- 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.
Question
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:
- 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%
- 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.
- Two vehicle engines, each costing GH¢80,000, were purchased by both companies. Pool 2 had a written down value of GH¢200,000.
- 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)
Find Related Questions by Tags, levels, etc.
- Tags: chargeable income, Dividends, Foreign tax payment, Tax computation, Tax law
- Level: Level 3
- Topic: Business income - Corporate income tax, Tax planning
- Series: AUG 2022
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