Foreign Exchange Loss – NBC Institute

AT – Nov 2020 – L3 – Q3a – International taxation

Tax implications of a loan from a parent company and foreign exchange losses for Mandy Ltd, a subsidiary of Menkay Incorporated.

Question

The following information is relevant to Mandy Ltd (Ghana), a subsidiary of Menkay Incorporated, a company resident in Japan.

Following Mandy Ltd’s operational challenges, a loan of US$1,500,000 was secured from its parent company in 2019 year of assessment.

Additional information relevant to Mandy Ltd’s operations:

Description	Amount (GH¢)
Interest on loan paid in 2019	300,000
Foreign exchange loss	105,000
Equity:
Share capital	150,000
Retained earnings	300,000
Total equity	450,000

Exchange rate: 1US$ = GH¢5.73

Required:
Determine the tax implication of the above transaction.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Debt-equity ratio, Foreign Exchange Loss, Interest expense, Tax implications, Thin Capitalization
Level: Level 3

Topic: International taxation
Series: NOV 2020

AT – Nov 2016 – L3 – Q3a – Business income – Corporate income tax

Analyze the treatment of interest and foreign exchange loss under thin capitalization rules.

Question

a) The current level of government borrowing has become a topical issue for discussion, causing observers to wonder whether borrowing is good or bad. In the light of this, you are required to:

Below is the capital structure of Nyameke Ghana Limited for the 2014 year of assessment:

	GH¢
Equity	20,000,000
Loans	80,000,000
Total	100,000,000

The loans were taken by Nyameke Limited from the parent company based in Nigeria. During the year under review, the subsidiary paid GH¢700,000 as interest on the loan and also incurred an exchange loss of GH¢500,000 on the repayment of a loan taken earlier from the parent company.

Required:
Determine how the above transaction will be treated for tax purposes. (6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Taxation, Foreign Exchange Loss, Interest Deductibility, Thin Capitalization
Level: Level 3

Topic: Business income - Corporate income tax
Series: NOV 2016

AT – Nov 2019 – L3 – Q1a – Tax planning

Analyze the tax implications of a loan arrangement under thin capitalization rules for Kelkadadi Ltd.

Question

The management of Kelkadadi Ltd, a company resident in Ghana since the year of assessment 2007, is a wholly owned subsidiary of Danlerigu Ltd, a company resident in Nigeria. The Finance Manager of Kelkadadi has invited you as a final level three candidate of ICAG and also a Tax Intern with Danlerigu to analyze the transaction below and provide tax implications thereon.

Kelkadadi Ltd contracted a loan of $10 million from Danlerigu Ltd to help it meet its operational activities. The balance standing on the loan account at the beginning of 2018 stood at $5 million and $4.1 million at the end of 2018 year of assessment. The exchange rates are as follows:

Year Start (2018) $1 = GH¢5.20
Year End (2018) $1 = GH¢5.21

The extract of the financial statement at the beginning of the year 2018 was as follows:

Stated Capital: GH¢200,000
Retained Earnings: GH¢1,235,000
Capital Surplus: GH¢40,000
Share Deals: GH¢30,000

Interest on the debt paid during the year amounted to GH¢90,124 and foreign exchange loss on the loan repayment stood at GH¢147,000.

Required:

Write a memo on the possible tax implication(s) on this arrangement to the Finance Manager.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Foreign Exchange Loss, Interest Deduction, Thin Capitalization, Withholding Tax
Level: Level 3

Topic: Tax planning
Series: NOV 2019

AT – Nov 2020 – L3 – Q3a – International taxation

Tax implications of a loan from a parent company and foreign exchange losses for Mandy Ltd, a subsidiary of Menkay Incorporated.

Question

The following information is relevant to Mandy Ltd (Ghana), a subsidiary of Menkay Incorporated, a company resident in Japan.

Following Mandy Ltd’s operational challenges, a loan of US$1,500,000 was secured from its parent company in 2019 year of assessment.

Additional information relevant to Mandy Ltd’s operations:

Description	Amount (GH¢)
Interest on loan paid in 2019	300,000
Foreign exchange loss	105,000
Equity:
Share capital	150,000
Retained earnings	300,000
Total equity	450,000

Exchange rate: 1US$ = GH¢5.73

Required:
Determine the tax implication of the above transaction.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Debt-equity ratio, Foreign Exchange Loss, Interest expense, Tax implications, Thin Capitalization
Level: Level 3

Topic: International taxation
Series: NOV 2020

AT – Nov 2016 – L3 – Q3a – Business income – Corporate income tax

Analyze the treatment of interest and foreign exchange loss under thin capitalization rules.

