000 granted to a powerful shareholder were adjusted in arriving at chargeable income	60,000

(Note: Manla Ltd has a basis period from January to December.)

Required:
i) Compute the taxes payable by Manla Ltd. (6 marks)
ii) Comment on the treatment of the investment loss of GH¢700,000. (2 marks)

Answer

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Tags: chargeable income, Dividend tax, Mining Support Services, Tax computation, Tax Losses
Level: Level 3

Topic: Business income - Corporate income tax
Series: NOV 2018

AT – Nov 2018 – L3 – Q3b – Business Income, Corporate Income Tax

Analysis of tax payable for a company planning to operate in a regional capital vs. a district capital based on projected financial performance.

Question

The following information is an extract of projected financial performance of YZ Ltd, a manufacturing company that intends to go into operation with a basis period from January to December. Management is contemplating operating in either Kumasi or Konongo, but the results are expected to be the same irrespective of the location. The following projected results from January to December Year 1 are worth analyzing:

	Kumasi (Regional Capital)	Konongo (District Capital)
Revenue	GH¢ 3,000,000	GH¢ 3,000,000
Cost	GH¢ 1,200,000	GH¢ 1,200,000
Gross Profit	GH¢ 1,800,000	GH¢ 1,800,000
Expenses	GH¢ 1,000,000	GH¢ 1,000,000
Net Profit	GH¢ 800,000	GH¢ 800,000

The following additional information is relevant:
A building to be bought on 1 March Year 1 for GH¢400,000 has been granted full year’s depreciation at the rate of 20%, and the same has been added to the projected cost above.

Required:
i) Compute the projected tax payable based on the information above and recommend where management is likely to site the entity and why.
ii) What other TWO (2) factors, apart from what has been identified in (i) above, may dictate siting a manufacturing business in a regional capital?

Answer

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Tags: Capital Allowance, District Capital, Regional Capital, Tax computation, Tax Decision
Level: Level 3

Topic: Business income - Corporate income tax
Series: NOV 2018

AT – NOV 2018 – L3 – Q2C – Business income – Corporate income tax, Tax administration in Ghana

Calculate taxable income and tax payable for an individual with multiple income sources, and identify tax compliance issues for a private practice.

Question

c) Kate Oppong, a physically challenged, works for the Ministry of Health as an eye surgeon and optician based at Komfo Anokye Teaching hospital in Kumasi. She dedicates most of her free time to her private practice, as well as writing books and articles for the Ghana Medical Journal. Kate is also part of the medical team for the local NGO and Sight Restoration, which is involved in cataract surgery for the disadvantaged members of society in remote rural areas.

Kate’s private practice is located in Kumasi and has a staff complement of six employees who are all full time workers. Kate only attends to the patients at her private practice strictly by appointment and her patient base has been steadily growing due to her experience and dedication.

In terms of her service contract with Sight Restoration, Kate is required to participate in all the cataract operations scheduled for the year. Her service contract is for a year, subject to renewal as and when donor support is available.Sight Restoration’s field staff, of which Kate is one, are paid a predetermined monthly salary plus an attendance allowance which is paid only after each cataract operation. The field staff is also entitled to a one-off representation allowance for participating in scheduled seminars.

Kate Oppong’s earnings and deductions for the year ended 31 December 2017 were:

Notes:

This amount is part repayment of the interest free personal loan of GH¢12,000 advanced to Kate on 1 January, 2017, repayable over two years. The Bank of Ghana interest rate for the year ended 31 December 2017 was constant at 20%.
This amount was fully expended towards the travelling costs for Kate and her minor son for his medical treatment in South Africa.
No employees tax (PAYE) or corporate income tax was paid in respect of the amounts paid to the employees of the private practice (including Kate) or the profits from the practice. This was because in Kate’s opinion her operations were ‘private’ and as such not subject to tax and also because she believed that she was already contributing her fair tax share from her other two employers.
Kate is a single parent and takes care of her single son in the senior high school. She also takes full responsibility of her aged mother.

