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ATAX – May 2017 – L3 – Q7b – Petroleum Profits Tax (PPT)

Explain "Memorandum of Understanding" in PPT computation and highlight the Year 2000 MOU details.

i. Describe briefly your understanding of the term “Memorandum of Understanding” as it applies to Petroleum Profits Tax computation. (3 Marks)

ii. State FOUR highlights of the Year 2000 Memorandum of Understanding. (4 Marks)

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ATAX – May 2017 – L3 – Q6b – Corporate Tax Compliance and Reporting

Compute the Companies Income Tax liability for small businesses using the small business rate and explain the computations.

You have been provided with the following information in respect of THREE small businesses:

You are required to:
i. Compute the Companies Income Tax liability for each of the companies for the relevant assessment year, using the small business rate. (3 Marks)
ii. Give reasons for your computations. (5 Marks)

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ATAX – May 2017 – L3 – Q3a – Capital Gains Tax (CGT)

Compute Capital Gains Tax for hire purchase transactions and explain the implications of hire purchase interest on CGT.

Global Company Nigeria Limited, a construction company based in Abuja, commenced business on January 7, 2009. The company has struggled to acquire necessary equipment due to poor financial results.

At a directors’ meeting on November 6, 2012, the company decided to approach a finance house for assistance. They provided the following information:

  • The company purchased an excavator on hire purchase on March 1, 2013, and paid a deposit of N32,000,000.
  • The excavator’s cost price was N55,000,000, with the balance payable in 25 monthly installments of N1,200,000 starting April 1, 2013.

The excavator was sold as follows:

  1. For N65,000,000 after installment payments on January 1, 2014.
  2. For N69,000,000 after installment payments on November 1, 2014.

You are required to:

i. Calculate the Capital Gains Tax (CGT) for the relevant Assessment Year, assuming the sales values above. (14 Marks)
ii. Explain the implications of hire purchase interest on Capital Gains Tax computations. (2 Marks)

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ATAX – May 2019 – L3 – Q7b – Corporate Tax Compliance and Reporting

Compute the total tax liabilities for Alaba Trading Limited for the 2018 assessment year, considering its assessable profit, capital allowances, and dividend payable.

For the assessment year 2018, below are the extracts from the tax computations of Alaba Trading Limited:

Item Amount (₦)
Assessable profit 8,200,000
Capital allowances 5,400,000
Dividend payable 6,000,000

Required:
Determine the total tax liabilities of Alaba Trading Limited for the assessment year.

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ATAX – May 2019 – L3 – Q1b – Petroleum Profits Tax (PPT)

Assess and compute the assessable profit, chargeable profit, chargeable tax, and total tax payable for a petroleum company, based on financial data.

b. Priceless Oil Limited commenced crude oil production in Nigeria in 2006. The company has provided the following financial report for the year ended December 31, 2018:

Additional Information:

  1. Posted price for exported crude oil averaged $52/barrel (at an exchange rate of ₦306 to $1).
  2. Included in other income: ₦38,000,000 from crude transportation (cost: ₦16,250,000).
  3. Natural gas contract with Tommy Limited: value ₦655,000,000, load factor 54%.
  4. Depreciation of ₦120,250,000 was included in production costs.
  5. Qualifying capital expenditures:
Type Date Location Amount (₦)
Storage tank March 12, 2018 On-shore 23,500,000
Plant and equipment November 15, 2018 Continental Shelf of 130
metres of water depth
75,000,000
  1. Capital allowances brought forward: ₦33,700,000; for the year: ₦88,500,000.
  2. Admin expenses include ₦3,500,000 stamp duties for debentures.
  3. Specific bad debts written off: ₦39,500,000.
  4. Donations were wholly expended for petroleum operations.
  5. ₦12,250,000 was paid to retrieve petroleum-related data (included in miscellaneous expenses).
  6. ₦20,500,000 interest was paid to an associate company at market rate.

Prepare and submit a report on the following computations:
i. Assessable profit (12 Marks)
ii. Chargeable profit (6 Marks)
iii. Chargeable tax (6 Marks)
iv. Total tax payable (6 Marks)

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ATAX – May 2019 – L3 – Q1a – Petroleum Profits Tax (PPT)

Assess and compute the assessable profit, chargeable profit, chargeable tax, and total tax payable for a petroleum company, based on financial data.

