Topic: International taxation

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  • 12 Marks

ATAX – May 2017 – L3 – Q4b – International Taxation

Explain the term “Tax Havens”, factors for considering them, and list five countries that are tax havens.

In the words of Benjamin Franklin, “the only things that are certain are death and taxes”. However, in some countries, taxes are not necessarily certain.

Required:
i. Explain briefly the term “Tax Havens”. (4 Marks)
ii. State THREE factors in considering whether a jurisdiction is a Tax Haven. (3 Marks)
iii. State FIVE countries that are Tax Havens. (5 Marks)

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  • 15 Marks

ATAX – Nov 2016 – L3 – Q7 – Tax Planning and Management

Summarizes key points on tax planning, tax evasion, double taxation agreements, and non-tax factors for investment.

As the Chairman of a Tax Summit in Ikeja, Lagos State, the discussion topics were:

  1. Tax Planning, an Effective Method of Tax Avoidance
  2. Tax Evasion in a Growing Economy
  3. Double Taxation – The Provisions and the Impact
  4. Jurisdiction for Investment – Non-Tax Factors

You are required to:

a) Explain briefly Tax Planning and Anti-Avoidance Legislations put in place by the Government. (3 Marks)
b) Summarize situations that may involve Tax Evasion. (4 Marks)
c) Explain Double Taxation Agreement – Provisions and the Main Objectives. (4 Marks)
d) Summarize Non-tax factors that attract investors in choosing a business jurisdiction. (4 Marks)

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  • 15 Marks

ATAX – Nov 2021 – L3 – Q6 – International Taxation

Explains BEPS, its techniques, OECD initiatives, and implications for corporate tax strategies.

At a workshop on “Base Erosion and Profit Shifting (BEPS)” organized by the Federal Ministry of Industries, a resource person explained that BEPS is a corporate tax planning strategy used by multinational corporations to “shift” profits from higher-tax jurisdictions to lower-tax jurisdictions, thereby eroding the tax base of the higher-tax jurisdictions.

One of the participants, an engineer and the General Manager of a leading manufacturing outfit based in Jos, with a head office in a European country, struggled to understand the concepts discussed. After seeking clarification from other participants without success, he approached you as the company’s Tax Manager to explain BEPS and whether it would be beneficial for the company (in collaboration with the head office) to engage in such practices.

Required:

As the company’s Tax Manager, you are to draft a paper addressing the General Manager’s concerns, covering the following:

a. Distinction between base erosion and profit shifting. (3 Marks)
b. Techniques of base erosion and profit shifting. (4 Marks)
c. The six key action initiatives of the Organisation for Economic Co-operation and Development (OECD) against base erosion and profit shifting. (6 Marks)
d. The implications of engaging in base erosion and profit shifting. (2 Marks)

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  • 15 Marks

ATAX – Nov 2021 – L3 – Q5 – International Taxation

Discusses the conditions for significant economic presence and the tax implications for TWITTY Incorporation.

The rapid growth in information and communication technology in Nigeria has brought with it boundless opportunities and changes in the way business activities are conducted. A significant number of transactions in Nigeria, in recent times, are consummated using mobile devices and online payments. In the same vein, the online platforms (mostly operated by international private entities) are perceived by various governments in developing countries (Nigeria inclusive) as undermining the economic interests of their host countries through non-payment of taxes, despite their significant economic presence.

In light of the above, the Finance Act 2019 provides for the treatment of digital and other service providers concerning the significant economic presence of a foreign entity. This provision was followed up with the issuance of Companies Income Tax (Significant Economic Presence) Order 2020 by the Federal Government of Nigeria.

You have been contacted by a foreign online outfit with interest in mobile networking and consultancy, TWITTY Incorporation, California, USA, through its official partner in Nigeria, MAAbioro Partners, to explain issues on the significant economic presence of a foreign entity, deemed to be operating in Nigeria.

Required:

As a tax consultant to TWITTY Incorporation, draft a report explaining the following areas:

a. The objectives of the relevant provisions of Finance Act 2019 and Companies Income Tax (Significant Economic Presence) Order 2020 concerning the significant economic presence of a foreign entity. (3 Marks)
b. Conditions for the determination of significant economic presence for digital activities. (5 Marks)
c. Determination of significant economic presence for technical and consultancy services. (2 Marks)
d. Activities exempted from significant economic presence in Nigeria. (3 Marks)
e. The tax implications of the Order 2020 on the activities of TWITTY Incorporation. (2 Marks)

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  • 20 Marks

ATAX – Nov 2020 – Q5 – International Taxation

Explain issues regarding tax havens, including key factors and competitive strategies.

