Topic: Tax administration in Ghana

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AT – Nov 2024 – L3 – Q5a – Transfer Pricing Documentation and Compliance

Explain the required transfer pricing documentation and exemptions under Ghana’s Transfer Pricing Regulations, 2020 (L.I. 2412).

Question

You are a Senior Transfer Pricing Associate of Fameye and Associates. You have received the following email from a former client, Asew LTD, who has received a Transfer Pricing audit assessment from the Ghana Revenue Authority (GRA) for the 2021, 2022, and 2023 years of assessment.

Subject: Transfer Pricing Compliance Assistance

Hello Team,

I came to the office today and received a letter from the GRA regarding a tax assessment on transfer pricing issues. According to the letter, our company owes the GRA some penalties for non-compliance with the transfer pricing regulations. I am confused as to what our compliance obligations are. I would need your assistance on how we can comply with the transfer pricing laws of Ghana.

I hope to hear from you soon.

Kind regards,

Nii Armaah
Managing Director, Asew LTD

Required:

In line with the provisions of the Transfer Pricing Regulations, 2020 (L.I. 2412), draft a response for the review of your Tax Partner, covering the following:

(i) The required transfer pricing documentation that must be maintained by companies in Ghana under the three-tier transfer pricing documentation requirements, including the time by which these must be filed with the GRA, where applicable. (ii) TWO conditions or circumstances under which a company may be exempted from compliance with any of the above documentation requirements.

Answer

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Tags: Documentation, Ghana Revenue Authority, Multinational Entities, Tax Compliance, Tax Regulations, Transfer Pricing
Level: Level 3

Topic: Tax administration in Ghana
Series: Nov 2024

AT – Nov 2024 – L3 – Q4b – Crowding Out Effect in Fiscal Policy

Explain the concept of ‘Crowding Out’ in fiscal policy, using relevant examples.

Question

Expansionary Fiscal Policy has been criticised on the grounds that it can lead to ‘Crowding Out’.

Required:

Explain with appropriate examples what is meant by ‘Crowding Out’ as used under Fiscal Policy.

Answer

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Tags: Crowding Out, Economic growth, Fiscal Policy, Government Spending, Private Sector, Public Finance
Level: Level 3

Topic: Fiscal Policy, Tax administration in Ghana
Series: Nov 2024

AT – Nov 2024 – L3 – Q4a – Value Added Tax Deductibility

Determine the deductible input VAT for a VAT-registered company operating multiple business divisions under different VAT treatments.

Question

The two scenarios below relate to ClearTel LTD, a VAT-registered company in Ghana. Each scenario is an independent scenario and should be considered separately.

Scenario 1

ClearTel LTD operates three divisions (XYZ). Division X deals in the sale of computers and mobile phones. Division Y deals in the sale of locally-manufactured sanitary towels. Division Z is into the supply of fertilizers to farmers in Ghana.

Revenue from each division for 2024 is shown below:

Division	Description	Revenue (GH¢)
X	Computers and mobile phones	1,005,700
Y	Sale of locally-manufactured sanitary towels	2,500,000
Z	Supply of fertilizers to farmers	78,800,000

ClearTel LTD has incurred total input VAT of GH¢50,500,000, and the Finance Manager of the company is unable to determine specifically which division of the business this input VAT amount relates to.

Required:

Determine the amount of input VAT ClearTel LTD can deduct, in line with the provisions of the Value Added Tax Act, 2013 (Act 870 as amended). Justify your answer

Answer

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Tags: Deductibility, Exempt supplies, Input Tax, Mixed Taxation, VAT, Zero-rated supplies
Level: Level 3

Topic: Tax administration in Ghana, Value-Added Tax (VAT)
Series: Nov 2024

AT – Nov 2024 – L3 – Q3b – Prohibitions on Representation and Tax Advice

Explain the prohibitions on representation and tax advice in relation to tax consultants under the Revenue Administration Act, 2016 (Act 915).

