Subject: PRINCIPLES OF TAXATION

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PT- Nov 2024 – L2 – Q5d – Data Analytics in Taxation

Explain how data analytics can be used to detect tax evasion and provide examples of how GRA might use data analytics to enhance tax compliance.

Question

GRA’s use of data analytics has become increasingly important in identifying tax evasion and improving compliance.

Required:
i) Explain how data analytics can be used to detect tax evasion.
ii) Provide TWO examples of how GRA might use data analytics to enhance tax compliance.

Answer

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Tags: AI in Taxation, Data Analytics, Fraud Detection, Ghana Revenue Authority, Predictive Analytics, Tax Compliance, Tax Enforcement, Tax Evasion
Level: Level 2

Topic: Application of Information Technology in Taxation
Series: Nov 2024

PT – Nov 2024 – L2 – Q5c – E-Auditing and Tax Compliance

Explain e-auditing, its differences from traditional tax audits, and discuss advantages for taxpayers and tax authorities.

Question

The integration of Information Technology in tax administration has enabled the Ghana Revenue Authority (GRA) to adopt e-auditing processes, allowing for the remote examination of taxpayers’ records. Required:
i) Describe the process of e-auditing and how it differs from traditional tax audits.
ii) Discuss TWO advantages of e-auditing for both the taxpayer and the tax authority.

Answer

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Tags: Data Analytics, Digital Taxation, E-Auditing, Ghana Revenue Authority, Tax Compliance
Level: Level 2

Topic: Application of Information Technology in Taxation
Series: Nov 2024

PT – Nov 2024 – L2 – Q5b – Withholding Tax & VAT Calculation

Compute VAT and direct tax withheld on a taxable supply of medical consumables to a tax withholding agent.

Question

Charley Chemist LTD made a taxable supply of medical consumables amounting to GH¢750,000 exclusive of VAT and levies on 23 November 2023 to the University of Ghana Medical Centre. The University of Ghana Medical Centre is a withholding tax agent for both VAT withholding and Direct Tax withholding.

Required:
i) Compute the amount of VAT withheld by the University of Ghana Medical Center.
ii) Compute the amount of direct tax withheld by the University of Ghana Medical Centre.

Answer

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Tags: Direct Tax, Medical Supplies, Tax Agent, Tax Compliance, Tax computation, Tax deduction, VAT, VAT Withholding, Withholding Tax
Level: Level 2

Topic: Value-Added Tax (VAT), Customs, and Excise Duties, Withholding Tax Administration
Series: Nov 2024

PT – Nov 2024 – L2 – Q5a – Notification to Commissioner-General for Non-Resident Contracts

Requirements for notifying the Commissioner-General when a resident contracts a non-resident.

Question

For the purpose of withholding tax, the Income Tax Act, 2016 (Act 896) requires a resident person who enters into a contract with a non-resident person which gives rise to income from Ghana to notify the Commissioner-General within thirty (30) days.

Required:

State the items that must be detailed in the notification to the Commissioner-General.

Answer

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Tags: Commissioner-General Notification, Income Tax Act, Non-resident taxation, Tax Compliance, Withholding Tax
Level: Level 2

Topic: Tax Administration
Series: Nov 2024

PT – Nov 2024 – L2 – Q4c – Tax Treatment of Repairs and Renovations

Explains the tax treatment of repairs and renovations for businesses.

Question

Question:
Repairs are essential for maintaining the safety of a property, and renovation improves the overall functionality of a property.

Required:
What is the tax treatment of repairs and renovations?

Answer

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Tags: Capital allowances, Depreciation, Renovations, Repairs, Tax Deductibility, Tax Treatment
Level: Level 2

Topic: Corporate Tax Liabilities
Series: Nov 2024

PT – Nov 2024 – L2 – Q4b – Tax Implication of Gift under Income Tax Act

Advise on the tax implications of receiving a gift from a spouse under the Income Tax Act.

