Topic: Income Tax Liabilities

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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.

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 – 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 – April 2022 – L2 – Q3a – Income Tax Liabilities

Explain the tax treatment for overtime allowance and bonus payments in Ghana.

Question

a) Explain the tax treatment for Overtime Allowance Payment and Bonus Payment.
(6 marks)

Answer

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Tags: Bonus payment, Employee Benefits, Income Tax, Overtime payment, Taxation

Topic: Income Tax Liabilities
Series: APR 2022

PT – April 2022 – L2 – Q3b(i & ii) – Income Tax Liabilities

Compute the tax liability on overtime allowances for Maame Agyeiwaa for January and February 2021.

Question

b) Maame Agyeiwaa is a junior staff member of KayDee Ltd. Her monthly basic salary is GH¢800. She was paid an overtime allowance totalling GH¢100 during the month of January 2021. In February 2021, Maame Agyeiwaa was paid overtime allowance totalling GH¢500.

Required:
i) Compute her tax liability on the overtime allowance for the month of January 2021.
(2 marks)

ii) Compute her tax liability on the overtime allowance payments for the month of February 2021.
(3 marks)

Answer

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Tags: Employment Income, Income Tax, Overtime payment, Tax computation

Topic: Income Tax Liabilities, Taxation of Overtime
Series: APR 2022

PT – April 2022 – L2 – Q3c – Income Tax Liabilities

Determine the tax implication of overtime allowance paid to Bawa in February 2021.

Question

c) Bawa is a junior staff member of Blinks Ltd. Her monthly basic salary is GH¢2,000. She was paid an overtime allowance totalling GH¢500 during the month of February 2021.

Required:
What is the tax implication of the overtime allowance paid?
(3 marks)

Answer

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Tags: Employee Benefits, Income Tax, Overtime payment, Taxation of income

Topic: Employment Income, Income Tax Liabilities, Taxation of Overtime
Series: APR 2022

PT – April 2022 – L2 – Q3e – Income Tax Liabilities

Calculate the tax liability on Bisa's bonus income for 2021

Question

Bisa works with Kaydei Ltd and earns an annual basic salary of GH¢140,000. He was paid a bonus of GH¢45,000 in 2021.

Required:
Determine the tax liability on the bonus.
(3 marks)

Answer

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Tags: Bonus payment, Employment Income, Individual Taxation, Tax Calculation

Topic: Income Tax Liabilities, Tax Administration
Series: APR 2022

PT – April 2022 – L2 – Q5c – Income Tax Liabilities

Explain how gifts received by individuals in relation to employment, business, or investment are taxed.

Question

Gift means a receipt without consideration or for inadequate consideration.

Answer

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Tags: Business income, Employment Income, Income Tax, Taxation of Gifts

Topic: Income Tax Liabilities, Taxation of Gifts
Series: APR 2022

PT – April 2022 – L2 – Q2d – Pension Entitlement Calculation

Compute the monthly pension entitlement of Mrs. Akoto based on her salary and months of contribution.

Question

d) Mrs. Akoto has been engaged by Madane Ltd as the Marketing Manager for 30 years on an annual salary of GH¢20,000.
The following information relates to Mrs. Akoto:
i) Throughout her working life, she earned her best salaries from Madane Ltd.
ii) She has 408 months’ contribution to her credit.
iii) She retired on 31 March 2020 at the age of 60.

Required:
Compute her monthly pension entitlement.
(5 marks)

Answer

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Tags: Pension calculation, Pension entitlement, Pension Right, Retirement

Topic: Income Tax Liabilities, Pension Calculation
Series: APR 2022

PT – Nov 2023 – L2 – Q1b – Income Tax Liabilities

Compute tax payable for resident and non-resident individuals for the 2022 year of assessment.

Question

The information below relates to individuals who earned income in the 2022 year of assessment:
Resident individuals:
Mr. Agandi and Mr. Yonny are resident employees in Ghana. The chargeable income earned per annum by Mr. Agandi and Mr. Yonny amounts to GH¢300,000 and GH¢650,000 respectively.

Non-Resident individuals:
Mrs. Zindana and Mrs. Maleda are non-resident individuals. Mrs. Zindana and Mrs. Maleda have earned chargeable incomes to the tune of GH¢300,000 and GH¢650,000 per annum respectively.

Required:
Compute their respective taxes payable for the 2022 year of assessment.

Answer

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Tags: Income Tax, Non-Resident Individuals, Resident Individuals, Tax computation
Level: Level 2

Topic: Income Tax Liabilities
Series: NOV 2023

PT – Nov2019 – L2 – Q3d – Tax Administration

This question asks to identify the key features of the Vehicle Income Tax Stickers (VITS) tax system.

