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ATAX – May 2017 – L3 – Q1 – Overview of Advanced Taxation

Explain tax concepts and calculate Companies Income Tax due for Rex Pharmaceuticals.

Question

You are the Tax Controller of Rex Pharmaceuticals (Nigeria) Limited having its Head Office in Ketu, Epe Local Government of Lagos State.

In the past three years, the company had been subjected to taxes by different Revenue Authorities within Lagos State and indeed, the entire country.

Apart from the Companies Income Tax, the issue of Withholding Tax is an area where the company’s management is very much concerned. The Managing Director is worried that this multiplicity of taxes is taking its toll on the company’s financials.

The company is already facing myriads of problems ranging from outrageous cost of capital which had led to increase in cost of production and attendant decrease in profit. The company’s goods are becoming uncompetitive, compared to imported goods. The long-term effect is either reduction in workforce or relocation to a more favorable economic climate.

The Managing Director summoned you to his office and among the issues raised at the meeting were:

(i) as a corporate body, the company ought not to be subjected to multiplicity of taxes beyond the Companies Income Tax;
(ii) the jurisdiction of the tiers of Government in imposition and collection of taxes;
(iii) the Withholding Tax;
(iv) the Pay As You Earn as it affects the staff; and
(v) the Capital Gains Tax.

You have also been informed of the following:

The company’s technical agreement with the foreign Head Office and the need to remit funds;
The Non-Executive Directors;
The Non-Resident directors are to receive N2,500,000;
Centralization of staff PAYE deductions;
Dividend payment to shareholders in different parts of the country. Those resident in Kogi are to receive N375,000;
Land for a factory in Abuja purchased from Alhaji Garuba Maito who resides in Kano;
Rex Pharmaceuticals received N4,500,000 as Net dividend from an associated company Laiketop Limited for the year ended September 30, 2014. In the Audited Financial Statements of Rex Pharmaceuticals for the year ended December 31, 2015, a dividend of N9,500,000 was proposed. Out of this amount, N3,500,000 was from dividend received from Laiketop Limited while the balance was from a Total Profit of N22,500,000 from other trading activities;
At present, out of the thirty employees in Abuja, five are resident in Suleja, Niger State.

Required:

(a) Explain briefly the following:
i. Capital Gains Tax
ii. Withholding Tax
iii. Double Taxation Treaty
iv. Multiple Taxation (12 Marks)

(b) Discuss measures put in place by the government to reduce cases of multiple taxation. (6 Marks)

(d) Determine the Companies Income Tax due from Rex Pharmaceuticals Limited for the year ended December 31, 2015. (6 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital gains tax, Companies Income Tax, Constitutional Tax Jurisdiction, Double Taxation, Multiple Taxation, PAYE, Withholding Tax
Level: Level 3

Topic: Overview of Advanced Taxation

AT – May 2018 – L3 – SA – Q1 – Taxation of Corporations

Discuss multiple taxation, jurisdiction, withholding tax, and penalties related to Rex Pharmaceuticals.

Question

You are the tax controller of Rex Pharmaceuticals (Nigeria) Limited, having its head office at Ketu in Epe local government of Lagos State.

In the past three years, the company had been subjected to an array of taxes by different revenue authorities within Lagos State and indeed the entire country.

Apart from the Companies Income Tax, Withholding Tax is another tax that the company‟s management is concerned about. The Managing Director is very much worried that this multiplicity of taxes is taking its toll on the company‟s financials.

The company is already facing myriads of problems ranging from high cost of capital which led to increase in cost of production and attendant reduction in profit. The company‟s goods are becoming uncompetitive compared with imported similar goods. The long term effect is either reduction in work force or relocation to a more favourable economic environment. The Managing Director has invited you to his office to discuss the following issues:

(i) Whether as a corporate body, the company ought to be subjected to myriads of taxes beyond the corporate tax;

(ii) The jurisdiction of the tiers of government in the imposition and collection of taxes;

(iii) Withholding Tax;

(iv) Pay-As-You-Earn (PAYE) as it affects the staff; and

(v) Capital Gains Tax.

