Taxation and Operating Strategies in Business

STP – Feb 2018 – L2 – Q4- Taxation and Operating Strategies

Calculate Honson Plc's tax liability for Kumasi/Accra, advise on Nsawam, and discuss non-tax factors for facility location.

Question

Honson Pic, a UK-based manufacturing company, is planning to build a new processing facility in Ghana. The Chief Executive Officer in a meeting with Management needs to decide whether to cite the facility in Accra or in Kumasi. Market intelligence has no preference for citing the facility either in Kumasi or Accra since information gathered indicate that business activities would largely be same in Kumasi and Accra for the next 10 years.

The following forecast information is relevant for the decision-making process being considered by management.

Kumasi	Accra	GH¢	GH¢

Required: i. Calculate Hamson Plc’s income tax liability for each proposed location for the first year. ii. Would you advise Hamson Plc to consider citing the facility in Nsawam, taking into consideration the close proximity of Nsawam to Accra? iii. Discuss three (3) non-tax factors that Hamson UK Plc may consider in the decision-making process to locate the facility either in Kumasi, Accra or elsewhere in the country.

b). With reference to the Income Tax Act, 2015 (Act 896) explain the following: i. Private Ruling issued by the Commissioner-General: (2 marks) ii. Conditions under which a Private Ruling will be binding on the Commissioner-General and on the person to whom the Private Ruling is issued.

Answer

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Tags: Corporate Taxation, Income Tax, Location Decision, Non-Tax Factors, Tax computation, Tax Incentives
Level: Level 2

Topic: Taxation and Operating Strategies in Business
Series: FEBRUARY 2018

STP – Feb 2020 – L2 – Q5 – Anti-Avoidance Provisions

Identify and discuss three anti-avoidance provisions in the Income Tax Act, 2015 (Act 896) and their limitations on tax planning.

Question

Although tax planners have the liberty to devise schemes which reduce the tax liability of their clients, the Income Tax Act, 2015 (Act 896) contains provisions which limit tax planning schemes.

Required:
Identify any three (3) anti-avoidance provisions in Act 896 and discuss how each of these provisions places a limitation on the ability of a person to engage in tax planning.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Year, Anti-Avoidance, Arm's Length, General Anti-Avoidance Rule, Income Splitting, Income Tax Act, Indirect Payments, Tax Planning, Thin Capitalization
Level: Level 2

Topic: Taxation and Operating Strategies in Business
Series: FEB 2020

STP – Feb 2020 – L2 – Q2 – Tax Implications of Financing Options

Advise on tax implications of financing a plant purchase as equity or loan for red flow Ghana Limited.

Question

Red flow Ghana Limited is a manufacturing entity in Ghana. Mr. Kurt Wildem, a citizen and resident of Germany owns 90% of the company’s shares. Mrs. Florence Wildem, a citizen and resident of Germany and wife of Mr. Wildem also owns 5% of the shares of the company. Mr. Jogen Wildem, the son of Mr. Kurt Wildem holds the remaining 5% of the shares in the company. As of 1st June 2019, the company had a stated capital of GH¢400,000.00. A report submitted by the management to the Board of Directors indicated that the company needs to acquire a plant valued at GH¢1,000,000.00 to enable the company to increase its production capacity. Mr. Kurt Wildem who is the majority shareholder has offered to finance the purchase of a plant for the company, but his challenge is whether to provide the asset to the company as a loan or as equity.

Required: Advise Mr. Kurt Wildem on i. the income tax treatment of providing the asset to the company as equity contribution. (7 marks) ii. the income tax treatment of providing the asset to the company as a loan. (7 marks) iii. the preferable option for providing the asset to the company in order to derive the maximum tax benefits.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Tax, Dividend taxation, Equity contribution, Loan financing, Tax deductions, Withholding Tax
Level: Level 2

Topic: Tax Strategies for New Business Formation, Taxation and Operating Strategies in Business
Series: FEB 2020

STP – Feb 2021 – L2 – Q4 – Taxation and Operating Strategies

Explain three anti-avoidance provisions in Ghana's Income Tax laws and their impact on tax planning.