Tax haven is a state, country, or territory where certain taxes are levied at a low rate or not at all. This has created problems for other countries as their products and services are no longer competitive in international markets. However, various international organizations, governments, and other stakeholders are still handicapped in mitigating or totally eliminating this malaise that is threatening the competitive global market.

You have been invited by a manufacturing outfit to help explain certain issues regarding tax haven in practice.

Required:
a. From the perspective of the Organisation for Economic Co-operation and Development (OECD), explain THREE key factors in deciding whether a jurisdiction is a tax haven or not. (6 Marks)
b. How can a country use its tax jurisdiction to address the issue of competition from a tax haven? (5 Marks)
c. Explain the advantages of and provide the criticisms against tax haven. (9 Marks)

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  • 20 Marks

ATAX – Nov 2020 – Q3 – International Taxation

Provide a report on regional economic integration and trade blocs for Larry Limited’s international market entry.

Larry Limited, Lagos, is a manufacturing company that has been producing household utensils successfully for several years. The company is planning to enter the international market but the management team has little or no information in respect of regional economic integration and trade blocs around the world. The Managing Director of the company has just engaged your professional accounting firm to provide advice on some salient issues in this respect.

Required:
As the Desk Officer in charge of international tax matters in the professional accounting firm, you are to present a report to your principal partner, for his review before sending it to the firm‘s client. Your report should cover the following areas:
a. Distinction between regional economic integration and trade blocs. (4 Marks)
b. Objectives of regional integration. (5 Marks)
c. Benefits of regional economic integration and trade blocs. (4 Marks)
d. Disadvantages of regional economic integration and trade blocs. (3 Marks)
e. Common market and economic union as major types of regional economic integration. (4 Marks)

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  • 5 Marks

ATAX – Nov 2018 – L3 – Q3b – International Taxation

Permanent Establishment (PE) under the Nigeria-UK Double Taxation Agreement

b) Double taxation agreements exist among Nigeria and some foreign countries.

Required:
Explain the term “Permanent Establishment” as contained in the double taxation agreement between Nigeria and the United Kingdom.
(5 Marks)

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  • 15 Marks

ATAX – Nov 2018 – L3 – Q3a – International Taxation

Tax implications for Sadiq Corporation's contracts executed by its Nigerian subsidiary, including PE under Nigeria-UK tax agreement.

(a) Sadiq Corporation was incorporated in Sweden as a limited liability company and has a subsidiary, Omologede Ventures Nigeria Limited located in Akure, Nigeria. Peniel Nigeria Plc awarded a contract to Sadiq Corporation to renovate a rice milling factory in Gboko, Benue State, and another in Abakaliki, Ebonyi State. The contract value for the Gboko factory is $11,064,150, and $7,337,616 for the Abakaliki factory. Sadiq Corporation later sub-contracted the two jobs to its subsidiary in Nigeria. The renovation is expected to be completed within six months.

The following information was submitted to the Federal Inland Revenue Service by Omologede Ventures Nigeria Limited for the year ended December 31, 2017:

Description Amount (N)
Direct materials 962,100,000
Scaffolding 183,538,320
Administrative expenses on hired professionals 33,352,800
Rentals on equipment 18,708,248
Maintenance of equipment 7,431,688
Personnel card (domestic) 28,803,029
Personnel cost (foreign) 14,738,250
Fees to engineers 11,298,689
Other operational costs 6,512,070

Additional Information:

  1. Capital allowance agreed by Omologede Ventures Nigeria Limited with the Federal Inland Revenue Service for the year was N104,418,744.
  2. 60% of the total contract sum was made available to Omologede Ventures Nigeria Limited.
  3. Depreciation is N69,902,092.
  4. 70% of the total contract sum was paid at the beginning of the job, while the balance was paid in September of the same year.
  5. The exchange rate at the time of signing the contract was N180 to $1. The rate changed in August of the same year to N195 to $1.

Withholding tax provisions were fully complied with by the two companies, and the tax remitted to the relevant tax authority as and when due.

Required:
As the local consultancy firm in Nigeria, provide advice to the management of the two companies on the tax implications of the contracts for the relevant year of assessment, clearly showing their tax liabilities (if any).
(15 Marks)

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  • 5 Marks

TAX – Nov 2015 – L2 – Q4a – International Taxation

This question explains the tax treatment of income earned by a non-resident individual who has spent time in Nigeria.

Mr. Alexis Sanchez was employed by Zenon Ltd as Director Commercial, West and Central Africa with effect from 1 March 2011. He entered Nigeria on the date his employment became effective and remained in Nigeria till 25 August 2011. He returned to Nigeria on 15 January 2012, and remained in Nigeria till 31 July 2012.