In line with provisions of the Petroleum Profits Tax Act Cap P13 LFN 2004 (as amended), explain “accounting period” of a petroleum exploration company. (2 Marks)

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AT – Nov 2014 – L3 – SC – Q7 – Capital Gains Tax (CGT)

Compute total income for 2011 tax assessment and capital gains tax for relevant year.

Mr. James Zonto lived in Canada for thirty years and decided to settle down permanently in Nigeria with effect from January 2007.

Based on advice from his secondary school classmate, Mr. James Zonto repatriated a huge amount of money to Nigeria. He took advantage of the better investment climate in Nigeria and acquired the following properties:

  1. Uyo Duplex: Bought on 2 March 2008 for N25,320,000. Rental income: N855,000 per annum (net of withholding tax).
  2. Fixed Deposit Account: Invested N14,000,000 on 4 January 2008 with Doronine Bank Plc, yielding interest (net of withholding tax) of N180,000 per month.
  3. Onitsha Property: Acquired on 6 October 2008 for N31,500,000 with incidental expenses of N2,400,000. Annual rent: N1,800,000.
  4. Okija House: Bought for N10,000,000 as a personal residence; not rented out.

In 2012, he decided to resettle in Toronto and took the following actions:

  • Uyo House: Sold for N47,450,000 after incurring the following expenses:
    • Advertising: N650,000
    • Valuation fees: N2,000,000
    • Estate Agent’s Commission: N2,372,500
    • Legal fees: N1,500,000
  • Fixed Deposit: Matured on 31 December 2011; not rolled over.
  • Onitsha Property: Sold one of the four duplexes for N14,175,000. Remaining duplexes valued at N40,500,000.
  • Okija House: Sold for N36,500,000 after incurring incidental expenses of N3,650,000.

Required:
(a) Compute the Total Income for Income Tax purposes for 2011 year of assessment.
(b) Compute the Capital Gains Tax payable for the relevant year of assessment.

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ATAX – May 2021 – L3 – Q2 – Tax Incentives and Reliefs

Computation of adjusted profit and tax liabilities for Nature Agricultural Products Limited under pioneer status.

The quest for economic development in every sector of the country has enabled the Federal Government to come up with various tax incentives, especially for pioneer companies.

Nature Agricultural Products Limited, a medium-sized company, was incorporated on January 10, 2015, as a manufacturer of animal feeds. The company thereafter applied for a pioneer status and was granted a pioneer certificate with a production day of March 1, 2015.

The following details were provided in respect of the business operations of the company:

(i)

(ii.) Capital expenditure incurred on or before February 28, 2018:

(iii) Accumulated profit as at February 28, 2018= N3,968,000
The management of the company did not apply for extension of the pioneer period.

Required:

a. Compute the adjusted profit for the relevant years. (3 Marks)

b. Compute the tax liabilities for the relevant assessment years. (17 Marks)

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ATAX – Nov 2018 – L3 – Q4b – Capital Gains Tax (CGT)

Computation of capital gains tax for jewelry sold on installment with multiple assessment years.

(b) Fidelis Agom recently decided to relocate to Sweden as a result of a new appointment offered to him by a multinational company. His wife, Chioma, decided to sell all her jewelry, which she acquired for a sum of N6.3 million. The buyer, Chief Mrs. Ngozi Danladi, was unable to pay immediately the sum of N8.4 million. She therefore decided to enter into a sale agreement with Chioma Agom to pay in four installments within an interval of three months as follows:

  • N3.5 million
  • N2.1 million
  • N2.1 million
  • N0.7 million

The first installment was paid on November 10, 2013, which was the day of the sale.

You are required to:
Compute the capital gains tax for the relevant years of assessment.
(5 Marks)

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ATAX – Nov 2018 – L3 – Q2 – Taxation of Specialized Businesses

Calculation of petroleum profits tax for Olu Oil Limited considering local and export crude oil sales, gas contracts, and various expenses.