Question

State and explain three (3) anti-avoidance provisions found in the Income Tax laws of Ghana and how these provisions place a limitation on the tax planning opportunities available to taxpayers.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Anti-Avoidance, Arm's Length, Income Splitting, Income Tax, Tax Planning, Thin Capitalization
Level: Level 2

Topic: Taxation and Operating Strategies in Business
Series: FEBRUARY 2021

STP – Aug 2012 – L3 – Q2 – Partnership Taxation

Compute chargeable income and tax payable for partners Nancy and Bouncy for 2010.

Question

Nancy and Bouncy are equal partners in a hairdo practice. Partnership profit agreed with the GRA for year 2010 is GHc12,000.
a). Records however indicate that partnership profit was net of:

Drawings of GHc600 each monthly period by Nancy and Bouncy;
Household allowance of GHc150 per month paid by the partnership to each partner;
Salary for each partner paid during the period was GHc200 p.m. on which a withholding tax of GHC per month is paid to the GRA;
b). Nancy failed to account for GHc1,500 which she was to use to purchase driers for the saloon.
c). To reciprocate Nancy’s gesture, Bouncy also withdrew GHc1,800 on the pretext of buying flyers for the saloon. She failed to account for the flyers or the amount. It has been agreed that they all should treat the amounts b) and c) above as exceptional drawings from the business.

Required:
Compute the chargeable income and tax payable by each partner for the 2010 year of assessment.
Hint:
Short formula for computing an individual’s annual tax payable for year 2010 is:
Tax = T + (Y – 16,200) × 25%, where
Tax = Total tax payable per annum on annual income earnings
T = tax paid on GH16,200.00 being part of the earnings which is GHC2,574.60
Y = Annual income earned.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Drawings, Income Aggregation, Partnership Taxation, Profit Apportionment, Tax payable
Level: Level 3

Topic: Taxation and Operating Strategies in Business
Series: AUG 2012

STP – Aug 2012 – L3 – Q1 – Tax Computation

Compute tax liability for Jamaa Mining Company for 2008 and 2009 based on provided financials.

Question

The profit and loss account of Jamaa Mining Company Ltd for the years ended December 2008 and 2009 are as tabled below:

	Year Ended 31 December (all amounts in ‘000)
	2009 GHC	2008 GHC
Turnover	309,000	430,000
Cost of Sales	(164,000)
Gross Profit	145,000
General and Admin Exp	(100,000)
Operating Profit	45,000
Other Income	5,300
Net Profit before tax	50,300
Income Tax provision	12,575
Transfer to Income Surplus	37,725
Income Surplus Account
Balance brought forward	46,945
Transfer from profit and loss account	9,220
Surplus carried forward	46,945

Notes:
2. Turnover is made up as follows
For year

	2009	2008
Collected for year but included in prior year a/c	291,000
Interest income received for 18 months	0	18,000
	309,000

Cost of sales includes:

	2009	2008
Withholding taxes paid	1,500	1,000
VAT unclaimed	6,000	8,000
Depreciation	43,000	25,000

4a. Gen and Admin expenses includes

	2009	2008
Rent prepaid of	3,000
Rent outstanding	500	500

4b. Includes unrealized foreign exchange gain of but realized in 2009

	2009	2008
	2,000	2,000

The GRA has agreed a capital allowance of GHC20,000 for year 2009 and GHC15,000 for year 2008.

Required:
Please advise management of Jamaa Mining Company Ltd on the tax due to the GRA for the years 2009 and 2008.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Allowance, Corporate Taxation, Mining Company, Tax computation, Taxable Profit
Level: Level 3

Topic: Taxation and Operating Strategies in Business
Series: AUG 2012

STP – Feb 2018 – L2 – Q4- Taxation and Operating Strategies

Calculate Honson Plc's tax liability for Kumasi/Accra, advise on Nsawam, and discuss non-tax factors for facility location.

Question

The following forecast information is relevant for the decision-making process being considered by management.

Kumasi	Accra	GH¢	GH¢

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Taxation, Income Tax, Location Decision, Non-Tax Factors, Tax computation, Tax Incentives
Level: Level 2

Topic: Taxation and Operating Strategies in Business
Series: FEBRUARY 2018

STP – Feb 2020 – L2 – Q5 – Anti-Avoidance Provisions

Identify and discuss three anti-avoidance provisions in the Income Tax Act, 2015 (Act 896) and their limitations on tax planning.

Question

Although tax planners have the liberty to devise schemes which reduce the tax liability of their clients, the Income Tax Act, 2015 (Act 896) contains provisions which limit tax planning schemes.

