- 10 Marks
AT – Nov 2020 – L3 – Q2b – Tax planning
Tax implications for a Singaporean investor looking to establish shoe or juice manufacturing companies in Ghana.
Question
Following the government’s commitment to build one factory in each district in Ghana and its desire to ensure food sufficiency through the planting for food and jobs program, an investor from Singapore intends to invest in a shoe manufacturing company to be located at Accra in the Greater Accra Region of Ghana. He also considers starting a juice manufacturing company at Nsawam in the Eastern Region of Ghana in response to the investment drive of the government.
As part of the investment, he intends to incur the following cost and start operations in 2018 on either proposal, which is the shoe manufacturing company or the juice manufacturing company.
| Description | Amount (GH¢) |
|---|---|
| Building | 7,200,000 |
| Plant and Machinery | 11,700,000 |
| Furniture and Fittings | 180,000 |
| Computers | 180,000 |
Additionally, he intends to recruit fresh graduates from the All Nations University College of Ghana. It is further projected that in the first three years, 2018, 2019, and 2020, it will incur GH¢36,000, GH¢32,400, and GH¢18,000 losses, respectively. The investor hopes to start making profit from the year 2021. He intends to borrow at 20% interest from his USA associate, amounting to the equivalent of GH¢100,000,000. The equity he intends to start with is GH¢36,000,000.
Required: As a tax adviser, evaluate the proposed investment by the Singaporean investor and the tax implication on the various activities highlighted in the scenario.
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