Olu Oil Limited has been in the oil prospecting business in one of the major oil fields in the Niger Delta region of Nigeria since 2009. The company has provided the following operational results for the year ended December 31, 2015:

(i) Type of crude oil and sales statistics:

  • Bonny Light: 35,000 barrels exported at 39º API
  • Bonny Medium: 25,200 barrels exported at 35º API
  • Forcados: 16,300 barrels exported at 32º API

Price per barrel:

  • Bonny Light: $52.03 at 35º API
  • Bonny Medium: $49.04 at 35º API
  • Forcados: $48.29 at 35º API

Adjustment for API variance: Actual realized price was arrived at after adjusting for the variance in API. Thus, for every API, $0.03 was the variance in price at 35º API.

(ii) Local sales of crude oil: 32,750 barrels of crude oil was produced and sold in the domestic market at the rate of N345 per barrel.

(iii) Natural gas sales from two contracts:

Contract Value (N) Load Factor
Obi Ltd 42,285,000 62
Oba Ltd 27,775,000 74

(iv) Miscellaneous income: N125,800,300, including N105,500,000 from the sale of refined petroleum products. Attributable expenses of N88,240,000 were included in management and administrative expenses.

(vi) Miscellaneous income included N105,500,000, from the sale of refined petroleum products. An equivalent attributable expenses of N88,240,000 was included in management and administrative expenses.
(vii) Interest paid included N5,350,000, which was paid to Prince Limited, an associated company.
(viii) Donations included:

(ix) The pension scheme was approved by the Joint Tax Board.

(x) Exchange loss on remittance amounting to N3,200,000 was included in management and administrative expenses.
(xi) The schedule of qualifying capital expenditure includes:

(xii) Capital allowances brought forward was N12,700,000.
(xiii) The rate of exchange was N360 to a US Dollar.
(xiv) NNPC provides the relevant schedule as follows:

Required:
Evaluate the transactions and advise the management on:
(a.) Assessable profit (14 Marks)
(b.) Chargeable profit (2 Marks)
(c.) Chargeable tax (2 Marks)
(d.) Total tax liability payable (2 Marks)

 

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PT – Nov 2021 – L2 – Q5b – Taxation of Capital Gains

Calculate the capital gains tax on the sale of shares by Maame Adwoa Konadu Yiadom.

Maame Adwoa Konadu Yiadom is a shareholder of Asokwa Company Ltd, a company not listed on the Ghana Stock Exchange Market. Maame Adwoa Konadu Yiadom transacted the following business with Asokwa Company Ltd:

  • 1 January 2010 purchased 100,000 ordinary shares for GH¢50,000.
  • 30 June 2015 purchased 100,000 ordinary shares at a price of GH¢0.60 per share.
  • 1 January 2020 Maame Adwoa Konadu Yiadom accepted a rights offer of 1 share for every 10 shares held as at 31 December 2019 at a price of GH¢0.50 per share.
  • 31 December 2020 Maame Adwoa Konadu Yiadom sold 50,000 shares for GH¢60,000, paying a commission of 2% of the sale value to the brokerage firm that facilitated the sale. The current market price per share on the market is GH¢1.12 per share.

Required:
Calculate the capital gain tax, if any.

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PT – Nov 2021 – L2 – Q4a – Corporate Tax Liabilities

Calculate the capital allowance claimable for NASA Ltd for the years 2017-2020 based on its non-current assets.

NASA Ltd commenced business on 1 October 2017, preparing accounts to 31 December each year. Accordingly, the company has the following extracts from its financial records on non-current assets:

Year 2017

  • Purchased Office furniture and fittings costing GH¢40,000.
  • Purchased office Air conditioners at the cost of GH¢20,000.
  • The company bought a land costing GH¢55,000.
  • Bought office building at the cost of GH¢700,000.
  • Purchased a computer at the cost of GH¢1,500.
  • Purchased office Photocopier at the cost of GH¢2,500.

Year 2018

  • Purchased a Television Set for the office at the cost of GH¢3,500.
  • Bought a 4×4 Vehicle (7-passenger-seater) for an amount of GH¢200,000.
  • Purchased a File Cabinet for GH¢2,000.