Question

Madam Tanaa is an employee of Tapoli Brewery Ghana LTD. Her husband, who is a retired staff of Tapoli Brewery LTD, gifted her a brand-new Toyota Camry costing GH¢270,000 on their 20th wedding anniversary. Madam Tanaa is worried about the tax implication of the gift and has approached you as a student learning tax at the Institute of Chartered Accountants, Ghana.

Required:
Advise Madam Tanaa on the tax implications of the gift of a Toyota Camry she received from her husband on their wedding anniversary, including the various options available to her.

Answer

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Tags: Gift tax, Income Tax, Spousal Gifts, Tax Exemptions, Tax Reliefs
Level: Level 2

Topic: Income Tax Liabilities
Series: Nov 2024

PT – Nov 2024 – L2 – Q4a – Chargeable Income Computation

Compute the chargeable income and tax payable for Amasa Architecture and Building LTD for the 2022 and 2023 years of assessment.

Question

Amasa Architecture and Building LTD has been in business for the past seven years. The following information relates to the company’s operations for the years ending 31 December 2022 and 2023.

DETAILS	2022 (GH¢)	2023 (GH¢)
Profit before tax	795,000	2,110,000
Provision for Depreciation	230,000	115,000
Donation to Manhyia Children Home (Approved by Social Welfare Department)	350,000	210,000
Donation towards 2023 Adae Kese Festival	105,000	150,000
Capital allowance agreed with the Ghana Revenue Authority	1,500,000	1,700,000
Withholding tax paid as contained in certificates received	10,000	25,000

Required:
Using the information provided above, compute the chargeable income and tax payable by Amasa Architecture and Building LTD for the years of assessment 2022 and 2023.

Answer

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Tags: Capital Allowance, chargeable income, Corporate Tax, Financial Statements, Tax adjustments, Tax computation
Level: Level 2

Topic: Corporate Tax Liabilities
Series: Nov 2024

PT – Nov 2024 – L2 – Q3b – Capital Gains Tax and Asset Realization

Tax computation on asset realization and understanding taxable capital assets.

Question

b) Kwamoso LTD sold the following assets to Mr. Badu on 18 May, 2023 for GH¢450,000 to settle a tax liability. Kwamoso LTD is not listed on the Ghana Stock Exchange.

Below are details of the assets:

Name of Asset	Cost (GH¢)	Net Book Value (GH¢)	Market Value (18 May 2023) (GH¢)	Market Value (31 Dec 2023) (GH¢)
Truck vehicle	750,000	480,000	320,000	350,000
Generator	60,000	29,400	8,400	8,000
Laptops	48,000	17,200	8,000	7,200

Required:

i) Compute the consideration received in respect of each asset realised.

ii) What constitutes capital assets in the context of capital gains tax in Ghana?

iii) Under what circumstance would there be a loss in the realization of a liability?

Answer

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Tags: Capital Gains, Market Value, Tax computation, Tax Liability, Taxable Assets
Level: Level 2

Topic: Taxation of Capital Gains
Series: Nov 2024

PT – Nov 2024 – L2 – Q3a – Tax Treatment of Employee Compensation

Explains the tax treatment of various types of employee compensation under the Income Tax Act, 2015 (Act 896).

Question

Describe the tax treatment of the following transactions in the context of the Income Tax Act, 2015 (Act 896).

i) Payment of GH¢2,500 salary for a casual worker in the month of Feb 2024.
ii) Payment of Bonus of GH¢32,000 to an employee with an Annual Basic salary of GH¢180,000.
iii) Payment of GH¢3,200 to a temporary worker in the month of July 2024.
iv) Payment of income to a non-resident employee in Ghana.
v) Redundancy payment to an employee.

Answer

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Tags: Bonus Taxation, Employee Compensation, Income Tax, Non-resident taxation, Redundancy
Level: Level 2

Topic: Income Tax Liabilities
Series: Nov 2024

PT – Nov 2024 – L2 – Q2e – Tax Audit and Under-declaration of Sales

Action to be taken regarding an under-declared sales revenue during a tax audit.