Question

With reference to the Revenue Administration Act, 2016 (Act 915), what constitutes prohibitions on representation and tax advice in relation to tax consultants?

Answer

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Tags: ICAG Regulations, Legal Framework, Revenue Administration Act, Tax advice, Tax Compliance, Tax Consultants, Tax Representation
Level: Level 3

Topic: Tax administration in Ghana
Series: Nov 2024

AT – Nov 2024 – L3 – Q3a – Tax Planning and Objection to Tax Assessment

Advise Poyooyo LTD on provisions in tax laws to challenge a disputed tax liability.

Question

The Directors of Poyooyo LTD have heard of the Maxims of Tax Planning, which outline strategies for minimizing tax liabilities legally.

In a recent visit by the Domestic Tax Revenue Division of the Ghana Revenue Authority (GRA), the Large Taxpayers Office (LTO) in Accra conducted a tax audit on the company, resulting in tax assessments raised against Poyooyo LTD for settlement.

Management of the company, in their last meeting with the directors, presented the outcome of the tax audit and strongly argued that the assessment was erroneous. They claimed that the liabilities raised were based on legitimate tax planning strategies the company employed.

They believe that the company is in full compliance with the tax laws and should not be required to settle the tax liabilities assessed. However, payment of the liability would significantly impact the company’s cash flow and disrupt its operations.

Poyooyo LTD has approached your tax consulting firm for assistance and guidance.

Required:

Advise Poyooyo LTD on the provisions of the tax laws that could be taken advantage of to avert the payment of the liability.

Answer

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Tags: Appeals, Objection, Revenue Administration Act, Tax Audit, Tax Liability, Tax Planning
Level: Level 3

Topic: Tax administration in Ghana, Tax planning
Series: Nov 2024

AT – Nov 2024 – L3 – Q2c – Extension of Time and Early Filing of Tax Returns

Explain the conditions for tax return extension and early filing requirements.

Question

Akosua Sokode has set up a small business to sell cosmetics in Accra. She just called you, an associate member of the Institute of Chartered Accountants Ghana, to seek your advice on tax returns and payment of taxes. Akosua Sokode told you that she cannot meet her tax payment deadlines and cannot file tax returns by the due dates. She also confided in you that maintenance of documents is a big problem for her.

Required:

Address the concerns of Akosua Sokode by briefing her on the following:

i) THREE factors regarding the extension of time for filing tax returns.

ii) TWO circumstances under which the Commissioner-General may request for filing of tax returns before the due date.

Answer

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Tags: Commissioner-General, Compliance, Filing Deadlines, Revenue Administration Act, Tax Policy, Tax Returns
Level: Level 3

Topic: Tax administration in Ghana
Series: Nov 2024

AT – Nov 2024 – L3 – Q1b – Challenges in Tax Reforms in Ghana

Analyze two key challenges in tax reforms in Ghana.

Question

Countries, including Ghana, have embarked on various tax reforms geared towards improving tax revenue to help provide infrastructure and guarantee sustainable growth. Tax administration in Ghana has therefore seen a number of reforms over the years, including restoring the tax base, improving tax administration, and the integration of the Revenue Agencies into an Authority to act as a one-stop shop as per the Ghana Revenue Authority Act, 2009 (Act 791).

Required:
In reference to the statement above, analyze TWO challenges (key issues) on tax reforms in Ghana.

Answer

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Tags: Compliance, Fiscal Policy, policy implementation, Revenue Administration, Tax Base Expansion, Tax Law Challenges, Tax reforms
Level: Level 3

Topic: Tax administration in Ghana
Series: Nov 2024

PT – May 2020 – L2 – Q5c – Withholding Tax Administration

This question requires the computation of the penalty for late filing of withholding tax returns by Adamu Ltd.

