- 20 Marks
POT – Mar 2025 – L2 – Q4- Partnership Taxation
Compute Nmani Pharmacy’s chargeable income for 2023.
Question
a) Three pharmacy students, Abanga, Banzey and Chambas who completed the Tamale Technical University have teamed up to undertake a business venture in the pharmaceutical sector under a Trading Name Nmani Pharmacy. They agreed to share profit and losses in the ratio 3:2:1 for Abanga, Banzey and Chambas respectively. The details provided below relate to the business financial performance for the year 2023.
| Details | GH¢ |
|---|---|
| Sales | 663,400 |
| Cost of goods sold: | |
| Opening inventory | 150,000 |
| Purchases | 300,000 |
| 450,000 | |
| Closing inventory | (120,000) |
| 330,000 | |
| Gross profit | 333,400 |
| Less expenses: | |
| Staff cost | 102,000 |
| Business promotions | 58,100 |
| Depreciation | 98,200 |
| Electricity and water | 53,000 |
| Expired drugs | 12,100 |
| Donation | 78,000 |
| Rent and rates | 15,000 |
| Sundry expenses | 50,000 |
| Vehicle running cost | 63,000 |
| (529,400) | |
| Net profit | 134,000 |
| Tax paid | (15,200) |
| Net profit after tax | 118,800 |
Additional Information:
- Staff cost includes monthly stipend allocations to the aged parents of the partners totaling GH¢18,000.
- All three Partners are taking care of their aged parents who are more than 60 years.
- Business promotions include lunch expenses of the partners amounting to GH¢21,200.
- Donations include funeral donation made during the funeral of the mother of the Vice Chancellor of the Tamale Technical University amounting to GH¢20,000.
- Sundry expenses include fine amounting to GH¢32,000 imposed by the Food and Drugs Authority for failure to remove some expired drugs from shelves.
- The Partners received Withholding Tax Certificates indicating an amount of GH¢15,200 from the Binabaani European Hospital for medical consumables supplied to the hospital.
- Capital allowance has been agreed with the Ghana Revenue Authority at GH¢104,200.
Required: i) Compute the chargeable income for Nmani Pharmacy for the 2023 Year of Assessment.
(ii) Compute the net tax payable by each partner for the year 2023.
(b) In line with the provisions of the Income Tax Act, 2015 (Act 896), partnership and limited liability companies in Ghana are taxed in accordance with their residency status in a year of assessment.
Required: State the criteria for the determination of the residency status of partnership and limited liability companies.
(c) All over the world, countries have introduced policies to guarantee income for their hard-working workforce who may go on retirement to enable them to live meaningful lives after retirement. Ghana’s pension system aims to provide personal financial security for employees in their retirement years.
Required: Describe the current pension system in Ghana.
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