- 8 Marks
AT – Dec 2023 – L3 – Q2a – Tax Planning
Computation of tax implications under thin capitalization rules and definition of exempt persons in corporate taxation.
Question
Scenario:
Papana Ltd, a resident company in Ghana, has cash flow challenges after a major customer ceased business dealings. Dawadawa Ltd, another resident company, negotiated with Papana Ltd and acquired 52% of its underlying ownership. As part of this arrangement, Dawadawa Ltd secured a loan facility of GH¢100 million for Papana Ltd at an interest rate of 4% above the average rate of 25%. The total interest paid in 2021 was GH¢2 million. Dawadawa Ltd is exempt from tax on all its income.
The capital structure of Papana Ltd for the 2021 year of assessment is as follows:
Required:
i) Compute the tax implications of the above arrangement.
ii) What constitutes an exempt person?
Find Related Questions by Tags, levels, etc.
- Tags: Corporate Tax, Exempt persons, Interest Deduction, Thin Capitalization
- Level: Level 3
- Topic: Tax planning
- Series: DEC 2023
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