You have also been provided with the following information:

The company‟s technical agreement with the foreign head office and the need to remit funds;
Non-resident directors are to receive N2,500,000;
Staff P.A.Y.E has been centralised;
Dividend has been paid to shareholders in different parts of the country, and those resident in Kogi State of Nigeria, received N375,000;
Land for a factory in Abuja was purchased from Alhaji Garuba Maito who resides in Kano;
The company received N4,500,000 as net dividend from an associated company, Laiketop Limited, for the year ended September 30, 2014;
In the audited financial statements of Rex Pharmaceuticals for the year ended December 31, 2015, a dividend of N9,500,000 was proposed. Out of this amount, N3,500,000 was from dividend received from Laiketop Limited while the balance was from a Total Profit of N22,500,000 from other trading activities; and
Out of the thirty employees in Abuja, five are resident in Suleja, Niger State.

You are required to prepare a memo to the Managing Director explaining the following:

(a) i. Double/Multiple Taxation.
ii. Double Taxation Treaty.
iii. Multiple Taxation in Nigeria.
iv. Measures put in place to reduce cases of multiple taxation in Nigeria.
v. Withholding Tax with respect to (i) to (v).
vi. Penalty for non-deduction/remittance of Withholding Tax. (12 Marks)

(b) The arms of government empowered to legislate on tax matters by the Constitution. (4 Marks)

(d) i. The appropriate description of the income received from Laiketop Limited.
ii. The tax due from other trading activities of Rex Pharmaceuticals.
iii. Amount to be recouped by Rex Pharmaceuticals, if any.
iv. Net amount received by shareholders of Rex Pharmaceuticals.
v. Relevant section of the law to buttress your points in (i) and (ii) above. (10 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital gains tax, Corporate Tax, PAYE, Tax Compliance, Tax Planning, Withholding Tax
Level: Level 3

Topic: Taxation of Companies
Series: MAY 2018

AT – NOV 2018 – L3 – Q2C – Business income – Corporate income tax, Tax administration in Ghana

Calculate taxable income and tax payable for an individual with multiple income sources, and identify tax compliance issues for a private practice.

Question

c) Kate Oppong, a physically challenged, works for the Ministry of Health as an eye surgeon and optician based at Komfo Anokye Teaching hospital in Kumasi. She dedicates most of her free time to her private practice, as well as writing books and articles for the Ghana Medical Journal. Kate is also part of the medical team for the local NGO and Sight Restoration, which is involved in cataract surgery for the disadvantaged members of society in remote rural areas.

Kate’s private practice is located in Kumasi and has a staff complement of six employees who are all full time workers. Kate only attends to the patients at her private practice strictly by appointment and her patient base has been steadily growing due to her experience and dedication.

In terms of her service contract with Sight Restoration, Kate is required to participate in all the cataract operations scheduled for the year. Her service contract is for a year, subject to renewal as and when donor support is available.Sight Restoration’s field staff, of which Kate is one, are paid a predetermined monthly salary plus an attendance allowance which is paid only after each cataract operation. The field staff is also entitled to a one-off representation allowance for participating in scheduled seminars.

Kate Oppong’s earnings and deductions for the year ended 31 December 2017 were:

Notes:

This amount is part repayment of the interest free personal loan of GH¢12,000 advanced to Kate on 1 January, 2017, repayable over two years. The Bank of Ghana interest rate for the year ended 31 December 2017 was constant at 20%.
This amount was fully expended towards the travelling costs for Kate and her minor son for his medical treatment in South Africa.
No employees tax (PAYE) or corporate income tax was paid in respect of the amounts paid to the employees of the private practice (including Kate) or the profits from the practice. This was because in Kate’s opinion her operations were ‘private’ and as such not subject to tax and also because she believed that she was already contributing her fair tax share from her other two employers.
Kate is a single parent and takes care of her single son in the senior high school. She also takes full responsibility of her aged mother.

Required:

i) State the Ghana Revenue Authority’s (GRA) requirements which have been breached by Kate Oppong and consequences of the breach based on the information given in note (3). (5 marks)

ii) Calculate the taxable income of and income tax payable by Kate Oppong for the year ended 31 December 2017. Note: All computations should be rounded to a whole cedi. (9 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Benefits in kind, Corporate Tax, Employment Income, NGO income, PAYE, Personal income tax, Private practice income, Tax Compliance
Level: Level 3

Topic: Business income - Corporate income tax, Tax administration in Ghana
Series: NOV 2018

ATAX – May 2017 – L3 – Q1 – Overview of Advanced Taxation

Explain tax concepts and calculate Companies Income Tax due for Rex Pharmaceuticals.