Question

You have been engaged as an Accounts Officer in Abokobi LTD. Sales of GH¢10,000,000 were inadvertently under-declared. A team from the Ghana Revenue Authority (GRA) is at your premises conducting an audit. The GRA Audit Team did not review the sales revenue. After the audit, you noted that the amount constituting the under-declaration of the sales was mistakenly credited to the suppliers’ account in the ledger.

Required:

Detail out your position on the above as to what action to take.

Answer

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Tags: Financial Ethics, Financial Reporting, Ghana Revenue Authority (GRA), Tax Audit, Tax Compliance, Tax Penalty, Tax Regulations, Under-declared Sales
Level: Level 2

Topic: Tax Administration
Series: Nov 2024

PT – March 2023 – L2 – Q2b – Value-Added Tax (VAT), Customs, and Excise Duties

State the conditions under which voluntary VAT registration may be denied.

Question

An application for a voluntary VAT registration may be denied the opportunity to register for VAT although the Value Added Tax Act, 2013 (Act 870) makes provision for voluntary VAT registration.

Required:

State the conditions under which an application for voluntary VAT registration may be denied.

Answer

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Tags: Conditions for Denial, Tax law, VAT Registration, Voluntary VAT
Level: Level 2

Topic: Value-Added Tax (VAT), Customs, and Excise Duties
Series: MAR 2023

PT – March 2023 – L2 – Q2a – Value-Added Tax (VAT), Customs, and Excise Duties

Explain the exceptions to the turnover rules under section 11 of the VAT Act.

Question

Despite the turnover rules stated under section 6 of the Value Added Tax Act, 2013 (Act 870), there are certain exceptions to the turnover rules under section 11 of the same Act.

Required:

Explain the exceptions to the turnover rules under section 11 of the Value Added Tax Act 2013 (Act 870).

Answer

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Tags: Registration Exceptions, Tax law, Turnover Rules, VAT
Level: Level 2

Topic: Value-Added Tax (VAT), Customs, and Excise Duties
Series: MAR 2023

PT – March 2023 – L2 – Q1c – Tax Administration

Explain the process for objecting to the Commissioner-General’s tax decision.

Question

A taxpayer is not satisfied with the Commissioner-General’s tax decision.

Required:

Explain the procedure to be followed in objecting to the Commissioner-General’s tax decision.
(10 marks)

Answer

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Tags: Appeals, Commissioner-General, Objection Procedure, Tax Decision
Level: Level 2

Topic: Tax Administration
Series: MAR 2023

PT – March 2023 – L2 – Q1b – Overview of the Ghanaian Tax System and Fiscal Policy

Differentiate between the features of direct and indirect taxes.

Question

Distinguish between the features of direct taxes and indirect taxes.

Answer

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Tags: Direct Taxes, Features, Indirect Taxes, Taxation Comparison
Level: Level 2

Topic: Overview of the Ghanaian Tax System and Fiscal Policy
Series: MAR 2023

PT – March 2023 – L2 – Q1a – Overview of the Ghanaian Tax System and Fiscal Policy

Differentiate between progressive and regressive tax systems with examples.

Question

When introducing new taxes in a developing economy like Ghana, the contribution of the new tax system to the tax buoyancy of the country is important. However, this will depend on whether the new tax instrument will be a progressive tax or a regressive tax.

Required:

Explain the difference between progressive tax system and regressive tax system and state ONE (1) example of each tax instrument.

Answer

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Tags: Examples of Taxation, Progressive Tax, Regressive Tax, Tax Systems
Level: Level 2

Topic: Overview of the Ghanaian Tax System and Fiscal Policy
Series: MAR 2023

PT – July 2023 – L2 – Q5c – Income Tax Liabilities

State the details required for a taxpayer to file a return when receiving a gift.

