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 – April 2022 – L2 – Q3a – Income Tax Liabilities

Explain the tax treatment for overtime allowance and bonus payments in Ghana.

Question

a) Explain the tax treatment for Overtime Allowance Payment and Bonus Payment.
(6 marks)

Answer

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Tags: Bonus payment, Employee Benefits, Income Tax, Overtime payment, Taxation

Topic: Income Tax Liabilities
Series: APR 2022

PT – April 2022 – L2 – Q3b(i & ii) – Income Tax Liabilities

Compute the tax liability on overtime allowances for Maame Agyeiwaa for January and February 2021.

Question

b) Maame Agyeiwaa is a junior staff member of KayDee Ltd. Her monthly basic salary is GH¢800. She was paid an overtime allowance totalling GH¢100 during the month of January 2021. In February 2021, Maame Agyeiwaa was paid overtime allowance totalling GH¢500.

Required:
i) Compute her tax liability on the overtime allowance for the month of January 2021.
(2 marks)

ii) Compute her tax liability on the overtime allowance payments for the month of February 2021.
(3 marks)

Answer

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Tags: Employment Income, Income Tax, Overtime payment, Tax computation

Topic: Income Tax Liabilities, Taxation of Overtime
Series: APR 2022

PT – April 2022 – L2 – Q3c – Income Tax Liabilities

Determine the tax implication of overtime allowance paid to Bawa in February 2021.

Question

c) Bawa is a junior staff member of Blinks Ltd. Her monthly basic salary is GH¢2,000. She was paid an overtime allowance totalling GH¢500 during the month of February 2021.

Required:
What is the tax implication of the overtime allowance paid?
(3 marks)

Answer

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Tags: Employee Benefits, Income Tax, Overtime payment, Taxation of income

Topic: Employment Income, Income Tax Liabilities, Taxation of Overtime
Series: APR 2022

PT – April 2022 – L2 – Q3d – Income Tax Liabilities

Calculate the tax liability on Eunice Danso's bonus income for 2021.

Question

Eunice Danso works with Gyidi Ltd and earns an annual basic salary of GH¢50,000. She was paid a bonus of GH¢6,000 in 2021.

Required:
Determine the tax liability on the bonus. (3 marks)

Answer

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Tags: Bonus payment, Employee Benefits, Income Tax, Tax computation, Tax implications

Topic: Bonus Payment Taxation, Employment Income, Individual Taxation, Tax Calculation
Series: APR 2022

PT – April 2022 – L2 – Q3e – Income Tax Liabilities

Calculate the tax liability on Bisa's bonus income for 2021

Question

Bisa works with Kaydei Ltd and earns an annual basic salary of GH¢140,000. He was paid a bonus of GH¢45,000 in 2021.

Required:
Determine the tax liability on the bonus.
(3 marks)

Answer

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Tags: Bonus payment, Employment Income, Individual Taxation, Tax Calculation

Topic: Income Tax Liabilities, Tax Administration
Series: APR 2022

PT – April 2022 – L2 – Q4 – Corporate Tax Liabilities

Calculate the tax payable for Therry Ltd for the 2020 year of assessment using the provided financial data and adjustments.

Question

The following extract relates to the financial data of Therry Ltd, a company resident in Ghana with a basis period from January to December each year. Therry Ltd has submitted its tax returns to GRA for the 2020 year of assessment:

The following additional information is available:

Interest Charges:
a. Interest on loan for MD’s personal housing project GH¢500,000
b. Foreign exchange loss on loan GH¢320,500
c. Bank charges GH¢75,000
Donations:
a. Osu Children Home GH¢10,000
b. Pastor (Azigi Church) GH¢30,000
c. Labone Senior High School GH¢20,000
d. National Disaster Management Organisation GH¢50,000
e. Political Parties Fundraising GH¢90,000
An amount of GH¢200,000 disclosed in the accounts was paid for repairs and improvements of an old machine bought three years ago. It is hoped that the performance of the machine will be enhanced after the improvements.
Creditors of the company agreed to cancel an amount of GH¢120,000 standing as part of the credit balance as incentive to the company. This has not been taken into account by the company in its tax returns to GRA.
An amount of GH¢300,000 being cost price of goods was issued to a related party outside Ghana at cost. The margin on the goods waived was sighted as GH¢40,000 in a correspondence with the related party.
Tax paid on account was GH¢20,000.
The company booked capital allowance unutilised certified by GRA from 2019 year of assessment as GH¢300,000.
Capital allowance agreed with GRA after taking into account all relevant issues was GH¢1,050,000 for 2020 year of assessment.
The machine (Pool 3 asset) had a written down value of GH¢4,000,000 as at 1 January 2020.
An allowable bad debt included in the selling and distribution expenses for 2019 amounted to GH¢100,000. The company recovered the amount in 2020 but no transaction was recorded in 2020.
Therry Ltd disposed off one of its capital assets for GH¢250,000 to the Managing Director. It cost the company GH¢300,000 to acquire the asset some years ago. An investigation revealed that the market value of the asset at the time of the sale was GH¢350,000. The company has already included the loss of the sale of the asset in administration expenses.
Required:
Determine the tax payable for the 2020 year of assessment. (20 marks)