Question

You are the Tax Controller of Rex Pharmaceuticals (Nigeria) Limited having its Head Office in Ketu, Epe Local Government of Lagos State.

In the past three years, the company had been subjected to taxes by different Revenue Authorities within Lagos State and indeed, the entire country.

The Managing Director summoned you to his office and among the issues raised at the meeting were:

You have also been informed of the following:

The company’s technical agreement with the foreign Head Office and the need to remit funds;
The Non-Executive Directors;
The Non-Resident directors are to receive N2,500,000;
Centralization of staff PAYE deductions;
Dividend payment to shareholders in different parts of the country. Those resident in Kogi are to receive N375,000;
Land for a factory in Abuja purchased from Alhaji Garuba Maito who resides in Kano;
Rex Pharmaceuticals received N4,500,000 as Net dividend from an associated company Laiketop Limited for the year ended September 30, 2014. In the Audited Financial Statements of Rex Pharmaceuticals for the year ended December 31, 2015, a dividend of N9,500,000 was proposed. Out of this amount, N3,500,000 was from dividend received from Laiketop Limited while the balance was from a Total Profit of N22,500,000 from other trading activities;
At present, out of the thirty employees in Abuja, five are resident in Suleja, Niger State.

Required:

(a) Explain briefly the following:
i. Capital Gains Tax
ii. Withholding Tax
iii. Double Taxation Treaty
iv. Multiple Taxation (12 Marks)

(b) Discuss measures put in place by the government to reduce cases of multiple taxation. (6 Marks)

(d) Determine the Companies Income Tax due from Rex Pharmaceuticals Limited for the year ended December 31, 2015. (6 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital gains tax, Companies Income Tax, Constitutional Tax Jurisdiction, Double Taxation, Multiple Taxation, PAYE, Withholding Tax
Level: Level 3

Topic: Overview of Advanced Taxation

AT – May 2018 – L3 – SA – Q1 – Taxation of Corporations

Discuss multiple taxation, jurisdiction, withholding tax, and penalties related to Rex Pharmaceuticals.

Question

You are the tax controller of Rex Pharmaceuticals (Nigeria) Limited, having its head office at Ketu in Epe local government of Lagos State.

In the past three years, the company had been subjected to an array of taxes by different revenue authorities within Lagos State and indeed the entire country.

(i) Whether as a corporate body, the company ought to be subjected to myriads of taxes beyond the corporate tax;

(ii) The jurisdiction of the tiers of government in the imposition and collection of taxes;

(iii) Withholding Tax;

(iv) Pay-As-You-Earn (PAYE) as it affects the staff; and

(v) Capital Gains Tax.

You have also been provided with the following information:

The company‟s technical agreement with the foreign head office and the need to remit funds;
Non-resident directors are to receive N2,500,000;
Staff P.A.Y.E has been centralised;
Dividend has been paid to shareholders in different parts of the country, and those resident in Kogi State of Nigeria, received N375,000;
Land for a factory in Abuja was purchased from Alhaji Garuba Maito who resides in Kano;
The company received N4,500,000 as net dividend from an associated company, Laiketop Limited, for the year ended September 30, 2014;
In the audited financial statements of Rex Pharmaceuticals for the year ended December 31, 2015, a dividend of N9,500,000 was proposed. Out of this amount, N3,500,000 was from dividend received from Laiketop Limited while the balance was from a Total Profit of N22,500,000 from other trading activities; and
Out of the thirty employees in Abuja, five are resident in Suleja, Niger State.

You are required to prepare a memo to the Managing Director explaining the following:

(b) The arms of government empowered to legislate on tax matters by the Constitution. (4 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital gains tax, Corporate Tax, PAYE, Tax Compliance, Tax Planning, Withholding Tax
Level: Level 3

Topic: Taxation of Companies
Series: MAY 2018

AT – NOV 2018 – L3 – Q2C – Business income – Corporate income tax, Tax administration in Ghana

Calculate taxable income and tax payable for an individual with multiple income sources, and identify tax compliance issues for a private practice.