Year 2019

  • Exchanged the vehicle bought in 2018 for four plots of land valued at GH¢200,000.
  • Paid for a Trade Mark costing GH¢15,000, which was licensed for ten years.
  • Purchased a business that resulted in Goodwill of GH¢100,000. The company decided to amortize the goodwill over 20 years.

Year 2020

  • Bought a home-used motor vehicle at the cost of GH¢70,000.
  • Purchased office computers for GH¢5,000.
  • Purchased Trucks and Trailers for GH¢50,000.
  • Sold some of the office furniture for GH¢3,000.

Required:
Calculate the amount of capital allowance claimable for 2017, 2018, 2019, and 2020 years of assessment. (16 marks)

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PT – Nov 2020 – L2 – Q5b – Withholding Tax Administration

Compute withholding taxes on goods, services, and works for resident companies.

The following relates to payments by Manita Ltd, a company resident in Ghana, to another resident company. Both companies are not exempt from withholding taxes:

Description Amount (GH¢)
Goods 3,000,000
Services 1,200,000
Works 2,000,000

Upon scrutiny of the company’s records, the following additional information emerged:
i) It came to light that the goods above include a dividend payment of 10%.
ii) The services above relate to 50% management and technical services and 50% consultancy services.

Required:
Compute the withholding taxes payable (if any) and state TWO (2) reasons for withholding tax imposition. (6 marks)

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PT – Nov 2021 – L2 – Q3 – Income Tax Liabilities

Calculate Agyeiwaa Grace’s taxable income for the 2020 year of assessment and explain gains and profits from employment.

Agyeiwaa Grace (Agyeiwaa), aged 56, is a foreign languages teacher at Mountaintop School, a private boarding school in Koforidua. Agyeiwaa has been in the teaching profession for the past 30 years. On 1 January 2020, the school promoted Agyeiwaa to head the languages department, which is a management position. She could also be subcontracted to other schools, institutions, and foreign language associations to assist their teachers and candidates during her free time. Agyeiwaa also holds a contract with the Ministry of Foreign Affairs and Regional Integration as an interpreter on a consultancy services basis.
On 5 January 2020, Agyeiwaa entered into a consultancy agreement with the Ministry of Education to translate some local textbooks. The project is for three years ending on 31 December 2022. Payment is only effected on completion of the translation of the textbooks, and the agreed amount is GH¢30,000 per translated textbook.

Details of Agyeiwaa’s income for the year ended 31 December 2020 are as follows:

Employment income and benefits
i) Agyeiwaa receives a gross monthly salary of GH¢4,000 and an annual bonus of GH¢12,000, payable in December.
ii) Responsibility allowance of GH¢6,960 per annum.
iii) Agyeiwaa makes use of a fully furnished house in the school’s staff residential area. The school deducts a monthly rent of GH¢100 from Agyeiwaa’s salary.
iv) Upon Agyeiwaa’s appointment as the languages department head, the school provided her with a new motor vehicle with fuel for her official use.
v) Agyeiwaa contributes 2.5% of her monthly salary to a registered pension fund. The school contributes 2.5% to a provident fund on behalf of Agyeiwaa.
vi) The school deducts her statutory social security contributions at source.
vii) Agyeiwaa received a total of GH¢12,000 inconvenience allowances from the Mountaintop School during the year.
viii) The school deducts the following amounts monthly from Agyeiwaa’s salary upon her instruction and pays the appropriate amounts to the institutions concerned:

  • Subscriptions to the Ghana National Association of Teachers: GH¢15
  • Life insurance policy to Royal Life Insurance Services: GH¢50

Other non-employment income
i) Agyeiwaa successfully translated four textbooks under the terms of her contract with the Ministry of Education during 2020.
ii) Agyeiwaa’s bank account was credited with a total of GH¢15,000, representing rental income collected by an estate agent regarding residential property owned by Agyeiwaa in Kumasi.
iii) Agyeiwaa services amounted to a gross of GH¢30,000 for her subcontract work with other schools and foreign language associations. Agyeiwaa paid Mountaintop School 10% of this amount under the terms of a standing arrangement for the use of the school’s resources.
iv) The Ministry of Foreign Affairs and Regional Integration paid Agyeiwaa GH¢9,250 net for her services as an interpreter during the year.

