Topic: Tax planning

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  • 5 Marks

AT – Nov 2024 – L3 – Q3c – Automatic Stabilizers vs Discretionary Fiscal Policies

Explain the difference between automatic stabilizers and discretionary fiscal policies with examples.

Some commentators in Ghana have argued that economic policymakers should allow automatic stabilizers to shape and direct the destiny of the economy rather than discretionary fiscal policies since the latter has failed woefully.

Required:
Distinguish between automatic stabilizers and discretionary fiscal policies as economic tools. Illustrate with examples.

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  • 12 Marks

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.

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.

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  • 4 Marks

TX – May 2019 – L3 – Q1b – Tax planning

Analyze the tax implications for an individual and employer on SSNIT and Provident Fund contributions.

Kofiga Kwame is 64 years old and has never worked as a salaried staff. He intends to take up an appointment with a Civil Society Organization called “We Care” because of his stance on anti-corruption. He approaches you to advise on his willingness to contribute towards Social Security and National Insurance Trust (SSNIT) of 5.5% and also 10% towards Voluntary Provident Fund (Tier 3) with an approved fund manager. It is hoped that his prospective employer would contribute 13% and 6.5% towards SSNIT and Tier 3 respectively to enhance his benefits when he retires from active employment at age 70.

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  • 5 Marks

TX – May 2019 – L3 – Q1d – Tax Planning

Discuss circumstances under which government should run state enterprises as business entities to increase revenue.

Some political analysts have often made the claim that governments over the world should create enabling environments for private businesses to flourish, including granting tax incentives as a way of creating jobs for the unemployed youth, and that governments should not directly engage in business. They sum this up often with the statement that “Government has no business doing business.” Others, however, hold a contrary view on this matter, making this an endless debate.

Required:

Under what circumstance would you encourage the running of state enterprises as business entities by the government to increase revenue as against the imposition of new taxes for the same purpose?
(5 marks)

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  • 4 Marks

TX – May 2019 – L3 – Q1e – International Taxation

Evaluate the negative consequences of public debt on the economy of Ghana.

Public debt is an important source of revenue for a government to finance public spending where taxation capacity may be limited, or when the alternative would be to print money and compromise macroeconomic stability. There are, however, negative consequences of high public debt on the economy.

Required:

Evaluate FOUR (4) of such negative consequences of public debt on the economy of Ghana.
(4 marks)

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  • 13 Marks

TX – May 2019 – L3 – Q2a – Taxable Income Calculation and Obligations

Calculate the taxable income and assess the tax obligations for a secondment and other income.

Agyemang Boateng has been working with Intellect Consult Limited (ICL) since 2010. At the beginning of January 2016, he was seconded to Accra Metropolitan Assembly (AMA) for a period of six months to be part of a team to spearhead a restructuring exercise and the review of the system of internal controls at the Revenue department of AMA.

Terms of the AMA engagement:

ICL was to be paid a one-off settlement of GH¢10,000 at the completion of the engagement as well as reimbursement of monthly operational expenses incurred based on submission of the relevant invoices.

Agyemang’s only entitlements from AMA were the following monthly allowances:

Inconvenience Allowance: GH¢300
Extra Duties Allowance: GH¢200
Agyemang’s secondment to AMA did not in any way affect his salary and other entitlements from his employer, ICL, as these continued to accrue to him during the period of the secondment.

Agyemang’s earnings and entitlements from ICL for the year of assessment ended 31 December 2016 are as follows:

Basic Salary: GH¢46,000
Bonus: GH¢9,500
Fuel allowance: GH¢1,750
Entertainment allowance: GH¢7,500
Additional Information:

Agyemang stays in a fully furnished ICL bungalow at East Legon in Accra. ICL charges him a rent of GH¢150 per month.
Agyemang makes use of ICL’s company vehicle, driver, and fuel for official use only.
On 1 January 2016, Agyemang successfully applied for a GH¢10,000 loan from his employer, ICL. His employer charged him interest of 2% per annum on the loan. During this period, Bank of Ghana policy rate was 15%. The loan was repayable within ten months.
On 1 October 2016, Agyemang commenced part-time lecturing in Accounting at a local private Senior High School. He was paid monthly for his services, and the total amount received for the three months ended 31 December 2016 was GH¢5,000 gross.
Agyemang’s other non-employment-related income received during the year ended 31 December 2016 were:

Net royalties received for his Accounting textbook: GH¢21,250
Gross local company dividends (Unquoted Company shares): GH¢13,000
Interest on Bank deposits from local financial institutions: GH¢10,000
Gross lottery winnings: GH¢12,000
Required:

i) Calculate Agyemang’s taxable income for the year ended 31 December 2016. (10 marks)

ii) State AMA’s tax obligation when making the disbursement of GH¢10,000 to ICL. (1 mark)

iii) What are the tax implications to Agyemang with respect to the following:

Part-time lecturing
Royalty
Dividends
Interest on bank deposit (2 marks)
iv) What is the tax implication of the loan taken by Agyemang? (1 mark)

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  • 7 Marks

TX – May 2019 – L3 – Q3B – Tax planning

Discuss the tax implications of finance lease arrangements, particularly concerning the eligibility for capital allowance under the Income Tax Act 2015 (Act 896).

b) At a tax seminar organised by The Institute of Chartered Accountants (Ghana) in December 2016, the issue of tax implications for finance lease arrangement dominated the discussion. The facilitator said that both the lessor and the lessee shall be denied capital allowance under the tax law.

