- 6 Marks
AT – March 2023 – L3 – Q2b – Business income – Corporate income tax
Discuss the tax implications of expenditures incurred for shareholders, executive directors, and non-executive directors.
Question
Mamba, a company resident in Ghana, has spent the following amounts on its officers for 2020 and 2021 years of assessment:
| Expenditure | Shareholders (GH¢) | Executive Directors (GH¢) | Non-Executive Directors (GH¢) |
|---|---|---|---|
| 2020 | 10,000,000 | 2,000,000 | 3,000,000 |
| 2021 | 20,000,000 | 3,000,000 | 3,000,000 |
The breakdown of the expenditure is as follows:
- Shareholders: The company spent half the amounts for each of the years for its Annual General Meeting (AGM). The rest of the amount was spent on scholarships for shareholders’ children’s educational scholarships.
- Executive Directors: The amount spent in 2020 was on providing security arrangements in the private residence of the Managing Director. The 2021 amount was spent on recreational facilities at the Deputy Managing Director’s private home.
- Non-Executive Directors: The amounts for both years were spent to provide the directors with employable skills on the international arena when they exit as non-directors.
Required:
Enumerate the tax implication of these expenditures and comment on how the Ghana Revenue Authority would treat each of the expenditures. (6 marks)
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