Required:
Identify any three (3) anti-avoidance provisions in Act 896 and discuss how each of these provisions places a limitation on the ability of a person to engage in tax planning.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Year, Anti-Avoidance, Arm's Length, General Anti-Avoidance Rule, Income Splitting, Income Tax Act, Indirect Payments, Tax Planning, Thin Capitalization
Level: Level 2

Topic: Taxation and Operating Strategies in Business
Series: FEB 2020

STP – Feb 2020 – L2 – Q2 – Tax Implications of Financing Options

Advise on tax implications of financing a plant purchase as equity or loan for red flow Ghana Limited.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Tax, Dividend taxation, Equity contribution, Loan financing, Tax deductions, Withholding Tax
Level: Level 2

Topic: Tax Strategies for New Business Formation, Taxation and Operating Strategies in Business
Series: FEB 2020

STP – Feb 2021 – L2 – Q4 – Taxation and Operating Strategies

Explain three anti-avoidance provisions in Ghana's Income Tax laws and their impact on tax planning.

Question

State and explain three (3) anti-avoidance provisions found in the Income Tax laws of Ghana and how these provisions place a limitation on the tax planning opportunities available to taxpayers.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Anti-Avoidance, Arm's Length, Income Splitting, Income Tax, Tax Planning, Thin Capitalization
Level: Level 2

Topic: Taxation and Operating Strategies in Business
Series: FEBRUARY 2021

STP – Aug 2012 – L3 – Q2 – Partnership Taxation

Compute chargeable income and tax payable for partners Nancy and Bouncy for 2010.

Question

Nancy and Bouncy are equal partners in a hairdo practice. Partnership profit agreed with the GRA for year 2010 is GHc12,000.
a). Records however indicate that partnership profit was net of:

Drawings of GHc600 each monthly period by Nancy and Bouncy;
Household allowance of GHc150 per month paid by the partnership to each partner;
Salary for each partner paid during the period was GHc200 p.m. on which a withholding tax of GHC per month is paid to the GRA;
b). Nancy failed to account for GHc1,500 which she was to use to purchase driers for the saloon.
c). To reciprocate Nancy’s gesture, Bouncy also withdrew GHc1,800 on the pretext of buying flyers for the saloon. She failed to account for the flyers or the amount. It has been agreed that they all should treat the amounts b) and c) above as exceptional drawings from the business.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Drawings, Income Aggregation, Partnership Taxation, Profit Apportionment, Tax payable
Level: Level 3

Topic: Taxation and Operating Strategies in Business
Series: AUG 2012

STP – Aug 2012 – L3 – Q1 – Tax Computation

Compute tax liability for Jamaa Mining Company for 2008 and 2009 based on provided financials.

Question

The profit and loss account of Jamaa Mining Company Ltd for the years ended December 2008 and 2009 are as tabled below:

	Year Ended 31 December (all amounts in ‘000)
	2009 GHC	2008 GHC
Turnover	309,000	430,000
Cost of Sales	(164,000)
Gross Profit	145,000
General and Admin Exp	(100,000)
Operating Profit	45,000
Other Income	5,300
Net Profit before tax	50,300
Income Tax provision	12,575
Transfer to Income Surplus	37,725
Income Surplus Account
Balance brought forward	46,945
Transfer from profit and loss account	9,220
Surplus carried forward	46,945

Notes:
2. Turnover is made up as follows
For year

	2009	2008
Collected for year but included in prior year a/c	291,000
Interest income received for 18 months	0	18,000
	309,000

Cost of sales includes:

	2009	2008
Withholding taxes paid	1,500	1,000
VAT unclaimed	6,000	8,000
Depreciation	43,000	25,000

4a. Gen and Admin expenses includes

	2009	2008
Rent prepaid of	3,000
Rent outstanding	500	500

4b. Includes unrealized foreign exchange gain of but realized in 2009

	2009	2008
	2,000	2,000

The GRA has agreed a capital allowance of GHC20,000 for year 2009 and GHC15,000 for year 2008.

Required:
Please advise management of Jamaa Mining Company Ltd on the tax due to the GRA for the years 2009 and 2008.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Allowance, Corporate Taxation, Mining Company, Tax computation, Taxable Profit
Level: Level 3

Topic: Taxation and Operating Strategies in Business
Series: AUG 2012

Topic: Taxation and Operating Strategies in Business

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STP – Feb 2018 – L2 – Q4- Taxation and Operating Strategies

Calculate Honson Plc's tax liability for Kumasi/Accra, advise on Nsawam, and discuss non-tax factors for facility location.