Required:

i) State the Ghana Revenue Authority’s (GRA) requirements which have been breached by Kate Oppong and consequences of the breach based on the information given in note (3). (5 marks)

ii) Calculate the taxable income of and income tax payable by Kate Oppong for the year ended 31 December 2017. Note: All computations should be rounded to a whole cedi. (9 marks)

Answer

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Tags: Benefits in kind, Corporate Tax, Employment Income, NGO income, PAYE, Personal income tax, Private practice income, Tax Compliance
Level: Level 3

Topic: Business income - Corporate income tax, Tax administration in Ghana
Series: NOV 2018

TX – May 2019 – L3 – Q3A – Capital Gains Tax

Compute the tax on capital gains from a property sale and explain the concept of realisation of capital assets.

Question

a)
i) Anthony purchased a house in Koforidua at a cost of GH¢480,000 in the year 2011. In 2011, he spent GH¢24,000 to repair and renovate the house. In March 2018, he spent extra GH¢18,000 on renovation with the intention to sell the house. Anthony engaged a Valuer in June 2018, to value the building and the Valuer charged GH¢5,400.

In July 2018, he placed an advert on ‘Zuria FM’ for the sale of the building and paid GH¢1,800. During the same period, he sold the house through an agent for GH¢660,000 to Kwame Burger and the agent’s commission was 3% of the sale value. Anthony also paid GH¢1,500 for stamp duty and legal permit for conveyance of the building to Kwame Burger.

Required: i) Compute any tax payable. (4 marks)

ii) What constitutes realisation of capital assets? (2 marks)
i) Compute any tax payable. (4 marks)
ii) What constitutes realisation of capital assets? (2 marks)

Answer

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Tags: Capital Gains, Property Sale, Realisation of Assets, Tax computation, Taxation Act
Level: Level 3

Topic: Business income - Corporate income tax
Series: MAY 2019

TX – May 2019 – L3 – Q5c – Business Income – Corporate Income Tax

Evaluate the statement regarding offsetting losses from export of non-traditional products against profits from local sales.

Question

A company engages in exports of non-traditional products and makes local sales of its products. It has as recently, as of 2018, recorded huge losses on the exports but makes gains on the local sales and intends to offset the loss against the profit from the local sales as both represent its business activities.

Required: Evaluate the above statement critically in light of the tax provisions and its effect, if any, on revenue.
(4 marks)

Answer

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Tags: Business income, Export, Local sales, Losses, Non-Traditional Products, Revenue
Level: Level 3

Topic: Business income - Corporate income tax
Series: MAY 2019

TF – May 2018 – L3 – Q2a – Capital Allowance

Calculate the capital allowances and chargeable income of Sekyiwaa Annam Industries Ltd for the year 2017.

Question

Sekyiwaa Annam Industries Limited manufactures personal hygiene soaps and related products at their factory in Takoradi. The company commenced business operations on 1 April 2016 and had an assessed loss of GH¢150,200 for the period ended 31 December 2016.

The company recorded a net profit of GH¢762,800 for the year ended 31 December 2017 after taking into account the following transactions in the income statement:

Gross rental income of GH¢180,000 received from the leasing of one wing of the office building. The rental income portion constitutes 10% of the office building.
Net interest received on bank deposits from Ghana Commercial Bank of GH¢10,028. Withholding tax of 8% has been deducted.
The registration of Trademarks at a total cost of GH¢75,000 in respect of the Company’s personal hygiene soaps that is to last for 10 years. The research and development expenses incurred in connection with these soaps amounted to GH¢15,000 and the company intends to expense it. The legal costs incurred to complete the registration of the Trademark was GH¢5,000.
A donation of GH¢120,000 worth of furniture was made to a local government-assisted school as part of the Company’s corporate social responsibility program, which was duly acknowledged by Ghana Education Service (GES).
Depreciation of fixed assets of GH¢57,000.
Replacement of two motor vehicle engines costing GH¢51,000.
Exceptional costs amounting to GH¢150,000 as a result of the production manager sustaining an injury while working on one of the production lines in the factory. GH¢35,000 of the costs relate to a payment made to the production manager as severance pay. GH¢110,000 was used to acquire additional computers. The remaining GH¢5,000 of the costs represent fines imposed by the Factory Inspectorate Department of the government following the incident.
Purchases of a Computer Server for accounting and human resource needs at a cost of GH¢20,000.
Additional Information:
Details of the Company’s other fixed assets, at cost, are provided below. These were all acquired/constructed during the year to 31 December 2016:

Asset Cost (GH¢)
Factory Building 800,000
Plant and Machinery 510,000
Office Building 420,000
Furniture and Office Equipment 60,000
Motor vehicles (Goods Vans) 130,000
Computers 30,000

Required:
i) Calculate the capital allowances claimable by Sekyiwaa Annam Industries Limited for the year ended 31 December 2017 using all the available information.
(8 marks)

ii) Calculate the chargeable income of Sekyiwaa Annam Industries Limited for the year ended 31 December 2017 and the tax payable.
(6 marks)

Answer

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Tags: Capital Allowance, chargeable income, Corporate Tax, Manufacturing, Taxable Income
Level: Level 3

Topic: Business income - Corporate income tax, Capital allowance
Series: MAY 2018

TF – May 2018 – L3 – Q5b – Minerals and mining

Computation of corporate tax payable for AB Ltd in the mining sector.

Question

AB Ltd is a mining company operating at Kyebi in the Eastern Region. The following data is relevant for the last quarter of 2017 year of assessment:

The following additional information is relevant:
i) Royalty has not been computed and paid on the above yet.
ii) Depreciation of an amount of GH¢1,000,000 was part of the cost of operation above.
iii) Proceeds from sale of depreciable assets amounting to GH¢500,000 were added to
revenue above.
iv) Capital allowance agreed with the Mining Unit of Ghana Revenue Authority was agreed
to be GH¢800,000.
Required:
Compute the taxes payable by AB Ltd to Ghana Revenue Authority and comment on any
TWO items as to why you allowed or disallowed it in the tax computation. (5 marks)

Answer

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Tags: Capital Allowance, Corporate Tax, Depreciation, Mining operations, Tax computation
Level: Level 3

Topic: Business income - Corporate income tax
Series: MAY 2018

AT – April 2022 – L3 – Q4 – Capital allowance | Business income – Corporate income tax

Calculate capital allowance and chargeable income for Joefel Company Ltd. Explain sources of revenue from upstream petroleum operations in Ghana.

Question

a) Joefel Company Ltd, manufacturer of fruit juice for local consumption commenced business on 1 October 2019, with accounting year-end at 31 December each year. The company submitted its accounts for 2019 and was assessed accordingly. The company submitted its tax returns for 2020 year of assessment to the Ghana Revenue Authority on 30 April 2021. Below are the details:

Additional information:
1) Advert and publicity
Radio and television 3,300
Newspaper advert 2,400
Permanent signboard at the company’s entrance in 2020 18,000

2) Installation of plant and others
Installation of plant 21,500
Heavy duty Generator bought in 2019 to support Plant and Machinery 20,500
General maintenance before the use of the plant 18,000

3) Staff Welfare
Staff medical bills 3,700
Safety wear for staff 10,500
Canteen Equipment purchased on 30 November 2020 12,000

4) Donation and Subscription
Goods given as gratis to customs officials 13,000
Donation of goods to SOS Children Village 10,000
Subscription to Association of Ghana Industries 5,000

5) Wages and Salaries
Old staff 120,000
Fresh graduates employed by Joefel Company Ltd. (Fresh graduates
constitute 1% of total workforce) 26,000

6) Other Income
Compensation from a customer for cancellation of a sale order 8,000
Compensation for loss of trading stock of the company 10,000
Compensation for cancellation of purchase order by supplier 5,000

Note 2) above has not been included in the plant and machinery acquired.