Question

In 2003, the Vehicle Income Tax Stickers (VITS) was introduced by way of LI 1727 and amended by Income Tax Regulations, 2016 (LI 2244).

Required:
Identify the key features of the VITS tax system.
(6 marks)

Answer

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Tags: Income Tax Regulations, Vehicle Income Tax, VITS
Level: Level 2

Topic: Income Tax Liabilities
Series: NOV 2019

PT – Aug 2022 – L2 – Q3a – Income Tax Liabilities

Determine the total tax liability for an employee's bonus and salary in 2019.

Question

Yamutu was employed by Yazo Company Ltd on 1 June 2016 with an annual basic salary of GH¢400,000. She was paid a bonus of GH¢240,000 in 2019.
Required:
Determine the tax on bonus and total tax liability of Yamutu in 2019.

Answer

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Tags: Bonus Taxation, Employee Income, Income Tax, Salary Calculation
Level: Level 2

Topic: Income Tax Liabilities
Series: AUG 2022

PT – Dec 2023 – L2 – Q2c – Income Tax Liabilities

Compute pension benefit and monthly pension pay based on provided salary and pension contributions.

Question

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)

Answer

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Tags: Ghana tax laws, National Pension Act, Pension benefits, Pension Computation, Retirement
Level: Level 2

Topic: Income Tax Liabilities
Series: DEC 2023

PT – Aug 2022 – L2 – Q1c – Income Tax Liabilities

Calculate interest for underestimation of tax for Vito Ltd for the 2019 year of assessment.

Question

The estimated chargeable income for Vito Ltd for the 2019 year of assessment was GH¢50,000,000, but its actual chargeable income declared at the end of the year was GH¢80,000,000. The company prepares accounts to 31 December each year. The company submitted its returns on 30 April, 2020. The BOG prevailing discount rate is 25%.

Required:
Calculate the interest for underestimation of tax.

Answer

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Tags: chargeable income, Income Tax, Interest calculation, Underestimation of Tax
Level: Level 2

Topic: Income Tax Liabilities
Series: AUG 2022

PT – Nov 2021 – L2 – Q3 – Income Tax Liabilities

Calculate Agyeiwaa Grace’s taxable income for the 2020 year of assessment and explain gains and profits from employment.

Question

Agyeiwaa Grace (Agyeiwaa), aged 56, is a foreign languages teacher at Mountaintop School, a private boarding school in Koforidua. Agyeiwaa has been in the teaching profession for the past 30 years. On 1 January 2020, the school promoted Agyeiwaa to head the languages department, which is a management position. She could also be subcontracted to other schools, institutions, and foreign language associations to assist their teachers and candidates during her free time. Agyeiwaa also holds a contract with the Ministry of Foreign Affairs and Regional Integration as an interpreter on a consultancy services basis.
On 5 January 2020, Agyeiwaa entered into a consultancy agreement with the Ministry of Education to translate some local textbooks. The project is for three years ending on 31 December 2022. Payment is only effected on completion of the translation of the textbooks, and the agreed amount is GH¢30,000 per translated textbook.

Details of Agyeiwaa’s income for the year ended 31 December 2020 are as follows:

Employment income and benefits
i) Agyeiwaa receives a gross monthly salary of GH¢4,000 and an annual bonus of GH¢12,000, payable in December.
ii) Responsibility allowance of GH¢6,960 per annum.
iii) Agyeiwaa makes use of a fully furnished house in the school’s staff residential area. The school deducts a monthly rent of GH¢100 from Agyeiwaa’s salary.
iv) Upon Agyeiwaa’s appointment as the languages department head, the school provided her with a new motor vehicle with fuel for her official use.
v) Agyeiwaa contributes 2.5% of her monthly salary to a registered pension fund. The school contributes 2.5% to a provident fund on behalf of Agyeiwaa.
vi) The school deducts her statutory social security contributions at source.
vii) Agyeiwaa received a total of GH¢12,000 inconvenience allowances from the Mountaintop School during the year.
viii) The school deducts the following amounts monthly from Agyeiwaa’s salary upon her instruction and pays the appropriate amounts to the institutions concerned:

Subscriptions to the Ghana National Association of Teachers: GH¢15
Life insurance policy to Royal Life Insurance Services: GH¢50

Other non-employment income
i) Agyeiwaa successfully translated four textbooks under the terms of her contract with the Ministry of Education during 2020.
ii) Agyeiwaa’s bank account was credited with a total of GH¢15,000, representing rental income collected by an estate agent regarding residential property owned by Agyeiwaa in Kumasi.
iii) Agyeiwaa services amounted to a gross of GH¢30,000 for her subcontract work with other schools and foreign language associations. Agyeiwaa paid Mountaintop School 10% of this amount under the terms of a standing arrangement for the use of the school’s resources.
iv) The Ministry of Foreign Affairs and Regional Integration paid Agyeiwaa GH¢9,250 net for her services as an interpreter during the year.

