Question Tag: Foreign income

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  • 15 Marks

AT – May 2018 – L3 – SB – Q4b – Double Taxation Reliefs and Credits

Calculate the final tax liability for Oduifa Construction Ltd., considering foreign income and double taxation relief.

Engineer Kole Ahmed manages a wholly owned Nigerian engineering outfit – Oduifa Construction Company Limited, based at Ikeja and incorporated in February 2010.

Given the challenging economic environment in Nigeria and inconsistent government policies, the company’s management embarked on foreign diversification of income. They sourced and secured some contracts in the United Kingdom where they have operational activities in London.

Extracts from the Statement of Profit or Loss for the year ended December 31, 2015, for Lagos and London operations, are as follows:

Description Lagos (N) London (N) Global (N)
Revenue 68,000,000 70,200,000 138,200,000
Direct expenses (43,410,000) (44,050,000) (87,460,000)
Gross profit 24,590,000 26,150,000 50,740,000
Administrative expenses:
– Staff salaries 1,200,000 1,440,000 2,640,000
– Rent and rates 840,000 960,000 1,800,000
– Motor vehicle expenses 136,000 148,000 284,000
– Repairs and maintenance 92,000 106,500 198,500
– Utilities 76,840 81,000 157,840
– Business insurances 55,000 60,000 115,000

Capital allowances: N725,000.

Required: Compute the final tax liability of the company for the relevant assessment year. (15 Marks)

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  • 20 Marks

AT – Nov 2023 – L1 – SB – Q4 – Double Taxation Reliefs and Credits

Explanation of the Nigerian-UK Double Taxation Agreement provisions, exempted foreign incomes, conflict resolution mechanisms, and tax treaty benefits.

A notable State‟s Chamber of Commerce and Industries has invited you and three
other tax consultants to their quarterly interactive forum, tagged “The Nigerian
Double Taxation Agreement with the UK.” The participants are top private sector
based industrialists who will be visiting the United Kingdom on a trade mission
next week.

Required:

As the lead discussant, you are to prepare a paper explaining the provisions of the Nigerian double taxation agreements with the United Kingdom in respect of:

i. Income arising from immovable properties (2 Marks)
ii. Business profits not arising through a permanent establishment (2 Marks)
iii. Profits or gains arising from the operations of ships and aircraft in international traffic (2 Marks)
iv. Dividends derived by a company resident in one country from a company resident in another country (2 Marks)
v. Interest arising in one country and paid to a resident of the other country (2 Marks)

b. State THREE foreign incomes exempted from Nigerian tax. (3 Marks)

c. Discuss THREE widely recognised resolution mechanisms being used by the Nigerian government to mitigate the effect of the conflicts between double taxation agreements and Nigerian tax laws. (3 Marks)

d. Explain FOUR benefits of double taxation agreements. (4 Marks)

(Total: 20 Marks)

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  • 8 Marks

AT – April 2022 – L3 – Q1c – International taxation

Calculate chargeable income, tax payable, and foreign tax credit for Lawaaba Guo.

Lawaaba Guo is a Ghanaian born in Nigeria and has lived all his life there. He got an opportunity to relocate to Ghana and took up an appointment as a lecturer in one of the prestigious universities within the first three months of his arrival in Ghana in 2018.

He took up employment with ABB Ltd as a procurement officer. The following relates to his employment details for 2020 year of assessment:

  • Salary: GH¢200,000
  • Commission from employers: GH¢10,000
  • Interest on savings from a Bank in Ghana (Gross): GH¢1,000

His investment income and other returns received from Nigeria are as follows:

  • Dividend of US$ 12,000 net of tax. Tax of US$ 1,000 was paid.
  • Rental Income of USD 6,000 gross with tax at the rate of 10%.
  • On-line consultancy fee USD 20,000 net of tax. Tax of USD1,500 was paid.

Additional information:

  • He is married.
  • Children (2): both schooling in Nigeria.
  • Contributes to Social Security at 5.5%.
  • Exchange Rate USD1 = GH¢5.2.