Required:

a
i) Compute the appropriate capital allowance for 2019 and 2020 years of assessment.
(8 marks)
ii) Calculate the chargeable income of the company for the 2020 year of assessment.
(6 marks)
b) Explain of the following sources of revenue accruing to the Government of Ghana from the upstream petroleum operations in Ghana:
i) Royalty.
ii) Carried Interest.
iii) Additional Interest.
iv) Additional Oil Entitlement.
(6 marks)

Answer

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Level: Level 3

Topic: Business income - Corporate income tax, Capital allowance
Series: APR 2022

AT – Mar 2024 – L3 – Q2c – Business income – Corporate income tax

Evaluating the tax benefits of manufacturing ceramics using local and foreign materials versus importing finished ceramics.

Question

Talantula Ltd has engaged you as an ICAG final level candidate on the options that would provide enormous benefits to them and also to the government. The two options are:

To manufacture ceramics using both local and foreign materials. The products will be sold locally and on the international market.
To import finished ceramics for sale in Ghana.

Required:
Evaluate FIVE (5) tax benefits of either of the business options you will want them to associate with over the other.

Answer

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Level: Level 3

Topic: Business income - Corporate income tax
Series: MAR 2024

AT – Dec 2023 – L3 – Q3a – Business income – Corporate income tax

Computing tax payable for Conti Ltd with adjustments for lunch, interest on loans, derivative transactions, and dividends.

Question

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:

GH¢200,000 was spent on staff lunch, with management stating that the staff were not affected by this payment.
Financial cost from derivative transactions amounted to GH¢20,000,000.
Financial gain from swaps arrangement was GH¢1,000,000.
Goods invoiced to a related company amounted to GH¢12,000,000, although these goods would have been sold to unrelated parties at GH¢13,130,000.

Additional information:

Interest on loans amounting to GH¢3,200,000 was added to the financial cost. 80% of the interest relates to capital work in progress, and the remainder supports working capital.
GH¢500,000 in net dividends was received from Ann Ltd, a resident company where Conti Ltd holds 24% voting power. The dividend has been added to revenue.

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?

Answer

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Tags: Corporate Income Tax, Dividend income, Expense adjustments, Financial derivatives
Level: Level 3

Topic: Business income - Corporate income tax
Series: DEC 2023

AT – Nov 2015 – L3 – Q5 – Business income – Corporate income tax

Analyzing withholding tax, taxable gifts, upstream petroleum taxation, carried interest, and mining license factors.

Question

a) Songe Enterprise Limited is a dealer in rice. It buys its rice from the Rice Masters, a wholesaler, and sells to retailers. It has not over the years deducted withholding tax on payments to its suppliers, and its management is contemplating doing so to avoid any possible sanctions from the Ghana Revenue Authority. It has received a letter from the Ghana Revenue Authority to conduct a tax audit on its activities. Ahead of the tax audit, the management has invited you as a Tax Consultant to conduct a tax health check on its operations and put things right.

Required:
Advise the company on the withholding tax situation on payment to its suppliers.
(6 marks)

b) What constitutes taxable gifts under Direct Tax?
(3 marks)

c) Should a contractor in the upstream petroleum sector be subject to tax by the Ghana Revenue Authority in a situation where its products are exported to its Parent Company without evidence of sale (technically called “export without sale”)?
(4 marks)

d) Carried interest is part of the income stream by the Host Government. What is the basis for the ownership of carried interest under petroleum upstream operations and the mining and mineral operations?
(4 marks)

e) CJA Ltd has been incorporated and intends to go into mining operations. You have been approached as a Tax Consultant on the key considerations for the issuance of a mining license.

Required:
What are the factors to be considered by the Minerals Commission before a license is recommended for issuance?
(3 marks)

Answer

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Tags: Carried Interest, Mining operations, Petroleum Operations, Taxable gifts, Withholding Tax
Level: Level 3

Topic: Business income - Corporate income tax
Series: NOV 2015

AT – Nov 2015 – L3 – Q4d – Business income – Corporate income tax

Discussing the tax implications of a bonus issue in the retained earnings of a company.