Question

a) The current level of government borrowing has become a topical issue for discussion, causing observers to wonder whether borrowing is good or bad. In the light of this, you are required to:

Below is the capital structure of Nyameke Ghana Limited for the 2014 year of assessment:

	GH¢
Equity	20,000,000
Loans	80,000,000
Total	100,000,000

Required:
Determine how the above transaction will be treated for tax purposes. (6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Taxation, Foreign Exchange Loss, Interest Deductibility, Thin Capitalization
Level: Level 3

Topic: Business income - Corporate income tax
Series: NOV 2016

AT – Nov 2019 – L3 – Q1a – Tax planning

Analyze the tax implications of a loan arrangement under thin capitalization rules for Kelkadadi Ltd.

Question

Year Start (2018) $1 = GH¢5.20
Year End (2018) $1 = GH¢5.21

The extract of the financial statement at the beginning of the year 2018 was as follows:

Stated Capital: GH¢200,000
Retained Earnings: GH¢1,235,000
Capital Surplus: GH¢40,000
Share Deals: GH¢30,000

Interest on the debt paid during the year amounted to GH¢90,124 and foreign exchange loss on the loan repayment stood at GH¢147,000.

Required:

Write a memo on the possible tax implication(s) on this arrangement to the Finance Manager.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Foreign Exchange Loss, Interest Deduction, Thin Capitalization, Withholding Tax
Level: Level 3

Topic: Tax planning
Series: NOV 2019

Question Tag: Foreign Exchange Loss

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

AT – Nov 2020 – L3 – Q3a – International taxation

Tax implications of a loan from a parent company and foreign exchange losses for Mandy Ltd, a subsidiary of Menkay Incorporated.

AT – Nov 2016 – L3 – Q3a – Business income – Corporate income tax

Analyze the treatment of interest and foreign exchange loss under thin capitalization rules.

AT – Nov 2019 – L3 – Q1a – Tax planning

Analyze the tax implications of a loan arrangement under thin capitalization rules for Kelkadadi Ltd.

AT – Nov 2020 – L3 – Q3a – International taxation

Tax implications of a loan from a parent company and foreign exchange losses for Mandy Ltd, a subsidiary of Menkay Incorporated.

AT – Nov 2016 – L3 – Q3a – Business income – Corporate income tax

Analyze the treatment of interest and foreign exchange loss under thin capitalization rules.

AT – Nov 2019 – L3 – Q1a – Tax planning

Analyze the tax implications of a loan arrangement under thin capitalization rules for Kelkadadi Ltd.

Our offerings

Contact Info

Customer

Get In Touch

NBC Institute

Question Tag: Foreign Exchange Loss

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

AT – Nov 2020 – L3 – Q3a – International taxation

Tax implications of a loan from a parent company and foreign exchange losses for Mandy Ltd, a subsidiary of Menkay Incorporated.

You're reporting an error for "AT – Nov 2020 – L3 – Q3a – International taxation"

AT – Nov 2016 – L3 – Q3a – Business income – Corporate income tax

Analyze the treatment of interest and foreign exchange loss under thin capitalization rules.

You're reporting an error for "AT – Nov 2016 – L3 – Q3a – Business income – Corporate income tax"

AT – Nov 2019 – L3 – Q1a – Tax planning

Analyze the tax implications of a loan arrangement under thin capitalization rules for Kelkadadi Ltd.

You're reporting an error for "AT – Nov 2019 – L3 – Q1a – Tax planning"

AT – Nov 2020 – L3 – Q3a – International taxation

Tax implications of a loan from a parent company and foreign exchange losses for Mandy Ltd, a subsidiary of Menkay Incorporated.

You're reporting an error for "AT – Nov 2020 – L3 – Q3a – International taxation"

AT – Nov 2016 – L3 – Q3a – Business income – Corporate income tax

Analyze the treatment of interest and foreign exchange loss under thin capitalization rules.

You're reporting an error for "AT – Nov 2016 – L3 – Q3a – Business income – Corporate income tax"

AT – Nov 2019 – L3 – Q1a – Tax planning

Analyze the tax implications of a loan arrangement under thin capitalization rules for Kelkadadi Ltd.

You're reporting an error for "AT – Nov 2019 – L3 – Q1a – Tax planning"

Our offerings

Contact Info

Customer

Get In Touch

NBC Institute

admin