Question

Kate Oppong’s earnings and deductions for the year ended 31 December 2017 were:

Notes:

This amount is part repayment of the interest free personal loan of GH¢12,000 advanced to Kate on 1 January, 2017, repayable over two years. The Bank of Ghana interest rate for the year ended 31 December 2017 was constant at 20%.
This amount was fully expended towards the travelling costs for Kate and her minor son for his medical treatment in South Africa.
No employees tax (PAYE) or corporate income tax was paid in respect of the amounts paid to the employees of the private practice (including Kate) or the profits from the practice. This was because in Kate’s opinion her operations were ‘private’ and as such not subject to tax and also because she believed that she was already contributing her fair tax share from her other two employers.
Kate is a single parent and takes care of her single son in the senior high school. She also takes full responsibility of her aged mother.

Required:

i) State the Ghana Revenue Authority’s (GRA) requirements which have been breached by Kate Oppong and consequences of the breach based on the information given in note (3). (5 marks)

ii) Calculate the taxable income of and income tax payable by Kate Oppong for the year ended 31 December 2017. Note: All computations should be rounded to a whole cedi. (9 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Benefits in kind, Corporate Tax, Employment Income, NGO income, PAYE, Personal income tax, Private practice income, Tax Compliance
Level: Level 3

Topic: Business income - Corporate income tax, Tax administration in Ghana
Series: NOV 2018

Question Tag: PAYE

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ATAX – May 2017 – L3 – Q1 – Overview of Advanced Taxation

Explain tax concepts and calculate Companies Income Tax due for Rex Pharmaceuticals.

AT – May 2018 – L3 – SA – Q1 – Taxation of Corporations

Discuss multiple taxation, jurisdiction, withholding tax, and penalties related to Rex Pharmaceuticals.

AT – NOV 2018 – L3 – Q2C – Business income – Corporate income tax, Tax administration in Ghana

Calculate taxable income and tax payable for an individual with multiple income sources, and identify tax compliance issues for a private practice.

ATAX – May 2017 – L3 – Q1 – Overview of Advanced Taxation

Explain tax concepts and calculate Companies Income Tax due for Rex Pharmaceuticals.

AT – May 2018 – L3 – SA – Q1 – Taxation of Corporations

Discuss multiple taxation, jurisdiction, withholding tax, and penalties related to Rex Pharmaceuticals.

AT – NOV 2018 – L3 – Q2C – Business income – Corporate income tax, Tax administration in Ghana

Calculate taxable income and tax payable for an individual with multiple income sources, and identify tax compliance issues for a private practice.

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ATAX – May 2017 – L3 – Q1 – Overview of Advanced Taxation

Explain tax concepts and calculate Companies Income Tax due for Rex Pharmaceuticals.

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AT – May 2018 – L3 – SA – Q1 – Taxation of Corporations

Discuss multiple taxation, jurisdiction, withholding tax, and penalties related to Rex Pharmaceuticals.

You're reporting an error for "AT – May 2018 – L3 – SA – Q1 – Taxation of Corporations"

AT – NOV 2018 – L3 – Q2C – Business income – Corporate income tax, Tax administration in Ghana

Calculate taxable income and tax payable for an individual with multiple income sources, and identify tax compliance issues for a private practice.

You're reporting an error for "AT – NOV 2018 – L3 – Q2C – Business income – Corporate income tax, Tax administration in Ghana"

ATAX – May 2017 – L3 – Q1 – Overview of Advanced Taxation

Explain tax concepts and calculate Companies Income Tax due for Rex Pharmaceuticals.

You're reporting an error for "ATAX – May 2017 – L3 – Q1 – Overview of Advanced Taxation"

AT – May 2018 – L3 – SA – Q1 – Taxation of Corporations

Discuss multiple taxation, jurisdiction, withholding tax, and penalties related to Rex Pharmaceuticals.

You're reporting an error for "AT – May 2018 – L3 – SA – Q1 – Taxation of Corporations"

AT – NOV 2018 – L3 – Q2C – Business income – Corporate income tax, Tax administration in Ghana

Calculate taxable income and tax payable for an individual with multiple income sources, and identify tax compliance issues for a private practice.

You're reporting an error for "AT – NOV 2018 – L3 – Q2C – Business income – Corporate income tax, Tax administration in Ghana"

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