Answer

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Tags: Allowable Deductions, Capital allowances, Corporate Tax, Tax computation

Topic: Corporate Tax Liabilities, Tax Computation for Companies
Series: APR 2022

PT – April 2022 – L2 – Q5a – Withholding Tax Administration

Explain four exemptions from withholding tax according to the Income Tax Act, 2015 (Act 896).

Question

Although the scope of withholding tax covers employment, business, and investment income, not every income is subject to withholding tax in accordance with the Income Tax Act, 2015 (Act 896) as amended.

Required:
Explain FOUR (4) of these withholding tax exemptions.
(10 marks)

Answer

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Tags: Exemptions, Income Tax, Tax Administration, Withholding Tax

Topic: Exemptions, Withholding Tax Administration
Series: APR 2022

PT – April 2022 – L2 – Q5b – Taxation of Capital Gains

Explain the circumstances under which an asset is considered realised for taxation purposes.

Question

A gain made by a person from the realisation of an asset is the total amount of consideration received for the sale of the asset less the cost of the asset at the time of realisation.

Required:
When is an asset realised? (5 marks)

Answer

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Tags: Capital Gains, Realisation of Assets, Taxable Events

Topic: Realisation of Assets, Taxation of Capital Gains
Series: APR 2022

PT – April 2022 – L2 – Q5c – Income Tax Liabilities

Explain how gifts received by individuals in relation to employment, business, or investment are taxed.

Question

Gift means a receipt without consideration or for inadequate consideration.

Answer

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Tags: Business income, Employment Income, Income Tax, Taxation of Gifts

Topic: Income Tax Liabilities, Taxation of Gifts
Series: APR 2022

PT – April 2022 – L2 – Q1c – Tax Administration

Calculate the taxes payable for each quarter for Bumu Manufacturing Company based on estimated chargeable income and tax paid.

Question

c) You have been offered an appointment by Bumu Manufacturing Company (BMC) as Tax Manager responsible for preparing and filing tax returns on behalf of the company. BMC files its returns with the Osu Medium Taxpayers Office of the Ghana Revenue Authority. The company’s Tax Identification Number is C0000261178. The company prepares accounts to 31 December each year.

BMC estimated its chargeable income for the 2019 year of assessment as GH¢3,000,000. Subsequently, the company secured a Government contract and anticipates in the third (3rd) quarter that its chargeable income would be GH¢4,500,000.

Additional Information:
Tax paid on account:
1st quarter GH¢100,000
2nd quarter GH¢120,000
3rd quarter GH¢200,000

Required:
Compute the taxes payable for BMC for each quarter.
(10 marks)

Answer

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Tags: chargeable income, Corporate Tax, Quarterly tax payment, Tax identification number, Tax return filing

Topic: Corporate Tax Liabilities, Tax Administration
Series: APR 2022

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 – April 2022 – L2 – Q3a – Income Tax Liabilities

Explain the tax treatment for overtime allowance and bonus payments in Ghana.

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PT – April 2022 – L2 – Q3b(i & ii) – Income Tax Liabilities

Compute the tax liability on overtime allowances for Maame Agyeiwaa for January and February 2021.

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PT – April 2022 – L2 – Q3c – Income Tax Liabilities

Determine the tax implication of overtime allowance paid to Bawa in February 2021.

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PT – April 2022 – L2 – Q3d – Income Tax Liabilities

Calculate the tax liability on Eunice Danso's bonus income for 2021.

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PT – April 2022 – L2 – Q3e – Income Tax Liabilities

Calculate the tax liability on Bisa's bonus income for 2021

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PT – April 2022 – L2 – Q4 – Corporate Tax Liabilities

Calculate the tax payable for Therry Ltd for the 2020 year of assessment using the provided financial data and adjustments.

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PT – April 2022 – L2 – Q5a – Withholding Tax Administration

Explain four exemptions from withholding tax according to the Income Tax Act, 2015 (Act 896).

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PT – April 2022 – L2 – Q5b – Taxation of Capital Gains

Explain the circumstances under which an asset is considered realised for taxation purposes.

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PT – April 2022 – L2 – Q5c – Income Tax Liabilities

Explain how gifts received by individuals in relation to employment, business, or investment are taxed.

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PT – April 2022 – L2 – Q1c – Tax Administration

Calculate the taxes payable for each quarter for Bumu Manufacturing Company based on estimated chargeable income and tax paid.

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