Question

The following is a statement of retained earnings:

Required:
What is the tax implication, if any, on the above income statement?

Answer

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Level: Level 3

Topic: Business income - Corporate income tax
Series: NOV 2015

AT – July 2023 – L3 – Q4 – Business income – Corporate income tax

Computing chargeable income and identifying relevant assumptions for a retail company.

Question

The following relates to the financial records of Konadu Yiadom Company Ltd submitted to the Ghana Revenue Authority for the year ended 31 December 2021. The company is into retail operations.

Notes:

The sales figure includes GH¢21,500 from the sale of old shop fittings which were replaced by new fittings during the year. The profit on the sale of the shop fittings was GH¢3,770.
Following completion of the accounts, the accountant received an invoice dated 14 December 2021 in respect of goods for resale, which were delivered in late December. This invoice was not recorded, and you have been informed that the total amount on the invoice, including VAT, was GH¢15,110. VAT included on the invoice was GH¢440. All levies are inclusive.
In June 2021, the company recognized the need to offer a special after-sales service to its customers. The company hired a new staff member and purchased a machine costing GH¢3,500 for the purpose. The local district assembly provided a grant to aid the purchase of the machine to the tune of GH¢1,250. The company included the cost of the machine in the purchases figure.
Staff cost is the total wages and salaries paid to the staff. GH¢37,000 was paid to fresh graduates employed during the year. They constitute 4% of the total workforce for the year 2021.
Promotion and Advertising is made up of:
- Managing Director’s wedding reception: GH¢2,800
- Refreshment during the opening of a new shop: GH¢5,000
- Sample product to invited guests during the opening of the new shop: GH¢3,510
Interest and Bank Payments are made up of:
- Interest on loan used to purchase stock for the business: GH¢3,020
- Overdraft interest on the business account: GH¢7,100
Legal Fees are made up of:
- Court fine resulting from traffic accident: GH¢3,950
- Defense of company driver for careless driving: GH¢3,830
- Litigation on business plot of land (90% chance of success): GH¢5,130
Bad Debts are made up of:
- Debt collection (Pursuing bad debts): GH¢455
- Decrease in general bad debts provision: (GH¢1,250)
- Increase in specific bad debts provision: GH¢1,800
Motor Expenses are made up of:
- Lease of a delivery van: GH¢11,500
- Van running expenses: GH¢6,910
Sundry Expenses are made up of:

Trade subscriptions: GH¢16,000
Support to elect a local Assembly Member: GH¢8,000
Provision for replacement of windows in the office: GH¢4,000
Gifts to customers during Christmas: GH¢6,000
Customer’s claim on defective goods: GH¢27,240
Provision for staff redundancy cost: GH¢25,000
Cost of investigating cash fraud: GH¢5,600
Investigation to acquire a new company: GH¢22,000

Additional Information:
The Ghana Revenue Authority has assessed and granted capital allowance of GH¢57,000 for the 2021 year of assessment.

Required:
You are required to compute the chargeable income for Konadu Yiadom Company Ltd for the 2021 year of assessment. Indicate clearly all necessary assumptions.

Answer

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Level: Level 3

Topic: Business income - Corporate income tax
Series: JULY 2023

AT – Nov 2015 – L3 – Q4a – Business income – Corporate income tax

Calculating taxes payable under ad valorem and specific tax rate methods for imported television sets.

Question

The Government intends to drastically discourage the importation of television sets and rather create local demands for Osafo Electronics as part of efforts to “Grow Made in Ghana products.”

The following data is relevant:
4,000 pieces of television sets at a cost of GHS2,200.00 per one were imported in March 2015 from USA by Kamus Enterprise. The cost of freight was GHS100 per television set via KLM Airline.