Required:
a) Calculate Agyeiwaa’s taxable income for the 2020 year of assessment. (14 marks)
b) Explain FOUR (4) possible individual gains and profits from an employment for a year of assessment. (6 marks

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PT – Nov 2021 – L2 – Q1a – Income Tax Liabilities

Assess the tax payable on a capital transfer from retained earnings to stated capital based on the details provided.

Kawukudi Ltd intends to increase its capital requirement. Therefore, it applied to the Registrar General with the following:

Retained Earnings Account (GHȼ)

  • Balance b/fwd: 100,000
  • Transfer from income statement: 1,200,000
  • Transfer to stated capital: (600,000)
  • Balance c/fwd: 700,000

Required:
Assess with explanation the tax payable under this circumstance.

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PT – Mar 2024 – L2 – Q5b -Taxation of Capital Gains

Compute the tax payable by Atta Panin on the sale of shares.

The following information relates to Atta Panin:

Required:
Compute the tax payable. (5 marks)

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PT – Mar 2024 – L2 – Q3c – Income Tax Liabilities

Compute the assessable income for all relevant years for Hajia Bintu after ceasing operations.

Hajia Bintu has been in business from 1 September 2018, preparing accounts to 31 August each year. She ceased to operate the business on 31 May 2023. The agreed profits for the past years of operations are as follows:

Year Agreed Profits (GH¢)
Year to 30/8/2019 18,000,000
Year to 30/8/2020 23,000,000
Year to 30/8/2021 28,000,000
Year to 30/8/2022 33,000,000
Period to 31/5/2023 50,000,000

Required:
Calculate the assessable income for all relevant years.

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PT – Mar 2024 – L2 – Q3a – Income Tax Liabilities

Distinguish between the Year of Assessment and Basis Period as used in income taxation.

The determination of a person’s tax liability is in relation to the concept of “Year of Assessment” and “Basis Period”.

Required:
In relation to the statement above, distinguish between the concept of Year of Assessment and Basis Period as used in income taxation.

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AT – Nov 2018 – L3 – Q5b – Business income – Corporate income tax

Computation of taxes payable by a mining support services company, including adjustments for dividends, tax losses, and investment deductions.

Manla Ltd, since its incorporation, has been providing Mining Support Services (MSS) in line with its mandate, and the following is relevant to its operations for the 2017 year of assessment:

Details GH¢
Chargeable income 240,000,000
Loss from investment deducted in arriving at the chargeable income 700,000
Dividend (gross) received from A Ltd (a mining company) where Manla Ltd has 26% voting power 20,000
Provision for bad debts written off 400,000
Tax loss from 2014 deducted 20,000
Net dividend received from a US-based company after 5% withholding tax 9,500
Items worth GH¢ 60,000 granted to a powerful shareholder were adjusted in arriving at chargeable income 60,000

(Note: Manla Ltd has a basis period from January to December.)

Required:
i) Compute the taxes payable by Manla Ltd. (6 marks)
ii) Comment on the treatment of the investment loss of GH¢700,000. (2 marks)

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AT – Nov 2018 – L3 – Q5a – Petroleum operations, Capital allowance

Computation of tax payable for a petroleum company, including adjustments for financial gains, costs, and capital allowances.

The following is relevant for the operation of AB Ltd, operating in the upstream petroleum sector for the 2017 year of assessment:

Details $
Revenue 100,000,000
Cost 80,000,000
Profit 20,000,000

The following additional information forms part of the above:

  • The revenue includes financial gain from swaps of $1,000,000.
  • The financial cost of $1,200,000 was added to the cost.
  • The cost includes depreciation of $200,000.
  • Research and development (R&D) of $100,000 was added to the cost of operation.
  • Revenue on 20,000 barrels of oil sold was added to revenue. The price used on the 20,000 barrels was $70 in its tax returns, but the agreed price is now $67, certified by the Petroleum Unit of the Ghana Revenue Authority.
  • Written down value (WDV) as of 31/12/2016 was $1,800,000 after granting capital allowance the second time as of 2016 year-end. This information is yet to be adjusted.

Required:
i) Compute the tax payable. (6 marks)
ii) Comment on the deductibility of financial cost in petroleum operations. (2 marks)

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