Required:
a) Calculate Agyeiwaa’s taxable income for the 2020 year of assessment. (14 marks)
b) Explain FOUR (4) possible individual gains and profits from an employment for a year of assessment. (6 marks

Answer

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Tags: Consultancy Income, Employment Income, Individual Taxation, Tax computation, Taxable Income
Level: Level 2

Topic: Income Tax Liabilities
Series: NOV 2021

PT – Nov 2021 – L2 – Q1a – Income Tax Liabilities

Assess the tax payable on a capital transfer from retained earnings to stated capital based on the details provided.

Question

Kawukudi Ltd intends to increase its capital requirement. Therefore, it applied to the Registrar General with the following:

Retained Earnings Account (GHȼ)

Balance b/fwd: 100,000
Transfer from income statement: 1,200,000
Transfer to stated capital: (600,000)
Balance c/fwd: 700,000

Required:
Assess with explanation the tax payable under this circumstance.

Answer

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Tags: Capital Transfers, Deemed Dividend, Ghana tax law, Retained Earnings, Tax computation
Level: Level 2

Topic: Income Tax Liabilities
Series: NOV 2021

PT – Nov 2020 – L2 – Q3 – Income Tax Liabilities

Compute the assessable income for partners, explain the taxation rules for different workers, and define resident individual for tax purposes.

Question

Shika, Bekwai, and Sena, who are in partnership, have agreed to share profits and losses in the ratio of 2:2:3, respectively. During the year ended 31 December 2018, their books showed an adjusted profit of GH¢210,000 after accounting for the following:

	Shika	Bekwai	Sena
Salaries	70,000	80,000	150,000
Interest on Capital	12,000	16,000	12,000
Partners’ Drawings	6,000	4,000	10,000

You are given the following additional information:
i) Shika is married with two children who are in school and maintained two dependent relatives, who are more than 60 years, on which she spends GH¢10,000 annually.
ii) Shika also has a life assurance policy on herself attracting capital sum of GH¢1,600,000 but pays annual premium of GH¢1,800.
iii) Bekwai took a mortgage for his building and has been paying GH¢4,000 per month as mortgage interest.
iv) Bekwai is undertaking a two-week training program to update his knowledge on how to manage accounting software used in partnership businesses. He has spent GH¢1,500 on the training.
v) Bekwai received a television as a gift valued at GH¢3,000 for being the best worker in 2018 in Ghana.
vi) Sena is 62 years old and unmarried but has three dependent children while Bekwai is also unmarried but has one child who is schooling in Ghana.

Required:
a) Compute the assessable income for each partner for the year 2018. (10 marks)
b) The partnership business has some casual workers, temporary workers, and part-time workers. What are the taxation rules and tax liabilities of such workers? (6 marks)
c) Shika is an ‘international woman’ who travels often. There was confusion in 2018 as to whether she should be taxed as a resident or non-resident. What constitutes a resident individual for taxation purposes in Ghana? (4 marks)

Answer

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Tags: Assessable Income, Ghanaian Tax System, Partnerships, Resident and Non-Resident Tax, Workers’ Taxation
Level: Level 2

Topic: Income Tax Liabilities
Series: NOV 2020

PT – Nov 2020 – L2 – Q2e – Income Tax Liabilities

Explain the tax compliance obligations of an individual who receives taxable gifts.

Question

What are the tax compliance obligations of an individual who receives taxable gifts?

Answer

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Tags: Compliance Obligations, Income Tax, Taxable gifts, Taxation of Gifts
Level: Level 2

Topic: Income Tax Liabilities
Series: NOV 2020

PT – Mar 2024 – L2 – Q5c – Income Tax Liabilities

Explain the tax treatment of a gift received.

Question

What is the tax treatment of a gift received?

Answer

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Level: Level 2

Topic: Income Tax Liabilities
Series: MAR 2024

PT – Mar 2024 – L2 – Q4b – Income Tax Liabilities

State the differences between capital expenditure and revenue expenditure with relevant examples.

Question

With relevant examples, state the differences between capital expenditure and revenue expenditure. (5 marks)

Answer

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Tags: Allowable Deductions, Capital Expenditure, Income Tax, Revenue Expenditure
Level: Level 2

Topic: Income Tax Liabilities
Series: MAR 2024

PT – Mar 2024 – L2 – Q4a – Income Tax Liabilities

State the general and residual deduction rules governing the ascertainment of a person’s income from business and investment.

Question

With reference to the Income Tax Act, 2015 (Act 896):

i) State the general and residual deduction rules governing the ascertainment of a person’s income from business and investment. (5 marks)

Answer

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Tags: Allowable expenses, Deduction Rules, Income from Business, Income Tax Act, Investment income
Level: Level 2