Additional information:

Rate of duty: 20%
Specific rate of duty: GHS80 per television set

Required:

i. Using the above, compute the taxes payable under both the ad valorem and specific methods.
(6 marks)

ii. Advise the government on which method would help achieve its intended action and why.
(2 marks)

Answer

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Tags: Ad Valorem tax, Government tax policy, Import duty, Specific tax rate, VAT
Level: Level 3

Topic: Business income - Corporate income tax
Series: NOV 2015

AT – Nov 2017 – L3 – Q5b – Business income – Corporate income tax

Computing loss to be carried forward and discussing dividend tax treatment.

Question

Kofas Ltd is a mining company incorporated in Ghana. In the 2016 year of assessment, the company furnished the Ghana Revenue Authority with the following:

Item	GH¢
Revenue	10,000,000
Cost	2,500,000
Gross Profit	7,500,000
Operating expenses	8,100,000
Net Profit	(600,000)

Additional Information:

Foopo Ltd paid a dividend of GH¢50,000 to Kofas Ltd, which was included in the revenue. Kofas Ltd holds 25% of the shares in Foopo Ltd.
The operating expenses of GH¢8,100,000 include the following:
- Filing penalties: GH¢1,000
- Capital work in progress: GH¢200,000
- Depreciation: GH¢100,000
It was agreed with the Ghana Revenue Authority that the capital allowance for the 2016 year of assessment would be GH¢300,000. This allowance is yet to be factored into the computation.

Required:
i) Compute the loss to be carried forward. (5 marks)
ii) Comment on the tax treatment of the dividend paid by Foopo Ltd. (2 marks)
iii) How is unrelieved loss in the mining sector treated? (1 mark)
iv) Under what circumstances will a dividend from petroleum operations be paid to the Government of Ghana? (2 marks)

Answer

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Tags: Dividend, Loss carry forward, Petroleum Tax, Tax
Level: Level 3

Topic: Business income - Corporate income tax
Series: NOV 2017

AT – Nov 2015 – L3 – Q3c – Business income – Corporate income tax

Explanation of the tax implication of a land gifted under a will.

Question

Kwame Patapaa has written in his Will that a parcel of land located in Kasoa should be given to his friend Adongo Muda upon his death in his Will. He is, however, not sure of the tax implication of this transaction and has approached you for assistance in this direction.

Required:
Detail out your response to this question.

Answer

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Tags: Gift tax, Land, Tax Exemptions, Wills
Level: Level 3

Topic: Business income - Corporate income tax
Series: NOV 2015

AT – Nov 2015 – L3 – Q2b – Business income – Corporate income tax

Determining the tax treatment of payments to part-time lecturers, facilitators, and experts engaged by a training and research center.

Question

A globally recognized Training and Research Centre on peacekeeping and peace support operations in Ghana has engaged you as a tax consultant to provide tax opinion on how the following transactions should be treated:

i. The Centre engages part-time lecturers on its Master’s Programmes which are run on a modular basis and run for a one-year period. Payments for the fees of these lecturers are based on the number of hours done.
(2 marks)

ii. The Centre engages facilitators who are to teach and direct the flow of class for courses that run for a short period. Payments for their services are based on hourly/daily work done.
(2 marks)

iii. The Centre engages experts/consultants to assist in developing new courses or review existing courses being run by the centre or undertake any other assignment as and when required by the Centre. Payment to this category of persons is also dependent on the duration of the task and based on man-days.
(2 marks)

Answer

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Tags: Contract for Service, Experts, Facilitators, Part-time lecturers, Withholding Tax
Level: Level 3

Topic: Business income - Corporate income tax
Series: NOV 2015

AT – Nov 2017 – L3 – Q3c – Business income – Corporate income tax

Identifying tax exposure on transfer from income surplus to stated capital.

Question

In order to increase its stated capital, XYZ Ltd transferred an amount from its income surplus account. As a tax advisor, identify the types of taxes XYZ Ltd is exposed to on the above arrangement.

(4 marks)

Answer

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Tags: Corporate Tax, Dividend tax, Stamp Duty
Level: Level 3