Question

The following unstructured invoice has been forwarded to Adamu Ltd from Asigra Ltd, a standard rated supplier:
Goods invoiced (VAT inclusive) GH¢3,000,000 The above transactions relate to payment for goods in January 2019.
Required:
i) Compute the withholding tax payable by Adamu Ltd.
(2 marks)
Assuming Adamu Ltd filed the withholding tax return 12 days after the due date,
ii) compute the penalty payable.
(3 marks)

Answer

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Tags: Ghana Revenue Authority, Late Filing Penalty, Withholding Tax
Level: Level 2

Topic: Penalties, Tax administration in Ghana
Series: MAY 2020

AT – Nov 2018 – L3 – Q5c – Tax administration, Minerals and mining

Explanation of how revenue from a shared processing facility is accounted for tax purposes in mining operations.

Question

A mining company with two contracts operating in the Western and Ashanti Regions of Ghana has one processing facility for its mining operations from both contracts. This has engaged the attention of the Ghana Revenue Authority for some time now regarding how to handle its activities for tax purposes.

Required:
As a final-level tax candidate, how will revenue received from a shared processing facility by a mining company be accounted for tax purposes?

Answer

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Tags: Mineral Operations, Mining Taxation, Revenue Allocation, Shared Processing
Level: Level 3

Topic: Minerals and mining, Tax administration in Ghana
Series: NOV 2018

AT – Nov 2018 – L3 – Q4c – Tax administration

Explanation of the objectives and effects of tax amnesty on government revenue.

Question

As part of tax administration, the government rolls out tax amnesty from time to time.

Required:
i) What does tax amnesty seek to serve? (2 marks)
ii) What are the effects of tax amnesty on revenue? (2 marks)

Answer

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Tags: Penalties, Revenue Collection, Tax Amnesty, Tax Compliance
Level: Level 3

Topic: Tax administration in Ghana
Series: NOV 2018

AT – Nov 2018 – L3 – Q4b – Tax Administration

Evaluation of the benefits of the self-assessment regime for taxpayers and the tax authority.

Question

The Income Tax Act, 2015 (Act 896), as amended, requires all taxpayers to be on self-assessment as taxpayers know better their circumstances for tax purposes.

Required:
Evaluate FOUR (4) benefits of the self-assessment regime.

Answer

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Tags: Self Assessment., Tax Compliance, Tax Revenue, Taxpayer Responsibility
Level: Level 3

Topic: Tax administration in Ghana
Series: NOV 2018

AT – Nov 2018 – L3 – Q4a – Tax administration in Ghana

Explanation of VAT registration period and consequences of failure to register, including ethical considerations and VAT exemptions.

Question

Mr. Patapaa commenced trading on 1 April 2017 and has made the following sales:

Period	Monthly Sales (GH¢)
April to June 2017	29,500
July to September 2017	12,200
October to December 2017	21,500

These figures are stated exclusive of Value Added Tax (VAT). Mr. Patapaa’s sales are all taxable activities.

As a trainee Chartered Accountant, you have advised Patapaa in writing that he should be registered for VAT, but he has refused to register because he thinks his net profit is insufficient to cover the additional cost.

Required:
i) Explain what period Mr. Patapaa was required to compulsorily register for VAT and the implications of continuing to trade after this period without registering. (2 marks)
ii) What are the sanctions for failure to register for VAT? (4 marks)
iii) Briefly explain from an ethical viewpoint the issues you, as a trainee Chartered Accountant, should consider to deal with Mr. Patapaa’s refusal to register for VAT. (2 marks)
iv) State the activities or persons that are exceptions to the normal threshold rules. (2 marks)

Answer

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Tags: Tax Ethics, Threshold Rules, VAT Compliance, VAT Penalties, VAT Registration
Level: Level 3

Topic: Tax administration in Ghana
Series: NOV 2018

AT – Nov 2018 – L3 – Q3c – Tax administration

Recommendations for ensuring voluntary tax compliance under the Ghana Revenue Authority reforms

Question

The Ghana Revenue Authority (GRA) has embarked on serious tax reforms to enable it to achieve its tax revenue targets year after year. As part of the reforms, it has been said that GRA should pursue voluntary tax compliance if it really wants to meet its revenue target.