STP – Feb 2020 – L2 – Q5 – Anti-Avoidance Provisions

Identify and discuss three anti-avoidance provisions in the Income Tax Act, 2015 (Act 896) and their limitations on tax planning.

STP – Feb 2020 – L2 – Q2 – Tax Implications of Financing Options

Advise on tax implications of financing a plant purchase as equity or loan for red flow Ghana Limited.

STP – Feb 2021 – L2 – Q4 – Taxation and Operating Strategies

Explain three anti-avoidance provisions in Ghana's Income Tax laws and their impact on tax planning.

STP – Aug 2012 – L3 – Q2 – Partnership Taxation

Compute chargeable income and tax payable for partners Nancy and Bouncy for 2010.

STP – Aug 2012 – L3 – Q1 – Tax Computation

Compute tax liability for Jamaa Mining Company for 2008 and 2009 based on provided financials.

STP – Feb 2018 – L2 – Q4- Taxation and Operating Strategies

Calculate Honson Plc's tax liability for Kumasi/Accra, advise on Nsawam, and discuss non-tax factors for facility location.

STP – Feb 2020 – L2 – Q5 – Anti-Avoidance Provisions

Identify and discuss three anti-avoidance provisions in the Income Tax Act, 2015 (Act 896) and their limitations on tax planning.

STP – Feb 2020 – L2 – Q2 – Tax Implications of Financing Options

Advise on tax implications of financing a plant purchase as equity or loan for red flow Ghana Limited.

STP – Feb 2021 – L2 – Q4 – Taxation and Operating Strategies

Explain three anti-avoidance provisions in Ghana's Income Tax laws and their impact on tax planning.

STP – Aug 2012 – L3 – Q2 – Partnership Taxation

Compute chargeable income and tax payable for partners Nancy and Bouncy for 2010.

STP – Aug 2012 – L3 – Q1 – Tax Computation

Compute tax liability for Jamaa Mining Company for 2008 and 2009 based on provided financials.

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STP – Feb 2018 – L2 – Q4- Taxation and Operating Strategies

Calculate Honson Plc's tax liability for Kumasi/Accra, advise on Nsawam, and discuss non-tax factors for facility location.

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STP – Feb 2020 – L2 – Q5 – Anti-Avoidance Provisions

Identify and discuss three anti-avoidance provisions in the Income Tax Act, 2015 (Act 896) and their limitations on tax planning.

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STP – Feb 2020 – L2 – Q2 – Tax Implications of Financing Options

Advise on tax implications of financing a plant purchase as equity or loan for red flow Ghana Limited.

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STP – Feb 2021 – L2 – Q4 – Taxation and Operating Strategies

Explain three anti-avoidance provisions in Ghana's Income Tax laws and their impact on tax planning.

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STP – Aug 2012 – L3 – Q2 – Partnership Taxation

Compute chargeable income and tax payable for partners Nancy and Bouncy for 2010.

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STP – Aug 2012 – L3 – Q1 – Tax Computation

Compute tax liability for Jamaa Mining Company for 2008 and 2009 based on provided financials.

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STP – Feb 2018 – L2 – Q4- Taxation and Operating Strategies

Calculate Honson Plc's tax liability for Kumasi/Accra, advise on Nsawam, and discuss non-tax factors for facility location.

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STP – Feb 2020 – L2 – Q5 – Anti-Avoidance Provisions

Identify and discuss three anti-avoidance provisions in the Income Tax Act, 2015 (Act 896) and their limitations on tax planning.

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STP – Feb 2020 – L2 – Q2 – Tax Implications of Financing Options

Advise on tax implications of financing a plant purchase as equity or loan for red flow Ghana Limited.

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STP – Feb 2021 – L2 – Q4 – Taxation and Operating Strategies

Explain three anti-avoidance provisions in Ghana's Income Tax laws and their impact on tax planning.

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STP – Aug 2012 – L3 – Q2 – Partnership Taxation

Compute chargeable income and tax payable for partners Nancy and Bouncy for 2010.

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STP – Aug 2012 – L3 – Q1 – Tax Computation

Compute tax liability for Jamaa Mining Company for 2008 and 2009 based on provided financials.

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