Required:
Explain the basis for the taxation of income earned by Mr. Alexis Sanchez in Nigeria for the relevant tax years.

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  • 10 Marks

AT – Nov 2018 – L3 – Q3a – Permanent establishment, International taxation

Tax policy implications on the establishment of a permanent entity, finance lease acquisitions, and dividend policies by a foreign company.

The management of Smith Plc, a UK-based company, is considering the possibility of launching its presence in Ghana and it is not sure of the tax implication of the following under the tax laws of Ghana:

i) It is considering making its presence through incorporation in Ghana or creating an external company that is a Permanent Establishment (Branch) instead.
ii) It intends to acquire all its non-current assets through finance lease as against buying the assets outright when it makes its presence in Ghana.
iii) It intends to bring some staff from the United Kingdom to work in Ghana who will be paid half salary in Ghana and the other half paid directly to their accounts in the United Kingdom as against paying their full salary in Ghana.
iv) Management intends to acquire shares in many companies in Ghana as part of efforts to create value for shareholders through dividend receipts as against granting loans to interested companies in Ghana if it is unable to make its presence in Ghana.

Required:
Evaluate the above policy interventions and advise on the tax implication of each to enable the management of Smith Plc to make a decision.

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  • 2 Marks

TX – May 2019 – L3 – Q2b – Anti-avoidance measures

Identify conditions for tax exemption for individuals employed in public service by foreign governments in Ghana.

Section 7(m) of the Income Tax Act, 2015 (Act 896) as amended indicates that “the income of an individual from employment in the public service of the government of a foreign country in Ghana is exempt from tax.”

Required:

Identify FOUR (4) conditions for granting such an exemption.
(2 marks)

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  • 20 Marks

AT – April 2022 – L3 – Q3 – International taxation | Tax planning

Analyze tax implications for Jones Addoteye and Maame Abrefa's company Addofa Ltd, including working time sharing, export activities, and tax planning opportunities.

Jones Addoteye is a Ghanaian Citizen by birth but has also acquired a British Citizenship. He has lived in Britain for several years and relocated to Ghana in January 2015. He decided to invest his life-long savings in Ghana by incorporating a company limited by shares with his wife, Maame Abrefa who also happens to be a Ghanaian/British. Jones and his wife are the only shareholders of the company called Addofa Ltd which was registered with the Registrar Generals Department in January 2016.

Jones and his wife Maame Abrefa continue to maintain links with Britain even though they have relocated to Ghana. This is because they still have some economic interest in Britain. In view of this, they decided to share their working time in both Ghana and Britain following an advice from a Junior Tax Consultant of one of the Ghanaian Tax Firms. The junior tax consultant informed them they will be tax efficient if they share their working time.

Part of their object for setting up Addofa Ltd was to produce poultry for sale to the Ghanaian market in the first few years and later export the poultry products to other countries. It is also part of Addofa Ltd’s growth strategies that after five (5) years, it will process and package the poultry in an edible manner for export to other African markets. This poultry processing business will be carried out in a new company which they intend to set up. Both companies will be located at Cape Coast, the Central Regional Capital. Business for Addofa Ltd is expected to grow significantly in 2021.

Addofa Ltd also invested 37% equity in another Ghanaian company from which they received dividend of GH¢50,000 in 2018.

Mr. Jones Addoteye intimated to you that even though he had some initial advice, he was still not sure if his wife and himself were making optimal tax decisions for themselves and for the company. He has therefore approached you as an experienced Tax Consultant for advice. They wish to take advantage of the beneficial provisions of the Income Tax Laws to arrange their personal and company affairs to be tax efficient.

Required:

a) Evaluate the tax implications on Jones Addotey and Maame Abrefa sharing their working time between Ghana and Britain. (8 marks)

b) Explain the tax implications available to Addofa Ltd if it goes into export or sell in the local market. (4 marks)

c) Explain the tax planning opportunities available to the new company to be set up. (4 marks)

d) Discuss the tax compliance obligations for Addofa Ltd at the time of commencement of operations in Ghana. (4 marks)

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  • 5 Marks

TF – May 2018 – L3 – Q3c – Business income – Corporate income tax

Discuss five benefits of the Double Taxation Agreement between Ghana and Mauritius.

The Government of Ghana recently signed a Double Taxation Avoidance agreement (DTA) with the government of Mauritius at Port Louis, Mauritius.

Speaking at a joint press conference after the signing ceremony, Ghana’s Vice President, Alhaji Dr. Bawumia, said:
“We have seen the manifestation of the first fruits of this Joint Permanent Commission with the signing of the historic double taxation agreement between Ghana and Mauritius, …, and we believe this is just the beginning of our cooperation.”