Question

When a gift is received by an individual, and that gift is not in respect of business and employment, the taxpayer shall within 21 days of receiving the gift submit to the GRA in writing a return containing certain information.

Required:
In reference to the above statement, state FOUR (4) details the taxpayer must provide when filing a return for a gift.

Answer

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Tags: Gift tax, Tax Filing, Taxpayer Responsibilities
Level: Level 2

Topic: Income Tax Liabilities
Series: JULY 2023

PT – July 2023 – L2 – Q5b – Taxation of Capital Gains

Calculate the capital gains tax payable on the sale of a warehouse with associated costs.

Question

Ann sold a warehouse on 13 June 2022 for GH¢640,000. The warehouse was purchased on 14 December 2020 for GH¢328,000 for investment purposes. Ann incurred the following:

Description	Amount (GH¢)
Legal fees	10,000
Accountant’s fees	15,000
Transfer tax	1,000

Required:
Calculate the tax payable.

Answer

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Tags: Asset Disposal, Capital Gains, Tax Calculation, Warehouse Sale
Level: Level 2

Topic: Taxation of Capital Gains
Series: JULY 2023

PT – July 2023 – L2 – Q5a – Withholding Tax Administration

Calculate taxes and determine whether each is final based on various transactions provided.

Question

The following information is available to you as a tax consultant:

Description	Amount (GH¢)
Dividend paid to resident person	100,000
Dividend paid to non-resident person	200,000
Payment of goods to resident person	300,000
Payment of goods to non-resident person	400,000
Rent – residential property	150,000
Rent – commercial property	300,000
Natural Resource Payment	1,000,000
Management and Technical Service fees to non-resident	400,000
Interest paid to resident financial institution	20,000,000
Royalty paid to non-resident person	400,000

Required: Compute taxes from the above information and indicate whether the tax is final or not final.

Answer

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Tags: Dividend, Final Tax, Goods payment, Non-resident, Rent, Withholding Tax
Level: Level 2

Topic: Withholding Tax Administration
Series: JULY 2023

PT – July 2023 – L2 – Q4b – Corporate Tax Liabilities

Advice on the tax implications of setting up as a subsidiary vs permanent establishment, finance leasing, and paying employees.

Question

The management of Chika Plc, a United Kingdom (UK) based Company, is considering the possibility of launching its presence into Ghana and it is not too sure of the tax implications of the following in light of the tax laws of Ghana:

i) It is considering making its presence through incorporation in Ghana or creating an external company that is a Permanent Establishment (Branch) instead.
ii) It intends to acquire all its non-current assets through finance lease as against buying the assets outright when it makes its presence in Ghana.
iii) It intends to bring some staff from the UK to work in Ghana who will be paid half salary in Ghana and the other half paid directly to their accounts in the UK.

Required:
Advise on the tax implications of each one of them to enable management of Chika Plc to take a decision. (8 marks)

Answer

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Tags: Corporate Tax, Employment, Finance lease, Permanent Establishment, Subsidiary
Level: Level 2

Topic: Corporate Tax Liabilities
Series: JULY 2023

PT – July 2023 – L2 – Q4a – Corporate Tax Liabilities

Calculation of capital allowance and assessable income for Karma Ltd for three years of assessment.

Question

Karma Ltd commenced business on 1 March 2020 preparing accounts to December each year. The following assets were acquired for use in the business:

Asset	Date of Acquisition	Cost (GH¢)
Industrial Building	15/10/2019	2,500,000
Plant & Machinery	20/11/2019	1,600,000
Computers	03/01/2020	80,000
Office Equipment	10/01/2020	138,000
Motor Van	15/02/2020	220,000
Toyota Saloon Car	30/09/2020	180,000

Additional assets acquired during 2022:

Computers and accessories – GH¢105,000
Office Equipment – GH¢78,000

The Toyota Saloon Car was written off in an accident on 31 October 2022, and the company received GH¢120,000 as compensation.

