- 6 Marks
AT – NOV 2021 – L3 – Q1a – Business income – Corporate income tax | International taxation
Compute tax payable for a Free Zone Enterprise based on income from local and export sales and determine the treatment of certain adjustments.
Question
Orga Ltd has the following information relating to its operation as a Free Zone Enterprise for the 2020 year of assessment with a basis period from January to December each year:
| Description | Amount (GH¢) |
|---|---|
| Revenue | 35,000,000 |
| Cost | (21,000,000) |
| Profit | 14,000,000 |
Additional information:
- Depreciation of GH¢200,000 has been added to the cost above.
- Revenue: Local sales GH¢25,000,000; Exports GH¢10,000,000.
- The Managing Director was provided with a mini bar and a swimming pool as part of his employment package costing GH¢1,200,000 in his private residence. The employer added only GH¢200,000 as part of the employment income for tax purposes. The total cost has been adjusted to the cost above.
- The dividend received from the United States of America net of taxes of 10% was GH¢22,500. This income has not yet been recorded, although it has been credited in the bank statement.
- The excess proceeds from the sale of a depreciable asset over the written down value amount to GH¢300,000. This has not yet been recorded in the company’s accounts.
Required:
i) Compute the tax payable. (6 marks)
ii) Explain the tax treatment of the cost of the swimming pool and mini bar. (2 marks)
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