Required:
Determine the following:
i) Chargeable Income
ii) Tax Payable
iii) Amount of foreign credit relief granted

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  • 4 Marks

AT – May 2021 – L3 – Q2d – International Taxation

Compute the tax payable for Ganigani Ltd considering foreign income and relinquished tax credit.

Ganigani Ltd is a company based in Ghana and has a business dealing mainly in Nigeria. In the 2020 year of assessment, the following data is relevant to parts of its operation:

  • Global income: GH¢25,000,000
  • Tax paid in Nigeria: ₦1,000,000
  • Exchange rate: GH¢1 = ₦67.59

Ganigani Ltd elects to relinquish a foreign tax credit for the year in line with section 112 of the Income Tax Act, 2015 (Act 896) as amended.

Required:
Compute the tax payable.

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  • 8 Marks

AT – May 2021 – L3 – Q1c – International Taxation | Business Income – Corporate Income Tax

Compute the tax payable by Kaeka Ltd considering both foreign and domestic income.

Kaeka Ltd is a resident company providing cleaning services in Ghana. For the first time in the history of the entity, it launched operations as an external company in January 2020 in Lusaka, Zambia. It came to light that the entity earned the equivalent of GH¢2,500,000, which was evenly made for the 2020 year of assessment. On the home front, it earned GH¢16,000,000 in the 2020 year of assessment as income in Ghana. Assume that allowable costs of GH¢12,000,000 were incurred. It received a dividend net of tax from a company in Israel it acquired shares from, amounting to GH¢20,000 in December 2020. Tax of GH¢5,000 was paid on the dividend received.

Required:
i) Compute the tax payable by Kaeka Ltd.
ii) Explain the tax implication if the company made the income from Zambia in the last quarter of 2020.

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  • 8 Marks

AT – Nov 2020 – L3 – Q3b – International taxation

Tax computation for Andrew Soweah as an individual, granting relief under the Ghana/UK Double Taxation Agreement using the credit method.

Andrew Soweah recently relocated to Ghana to commence his business after retirement from TaskForce (UK) Ltd, a security company he served for over 20 years. The nature of the business was to provide private security to diplomats and the very affluent.

Before coming to Ghana, he rented out his apartment in the UK for a yearly rent of £18,000. He also maintained a healthy balance in his account with Diamond Bank in London.

His income for 2019 year of assessment is summarized as follows:

  • Business Income (net of all taxes): GH¢126,000.
  • Dividend received from Faithful Ltd, a resident company at gross amount was GH¢18,000.
  • Rent of £16,200 was paid into his account with Diamond Bank. Withholding tax amounting to £1,800 had been deducted.
  • Diamond Bank credited his account with net of £8,100 bank interest. UK tax rate on interest is 10%.

Additional Information:

  • Exchange rate is GH¢7.5 for £1.
  • Andrew Soweah does not contribute to social security in Ghana.

Required: Compute his tax liability as an individual for the relevant year of assessment while granting him relief for double taxation under the Ghana/UK Double Taxation Agreement using the credit method.

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  • 8 Marks

AT – March 2023 – L3 – Q1b – Business income – Corporate income tax

Compute the tax payable by Manpower Ltd, considering foreign income and capital allowances.

Kofi Agyemang worked in Canada for a very long time and relocated to Ghana to benefit from the One District One Factory (1D1F) initiative. Kofi Agyemang set up a company called Manpower Ltd and was granted approval by the 1D1F Secretariat to operate a manufacturing company at Koforidua, the capital town of Eastern Region.

An extract from the accounts of Manpower Ltd for the 2021 year of assessment was as follows:

Description GH¢
Chargeable Income 2,000,000
Dividend from Val Ltd:
Ghana (gross) 100,000
Canada (net of tax) 120,000
Interest on current account from:
Ghana (gross) 80,000
Canada (net of taxes) 100,000
Rental Income:
Ghana (gross) 200,000
Canada (gross) 150,000
Depreciation 67,000

Additional information:
i) Taxes paid on the foreign income:

  • Dividend: GH¢18,000
  • Interest: GH¢15,000
  • Rental income: GH¢15,000

ii) Capital allowance agreed with the Ghana Revenue Authority amounted to GH¢140,000.

