- 6 Marks
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.
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