Profits declared by Karma Ltd for the first three years of assessment:

Period to 31/12/2020: GH¢600,000
Year to 31/12/2021: GH¢1,500,000
Year to 31/12/2022: GH¢2,680,000

Required:
Compute the capital allowance and the assessable income of the company for the relevant years of assessment. (12 marks)

Answer

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Tags: Assessable Income, Capital Allowance, Corporate Tax, Depreciable assets, Tax computation
Level: Level 2

Topic: Corporate Tax Liabilities
Series: JULY 2023

Subject: PRINCIPLES OF TAXATION

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PT- Nov 2024 – L2 – Q5d – Data Analytics in Taxation

Explain how data analytics can be used to detect tax evasion and provide examples of how GRA might use data analytics to enhance tax compliance.

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PT – Nov 2024 – L2 – Q5c – E-Auditing and Tax Compliance

Explain e-auditing, its differences from traditional tax audits, and discuss advantages for taxpayers and tax authorities.

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PT – Nov 2024 – L2 – Q5b – Withholding Tax & VAT Calculation

Compute VAT and direct tax withheld on a taxable supply of medical consumables to a tax withholding agent.

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PT – Nov 2024 – L2 – Q5a – Notification to Commissioner-General for Non-Resident Contracts

Requirements for notifying the Commissioner-General when a resident contracts a non-resident.

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PT – Nov 2024 – L2 – Q4c – Tax Treatment of Repairs and Renovations

Explains the tax treatment of repairs and renovations for businesses.

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PT – Nov 2024 – L2 – Q4b – Tax Implication of Gift under Income Tax Act

Advise on the tax implications of receiving a gift from a spouse under the Income Tax Act.

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PT – Nov 2024 – L2 – Q4a – Chargeable Income Computation

Compute the chargeable income and tax payable for Amasa Architecture and Building LTD for the 2022 and 2023 years of assessment.

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PT – Nov 2024 – L2 – Q3b – Capital Gains Tax and Asset Realization

Tax computation on asset realization and understanding taxable capital assets.

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PT – Nov 2024 – L2 – Q3a – Tax Treatment of Employee Compensation

Explains the tax treatment of various types of employee compensation under the Income Tax Act, 2015 (Act 896).

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PT – Nov 2024 – L2 – Q2e – Tax Audit and Under-declaration of Sales

Action to be taken regarding an under-declared sales revenue during a tax audit.

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PT – March 2023 – L2 – Q2b – Value-Added Tax (VAT), Customs, and Excise Duties

State the conditions under which voluntary VAT registration may be denied.

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PT – March 2023 – L2 – Q2a – Value-Added Tax (VAT), Customs, and Excise Duties

Explain the exceptions to the turnover rules under section 11 of the VAT Act.

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PT – March 2023 – L2 – Q1c – Tax Administration

Explain the process for objecting to the Commissioner-General’s tax decision.

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PT – March 2023 – L2 – Q1b – Overview of the Ghanaian Tax System and Fiscal Policy

Differentiate between the features of direct and indirect taxes.

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PT – March 2023 – L2 – Q1a – Overview of the Ghanaian Tax System and Fiscal Policy

Differentiate between progressive and regressive tax systems with examples.

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PT – July 2023 – L2 – Q5c – Income Tax Liabilities

State the details required for a taxpayer to file a return when receiving a gift.

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PT – July 2023 – L2 – Q5b – Taxation of Capital Gains

Calculate the capital gains tax payable on the sale of a warehouse with associated costs.

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PT – July 2023 – L2 – Q5a – Withholding Tax Administration

Calculate taxes and determine whether each is final based on various transactions provided.

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PT – July 2023 – L2 – Q4b – Corporate Tax Liabilities

Advice on the tax implications of setting up as a subsidiary vs permanent establishment, finance leasing, and paying employees.

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PT – July 2023 – L2 – Q4a – Corporate Tax Liabilities

Calculation of capital allowance and assessable income for Karma Ltd for three years of assessment.

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