Required:
Compute the tax payable by Manpower Ltd for the 2021 year of assessment. (8 marks)

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  • 15 Marks

AT – May 2018 – L3 – SB – Q4b – Double Taxation Reliefs and Credits

Calculate the final tax liability for Oduifa Construction Ltd., considering foreign income and double taxation relief.

Engineer Kole Ahmed manages a wholly owned Nigerian engineering outfit – Oduifa Construction Company Limited, based at Ikeja and incorporated in February 2010.

Given the challenging economic environment in Nigeria and inconsistent government policies, the company’s management embarked on foreign diversification of income. They sourced and secured some contracts in the United Kingdom where they have operational activities in London.

Extracts from the Statement of Profit or Loss for the year ended December 31, 2015, for Lagos and London operations, are as follows:

Description Lagos (N) London (N) Global (N)
Revenue 68,000,000 70,200,000 138,200,000
Direct expenses (43,410,000) (44,050,000) (87,460,000)
Gross profit 24,590,000 26,150,000 50,740,000
Administrative expenses:
– Staff salaries 1,200,000 1,440,000 2,640,000
– Rent and rates 840,000 960,000 1,800,000
– Motor vehicle expenses 136,000 148,000 284,000
– Repairs and maintenance 92,000 106,500 198,500
– Utilities 76,840 81,000 157,840
– Business insurances 55,000 60,000 115,000

Capital allowances: N725,000.

Required: Compute the final tax liability of the company for the relevant assessment year. (15 Marks)

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  • 20 Marks

AT – Nov 2023 – L1 – SB – Q4 – Double Taxation Reliefs and Credits

Explanation of the Nigerian-UK Double Taxation Agreement provisions, exempted foreign incomes, conflict resolution mechanisms, and tax treaty benefits.

A notable State‟s Chamber of Commerce and Industries has invited you and three
other tax consultants to their quarterly interactive forum, tagged “The Nigerian
Double Taxation Agreement with the UK.” The participants are top private sector
based industrialists who will be visiting the United Kingdom on a trade mission
next week.

Required:

As the lead discussant, you are to prepare a paper explaining the provisions of the Nigerian double taxation agreements with the United Kingdom in respect of:

i. Income arising from immovable properties (2 Marks)
ii. Business profits not arising through a permanent establishment (2 Marks)
iii. Profits or gains arising from the operations of ships and aircraft in international traffic (2 Marks)
iv. Dividends derived by a company resident in one country from a company resident in another country (2 Marks)
v. Interest arising in one country and paid to a resident of the other country (2 Marks)

b. State THREE foreign incomes exempted from Nigerian tax. (3 Marks)

c. Discuss THREE widely recognised resolution mechanisms being used by the Nigerian government to mitigate the effect of the conflicts between double taxation agreements and Nigerian tax laws. (3 Marks)

d. Explain FOUR benefits of double taxation agreements. (4 Marks)

(Total: 20 Marks)

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  • 8 Marks

AT – April 2022 – L3 – Q1c – International taxation

Calculate chargeable income, tax payable, and foreign tax credit for Lawaaba Guo.

Lawaaba Guo is a Ghanaian born in Nigeria and has lived all his life there. He got an opportunity to relocate to Ghana and took up an appointment as a lecturer in one of the prestigious universities within the first three months of his arrival in Ghana in 2018.

He took up employment with ABB Ltd as a procurement officer. The following relates to his employment details for 2020 year of assessment:

  • Salary: GH¢200,000
  • Commission from employers: GH¢10,000
  • Interest on savings from a Bank in Ghana (Gross): GH¢1,000

His investment income and other returns received from Nigeria are as follows:

  • Dividend of US$ 12,000 net of tax. Tax of US$ 1,000 was paid.
  • Rental Income of USD 6,000 gross with tax at the rate of 10%.
  • On-line consultancy fee USD 20,000 net of tax. Tax of USD1,500 was paid.

Additional information:

  • He is married.
  • Children (2): both schooling in Nigeria.
  • Contributes to Social Security at 5.5%.
  • Exchange Rate USD1 = GH¢5.2.

Required:
Determine the following:
i) Chargeable Income
ii) Tax Payable
iii) Amount of foreign credit relief granted

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  • 4 Marks

AT – May 2021 – L3 – Q2d – International Taxation

Compute the tax payable for Ganigani Ltd considering foreign income and relinquished tax credit.