The facilitator intimated that capital allowance is granted to persons who acquire assets and own them and use such to generate business income. Both the lessor and the lessee, consequently do not qualify for capital allowance under the Income Tax Act (Act 896), 2015 and its regulations, he added.

Required:
As a tax advisor, submit a response to the above based on the tax provisions. The response is to be published in the Institute’s Journal. (7 marks)

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  • 4 Marks

TX – May 2019 – L3 – Q3C – Tax Planning

Discuss the tax benefits associated with investing in farming and agro-processing businesses in Ghana.

c) Your senior brother has stayed in the United Kingdom for more than 20 years and would like to return to Ghana and establish a business. He is confused as to which area to invest to maximise the benefits from tax planning.

He has been told that you are undertaking a course in Taxation and would like to have your explanation and the tax benefits, if any, from investing in the following areas:

i) Farming (2 marks)
ii) Agro-Processing Business (2 marks)

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  • 5 Marks

TF – May 2018 – L3 – Q1b – Tax planning

Explain five goals of government spending as a fiscal policy instrument.

One of the factors that helps determine the country’s economic direction is fiscal policy. Government uses fiscal policy to influence the economy by adjusting revenue and spending levels.

Required:
Identify and explain FIVE goals of government spending as a fiscal policy instrument.
(10 marks)

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  • 6 Marks

TF – May 2018 – L3 – Q3b – Tax planning

Briefly explain tax holiday, tax exemptions, tax reliefs, and tax rebates.

Tax planning is the analysis of a financial situation or plan from a tax perspective. The purpose of tax planning is to ensure tax efficiency, with the elements of the financial plan working together in the most tax-efficient manner possible.

Required:
Briefly explain the following terms with respect to tax planning:
i) Tax holiday
ii) Tax exemptions
iii) Tax relief
iv) Tax rebates/refund
(6 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 – Q4b – Tax Planning

Advise on the relevance of the number of shareholders for tax planning purposes in a limited liability company.

A proprietor of an enterprise intends converting his business into a limited liability company. He also intends to have shareholders made up of 5 members as against 6 members proposed by his wife in a discussion. He has approached you as a final level ICAG Tax student to advise him on the relevance of the number of shareholders in a limited liability company setting.

Required:
Advise for tax planning purposes, the relevance of numbers of shareholders.
(5 marks)

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  • 6 Marks

AT – April 2022 – L3 – Q2c – Tax planning | Business income – Corporate income tax

Explain tax incentives for farming, agro-processing, and rental income from cocoa farming activities.

Tax incentives have traditionally been used by governments as tools to promote a particular economic goal. They are preferential tax treatments offered to a selected group of taxpayers and may take the form of tax exemptions, tax holidays, preferential tax rates, and others.

Required:
Explain the tax implications of the following:
i) A person engaged in Farming activity
ii) A person engaged in Agro-Processing activity
iii) The rental income of a person engaged in Cocoa Farming activity

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  • 6 Marks

AT – April 2022 – L3 – Q2b – Tax planning

Explain how a Free Zone Enterprise can mitigate its tax liabilities and benefit shareholders.

Free Zone means area or building declared as a free zone by publication in commercial and industrial bulletins. It includes Single Factory Zones, Free Ports, Free Airports, and other specified areas. Free Zone operations are export-led and aimed at promoting foreign earnings for Ghana.

Required:
What mitigation measures will a Free Zone Enterprise adopt to reduce its tax liabilities and raise enough benefits to the shareholders?

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  • 6 Marks

AT – April 2022 – L3 – Q1b – Tax planning

Differentiate between tax avoidance and aggressive tax avoidance.

“Bending the law without breaking it is said to be the way to go by businesses”. This concept of tax administration has caught up with so many businesses that they now engage experts to help shape their business transactions to create this impact for them.

Required:
How is tax avoidance different from aggressive tax avoidance?

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  • 10 Marks

AT – May 2021 – L3 – Q5a – Tax planning

Write a report on tax planning maxims for Baby Heights Ltd's Board of Directors.

You are a final level student of ICAG engaged by Baby Heights Ltd, a manufacturing company. The company is having issues with the Ghana Revenue Authority on tax evasion and avoidance. Your first assignment is to meet the Board of Directors to brief them on various issues governing tax planning and how to take advantage of the provisions in the taxation laws to avoid the payment of certain taxes and possibly defer certain tax liabilities.

Required:
Write a brief report in relation to the case above, explaining to the Board of Directors about tax planning maxims or variables with appropriate examples.

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  • 10 Marks

AT – Aug 2022 – L3 – Q5b – Tax Planning

Advise Wina Ltd on the tax implications of acquiring shares and providing a financial facility to Fatia Ltd in Ghana.