Required:
Discuss FIVE benefits likely to result from the Double Taxation Agreement.
(5 marks)

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  • 4 Marks

TF – May 2018 – L3 – Q4a – Permanent establishment

Discuss how a non-resident person is taxed in Ghana with and without a permanent establishment.

Tax administration allows for cross-border transactions. To this end, entities conduct businesses across countries as a way of increasing their competitiveness and international appeal and consequently their profits.

Required:
Discuss how a non-resident person would be taxed in Ghana if they:
i) Have a permanent establishment.
ii) Do not have a permanent establishment.
(4 marks)

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  • 5 Marks

TF – May 2018 – L3 – Q5c – Tax administration in Ghana

Explanation of duty drawback and its types as a tax incentive for exporters.

What constitutes “Duty Drawback” and what are the types of “Duty Drawbacks” in customs administration?

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  • 5 Marks

TF – May 2018 – L3 – Q5d – International taxation

Explanation of arm's length price and its effect on tax revenue.

The Transfer Pricing Unit of the Ghana Revenue Authority frowns upon any transaction between controlled persons that is not conducted at arm’s length.

Required:
What is arm’s length price and its effect on tax revenue?

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  • 8 Marks

AT – April 2022 – L3 – Q1c – International taxation

Calculate chargeable income, tax payable, and foreign tax credit for Lawaaba Guo.

Lawaaba Guo is a Ghanaian born in Nigeria and has lived all his life there. He got an opportunity to relocate to Ghana and took up an appointment as a lecturer in one of the prestigious universities within the first three months of his arrival in Ghana in 2018.

He took up employment with ABB Ltd as a procurement officer. The following relates to his employment details for 2020 year of assessment:

  • Salary: GH¢200,000
  • Commission from employers: GH¢10,000
  • Interest on savings from a Bank in Ghana (Gross): GH¢1,000

His investment income and other returns received from Nigeria are as follows:

  • Dividend of US$ 12,000 net of tax. Tax of US$ 1,000 was paid.
  • Rental Income of USD 6,000 gross with tax at the rate of 10%.
  • On-line consultancy fee USD 20,000 net of tax. Tax of USD1,500 was paid.

Additional information:

  • He is married.
  • Children (2): both schooling in Nigeria.
  • Contributes to Social Security at 5.5%.
  • Exchange Rate USD1 = GH¢5.2.

Required:
Determine the following:
i) Chargeable Income
ii) Tax Payable
iii) Amount of foreign credit relief granted

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  • 9 Marks

AT – May 2021 – L3 – Q3a – International Taxation

Explain how foreigners should participate in business activities in Ghana under the GIPC Act, 2013 (Act 865).

Ghana Investment Promotion Centre (GIPC) is a governmental agency established to promote, co-ordinate, and facilitate investment in Ghana. In its efforts at promoting both local and foreign investments in Ghana, it has mounted a series of lectures to drum home this fact and has done so well over the years in this regard.

Required:
In line with the GIPC Act, 2013 (Act 865), how should foreigners participate in business activities in Ghana?

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  • 4 Marks

AT – May 2021 – L3 – Q2d – International Taxation

Compute the tax payable for Ganigani Ltd considering foreign income and relinquished tax credit.

Ganigani Ltd is a company based in Ghana and has a business dealing mainly in Nigeria. In the 2020 year of assessment, the following data is relevant to parts of its operation:

  • Global income: GH¢25,000,000
  • Tax paid in Nigeria: ₦1,000,000
  • Exchange rate: GH¢1 = ₦67.59

Ganigani Ltd elects to relinquish a foreign tax credit for the year in line with section 112 of the Income Tax Act, 2015 (Act 896) as amended.

Required:
Compute the tax payable.

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  • 8 Marks

AT – May 2021 – L3 – Q1c – International Taxation | Business Income – Corporate Income Tax

Compute the tax payable by Kaeka Ltd considering both foreign and domestic income.

Kaeka Ltd is a resident company providing cleaning services in Ghana. For the first time in the history of the entity, it launched operations as an external company in January 2020 in Lusaka, Zambia. It came to light that the entity earned the equivalent of GH¢2,500,000, which was evenly made for the 2020 year of assessment. On the home front, it earned GH¢16,000,000 in the 2020 year of assessment as income in Ghana. Assume that allowable costs of GH¢12,000,000 were incurred. It received a dividend net of tax from a company in Israel it acquired shares from, amounting to GH¢20,000 in December 2020. Tax of GH¢5,000 was paid on the dividend received.

Required:
i) Compute the tax payable by Kaeka Ltd.
ii) Explain the tax implication if the company made the income from Zambia in the last quarter of 2020.

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