Required:
Recommend THREE factors that are necessary to ensure voluntary tax compliance.

Answer

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Tags: Penalties, Simplified Procedures, Tax Compliance, Taxpayer Education
Level: Level 3

Topic: Tax administration in Ghana
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

AT – Nov 2018 – L3 – Q2b – Tax administration in Ghana

Explaining three worthwhile causes and their approval by the Commissioner-General.

Question

The Income Tax Act, 2015 (Act 896), provides under subsection (2) of section 100 a list of worthwhile causes approved by the Government that a person can deduct in the course of doing business.
Required:
Explain THREE (3) worthwhile causes and the basis of approval by the Commissioner-General of GRA? (3 marks)

Answer

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Tags: Charitable contributions, Commissioner-General, Income Tax Act, Tax deductions, Worthwhile causes
Level: Level 3

Topic: Tax administration in Ghana
Series: NOV 2018

AT – Nov 2018 – L3 – Q2a – Tax administration in Ghana

Defining long-term contracts and outlining the tax rules under the Income Tax Act.

Question

a) Long-term contracts span over a long period of time and have tax implications.
Required:
i) What is long-term contract as defined in the Income Tax Act, 2015 (Act 896)? (1 mark)
ii) What are the tax rules on long-term contracts? (2 marks)

Answer

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Tags: Contract Completion, Income Tax Act, Long-Term Contracts, Tax Rules
Level: Level 3

Topic: Tax administration in Ghana
Series: NOV 2018

AT – Nov 2018 – L3 – Q1d – Tax administration in Ghana

Explaining the term "class ruling" and its relevance in tax administration.

Question

In line with best practices, the Ghana Revenue Authority is mandated to encourage voluntary tax compliance to shore up revenue. This, among others, includes responding to taxpayers’ requests promptly.
Required:
Explain the term class ruling and its relevance. (4 marks)

Answer

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Level: Level 3

Topic: Tax administration in Ghana
Series: NOV 2018

AT – Nov 2018 – L3 – Q1c – Tax administration in Ghana

Evaluating the roles of Ghana Revenue Authority in managing the Ghanaian economy.

Question

Tax reforms have characterised global taxation. Countries have embarked on various reforms geared towards improving tax revenue to help provide the basis for infrastructural and guarantee sustainable development. Ghana has not been left out in these critical tax reforms.
Tax administration in Ghana therefore has seen a number of reforms since the 1960s, with the most recent being the integration of the Revenue Agencies into an Authority to act as a one-stop shop as per the Ghana Revenue Authority Act, 2009 (Act 791).
Required:
Evaluate FOUR (4) roles played by the Ghana Revenue Authority in the management of the Ghanaian economy. (6 marks)

Answer

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Tags: Economic Management, Fiscal Policy, Ghana Revenue Authority, Revenue Collection, Tax reforms
Level: Level 3

Topic: Tax administration in Ghana
Series: NOV 2018

AT – Nov 2018 – L3 – Q1b – Tax administration in Ghana

Explaining the benefits of foreign debt over domestic debt for government financing.

Question

The use of debt for a country’s financing has engaged the attention of economists and also the ordinary man in the interest regarding its impact on our economy. While some prefer domestic debt, others are making a case for foreign debts as part of government’s fiscal policy.
Required:
What are the benefits to a government for going in for a foreign debt as opposed to going in for domestic debt as a support to the revenue base from taxes? (6 marks)

Answer

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Tags: Domestic Debt, Fiscal Policy, Foreign Debt, Government Revenue
Level: Level 3

Topic: Tax administration in Ghana
Series: NOV 2018

AT – Nov 2018 – L3 – Q1a – Tax administration in Ghana

Identifying the social impacts of taxation in Ghana.

Question

Taxation is an important tool that has helped and hurt economies the world over including those of the developing countries.
Required:
Identify FOUR (4) social impacts of taxation in Ghana.

(4 marks)

Answer

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Tags: Harmful Products, Redistribution, Social Amenities, Social Impact, Taxation
Level: Level 3