Wina Ltd (Wina) is a company incorporated in the United States of America and also resident
in the United States of America. The Company has been looking for opportunities across Africa
to invest its idle funds in support of shareholders’ decision.
In the latter part of 2021, the management of Wina identified Ghana as a country with huge
potentials for foreign investments. Wina intends to acquire 60% shares in Fatia Ltd (Fatia), a
company resident in Ghana with indigenous ownership but with unimpressive financial
records.When the deal is approved, it would provide a financial facility, the equivalent of
GH¢10,000,000 as a loan with interest at the rate of 22.5% comparable to all other interest
rates.
The equity of Fatia amounts to GH¢500,000 comprising Stated Capital of GH¢250,000,
Retained Earnings of GH¢200,000 and Revaluation Reserves of GH¢50,000.
Required:
Using the format of a memo:
Advise the management of Wina as a final level candidate on the tax implications of this
investment and the credit support that Wina can give without any restriction from the Ghana
Revenue Authority.

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  • 20 Marks

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

Provide a briefing paper on tax planning options available for an individual and their companies.

John Zookay is a Ghanaian Citizen who has lived in the Republic of Liberia for many years.
He is also a citizen of Liberia. He is an employee of a Multinational Company that has a
subsidiary company in Ghana and Liberia. He works for the Ghanaian subsidiary company,
but his role makes him work for the other subsidiary in Liberia as well. John has chosen Ghana
as a place of his permanent home even though his immediate family is based in the Republic
of Liberia and he visits Ghana anytime during the year.
In 2018, John spent more than 184 days outside Ghana working for the Liberia office. In
addition to his employment income in Ghana, he earned some income from a high yielding
fixed deposit accounts maintained with Bank of Africa, Ghana. His gross interest income for
the year 2018 was GH¢10,000 from Bank of Africa. A few years back, whilst studying in the
United Kingdom, he maintained some high yielding interest bearing account from which he
earned £3,500 in 2018. John does not know how the current income tax law “Income Tax Act,
2015 (Act 896)” will affect his incomes earned from Ghana and elsewhere in the United
Kingdom and is worried that he would be liable to tax on all his incomes in Ghana. He is keen
on getting tax planning advice from you to enable him reduce his tax liability (if any).
John also had serious business interests in Ghana. In view of this interests, he set up two
companies limited by shares in Ghana in which he implemented his business ideas. The
following are the objects of his two companies:
1) farming and production of palm fruits on commercial scale; and
2) processing of palm fruits into oil for both the local and international market

John together with his management team strategically decided that each of the companies
maintains equity in each other in order to avoid difficulties with sourcing for external funding
thus using income from dividends within his companies effectively. John intends that at some
point, he will merge the two companies into one to avoid all the legal compliance obligations
and duplication of cost associated with running separate companies. All the two companies are
instalment taxpayers and are required to file their self-assessment estimate at their various tax
offices.
John desperately needs your assistance to enable him structure his personal and business
interest so as to minimise his tax liability.
Required:
a) Prepare a briefing paper to John on the tax implications on him and his companies. (10 marks)
b) Advise him on the compliance obligations of his companies under self-assessment. (10 marks)

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  • 12 Marks

AT – Aug 2022 – L3 – Q1b – Business income – Corporate income tax | Tax planning

Discuss tax implications of holding voting power and tax payments made abroad by resident companies.

The following relates to information of two companies, both resident in Ghana, for 2021 year of assessment with the basis period January to December each year:

Company A (GH¢) Company B (GH¢)
Income 10,000,000 12,000,000
Cost of Sales (4,200,000) (4,400,000)
Gross Profit 5,800,000 7,600,000
Less: Operating Costs (4,900,000) (3,000,000)
Chargeable Income 900,000 4,600,000

Additional information:

  1. Dividend paid to each company by Company C, another resident company in Ghana, is as follows:
    • Company A: GH¢200,000
    • Company B: GH¢230,000
      Both companies hold shares in Company C:
    • Company A holds 25%
    • Company B holds 30%
  2. Contribution towards Kanzo Football Club, a local football club, amounted to GH¢80,000 (Company A) and GH¢100,000 (Company B). Both companies could not show government approval for the contribution.
  3. Two vehicle engines, each costing GH¢80,000, were purchased by both companies. Pool 2 had a written down value of GH¢200,000.
  4. Company B paid foreign employees’ tax to the UK, as the employees were from the UK.

Required:
i) What is the tax implication of holding 25% or more of the voting power of another resident company? (1.5 marks)
ii) What is the position of the tax law on tax payment made by Company B to the UK? (1.5 marks)
iii) What is the total tax payable by both companies? (8 marks)
iv) What is the total tax expenditure? (1 mark)
(12 marks)

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  • 3 Marks

AT – May 2020 – L3 – Q5c – Tax planning

Explain how the income of Lydia Waakye, a 16-year-old sole proprietress with a supermarket shop, will be subject to tax

Lydia Waakye aged 16 years old is a sole proprietress with a big super market shop and makes income of an amount of GH¢40,000 per annum over the last 3 years.

Required: How will the income be subject to tax?

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