Ganigani Ltd is a company based in Ghana and has a business dealing mainly in Nigeria. In the 2020 year of assessment, the following data is relevant to parts of its operation:

  • Global income: GH¢25,000,000
  • Tax paid in Nigeria: ₦1,000,000
  • Exchange rate: GH¢1 = ₦67.59

Ganigani Ltd elects to relinquish a foreign tax credit for the year in line with section 112 of the Income Tax Act, 2015 (Act 896) as amended.

Required:
Compute the tax payable.

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  • 8 Marks

AT – May 2021 – L3 – Q1c – International Taxation | Business Income – Corporate Income Tax

Compute the tax payable by Kaeka Ltd considering both foreign and domestic income.

Kaeka Ltd is a resident company providing cleaning services in Ghana. For the first time in the history of the entity, it launched operations as an external company in January 2020 in Lusaka, Zambia. It came to light that the entity earned the equivalent of GH¢2,500,000, which was evenly made for the 2020 year of assessment. On the home front, it earned GH¢16,000,000 in the 2020 year of assessment as income in Ghana. Assume that allowable costs of GH¢12,000,000 were incurred. It received a dividend net of tax from a company in Israel it acquired shares from, amounting to GH¢20,000 in December 2020. Tax of GH¢5,000 was paid on the dividend received.

Required:
i) Compute the tax payable by Kaeka Ltd.
ii) Explain the tax implication if the company made the income from Zambia in the last quarter of 2020.

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  • 8 Marks

AT – Nov 2020 – L3 – Q3b – International taxation

Tax computation for Andrew Soweah as an individual, granting relief under the Ghana/UK Double Taxation Agreement using the credit method.

Andrew Soweah recently relocated to Ghana to commence his business after retirement from TaskForce (UK) Ltd, a security company he served for over 20 years. The nature of the business was to provide private security to diplomats and the very affluent.

Before coming to Ghana, he rented out his apartment in the UK for a yearly rent of £18,000. He also maintained a healthy balance in his account with Diamond Bank in London.

His income for 2019 year of assessment is summarized as follows:

  • Business Income (net of all taxes): GH¢126,000.
  • Dividend received from Faithful Ltd, a resident company at gross amount was GH¢18,000.
  • Rent of £16,200 was paid into his account with Diamond Bank. Withholding tax amounting to £1,800 had been deducted.
  • Diamond Bank credited his account with net of £8,100 bank interest. UK tax rate on interest is 10%.

Additional Information:

  • Exchange rate is GH¢7.5 for £1.
  • Andrew Soweah does not contribute to social security in Ghana.

Required: Compute his tax liability as an individual for the relevant year of assessment while granting him relief for double taxation under the Ghana/UK Double Taxation Agreement using the credit method.

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  • 8 Marks

AT – March 2023 – L3 – Q1b – Business income – Corporate income tax

Compute the tax payable by Manpower Ltd, considering foreign income and capital allowances.

Kofi Agyemang worked in Canada for a very long time and relocated to Ghana to benefit from the One District One Factory (1D1F) initiative. Kofi Agyemang set up a company called Manpower Ltd and was granted approval by the 1D1F Secretariat to operate a manufacturing company at Koforidua, the capital town of Eastern Region.

An extract from the accounts of Manpower Ltd for the 2021 year of assessment was as follows:

Description GH¢
Chargeable Income 2,000,000
Dividend from Val Ltd:
Ghana (gross) 100,000
Canada (net of tax) 120,000
Interest on current account from:
Ghana (gross) 80,000
Canada (net of taxes) 100,000
Rental Income:
Ghana (gross) 200,000
Canada (gross) 150,000
Depreciation 67,000

Additional information:
i) Taxes paid on the foreign income:

  • Dividend: GH¢18,000
  • Interest: GH¢15,000
  • Rental income: GH¢15,000

ii) Capital allowance agreed with the Ghana Revenue Authority amounted to GH¢140,000.

Required:
Compute the tax payable by Manpower Ltd for the 2021 year of assessment. (8 marks)

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