Outright purchase – NBC Institute

AT – Nov 2020 – L3 – Q4b – Business income – Corporate income tax

Evaluate the tax implications of financing a vehicle through a finance lease arrangement versus an outright purchase for a mining company.

Question

A mining company in Ghana intends to buy a vehicle (Pajero) for official use under a finance lease arrangement or an outright purchase. The cost profile of the vehicle is as follows:

i) Outright Purchase: Cost at GH¢80,000.

ii) Finance Lease Arrangement: Cost inclusive of interest is GH¢105,000, to be paid over three years. The interest component is GH¢30,000 to be spread over the three years.

Required:
Determine which of the options you would advise to be adopted.

Answer

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Tags: Capital Allowance, Finance lease, Investment Decision, Outright purchase, Tax implications
Level: Level 3

Topic: Business income - Corporate income tax
Series: NOV 2020

Question Tag: Outright purchase

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AT – Nov 2020 – L3 – Q4b – Business income – Corporate income tax

Evaluate the tax implications of financing a vehicle through a finance lease arrangement versus an outright purchase for a mining company.

AT – Nov 2020 – L3 – Q4b – Business income – Corporate income tax

Evaluate the tax implications of financing a vehicle through a finance lease arrangement versus an outright purchase for a mining company.

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Evaluate the tax implications of financing a vehicle through a finance lease arrangement versus an outright purchase for a mining company.

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Evaluate the tax implications of financing a vehicle through a finance lease arrangement versus an outright purchase for a mining company.

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