Subject: PRINCIPLES OF TAXATION

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  • 5 Marks

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.

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.

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  • 5 Marks

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.

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.

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  • 5 Marks

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.

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.

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  • 5 Marks

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.

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.

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  • 2 Marks

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

Explains the tax treatment of repairs and renovations for businesses.

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?

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  • 3 Marks

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.

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.

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  • 10 Marks

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.

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.

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  • 10 Marks

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

Tax computation on asset realization and understanding taxable capital assets.

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?

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  • 10 Marks

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).

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.

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  • 5 Marks

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.

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.

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  • 4 Marks

PT – Nov2019 – L2 – Q4c – Income Tax Liabilities

This question asks to explain the taxation rules governing research and development expenses.

c) Explain briefly the taxation rules governing research and development expenses. (4 marks)

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  • 8 Marks

PT – Nov2019 – L2 – Q4b – Income Tax Liabilities

This question asks to identify items that constitute domestic and excluded expenditures for tax purposes.

b) ‘No deductions are allowed for domestic or excluded expenditure incurred by a person in the computation of assessable income.’

Required:
i) Identify FOUR (4) items that constitute domestic expenditure. (4 marks)
ii) Identify FOUR (4) items that constitute excluded expenditure. (4 marks)

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  • 10 Marks

PT – Nov2019 – L2 – Q4a – Corporate Tax Liabilities

This question asks to compute the chargeable income of Valentine Ghana Limited for the 2018 tax year based on the provided financial statements and additional information.

Valentine Ghana Limited is a producer of love greeting cards, and the following was extracted from its financial statements for the year ended 31 December 2018.
a) Valentine Ghana Limited is a producer of love greeting cards and the following was
extracted from its financial statements for the year ended 31 December,2018.

Deduct:

Net Profit: GH¢346,110
Additional Information:
i) Capital allowances for the year were GH¢204,000, as agreed with the Ghana Revenue Authority (GRA).
ii) The figures for repairs and maintenance include an amount of GH¢33,150 for the cost of erecting a new gate to the factory.
iii) 50% of other income was the personal rental income of the Managing Director.
iv) One-third of vehicle running expenses was expended on the personal car of the Managing Director, used for the company’s operation based on company policy.

Required:
Calculate the chargeable income of Valentine Ghana Limited for 2018 Year of Assessment.
(8 marks)

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  • 6 Marks

PT – Nov2019 – L2 – Q3d – Tax Administration

This question asks to identify the key features of the Vehicle Income Tax Stickers (VITS) tax system.

In 2003, the Vehicle Income Tax Stickers (VITS) was introduced by way of LI 1727 and amended by Income Tax Regulations, 2016 (LI 2244).

Required:
Identify the key features of the VITS tax system.
(6 marks)

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  • 6 Marks

PT – Nov2019 – L2 – Q3c – Income Tax Liabilities

This question focuses on determining the chargeable income and tax liability of an expatriate working in Ghana.

Lord Pakro was seconded to Ghana from the Crops Scientists Institute in USA as a Crop Scientist to Crop Research Institute in Ghana, for a period of 5 months, starting from 1 August, 2018. He was based at Nyankpala (Northern part of Ghana), one of the farming sites of the Crop Research Institute.

His conditions of service were as follows:
GH¢

Salary: 6,000 per month
Expatriate allowance: 2,000 per month
Risk allowance: 1,000 per month
He was provided with a furnished bungalow and a Toyota Pick-up vehicle with driver and fuel for both official and private activities.

In addition to the above, the parent company agreed to meet his commitment at home during his six-month stay in Ghana at $1,200 per month. The average exchange rate has been $1=GH¢5.00.

Required:
Determine Lord Pakro’s chargeable income and tax liability, if any, during his stay in the country. Produce the related notes guiding your determination.
(6 marks)

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  • 3 Marks

PT – Nov 2019 – L2 – Q3b – Income Tax Liabilities

This question asks to calculate the tax implications of overtime payments for a senior staff member.

Amos is a Senior Staff member of Sims Company Limited. His monthly basic salary is GH¢1,490.00. He was paid an overtime totalling GH¢650.00 during the month of January, 2019.

Required:
What is the tax implication? (3 marks)

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  • 7 Marks

PT – Nov 2019 – L2 – Q3a – Income Tax Liabilities

Computes King Peter’s tax liability on overtime for the months of January and February 2019.

a) King Peter is a Junior Staff member of Sir James Company Limited. His monthly basic salary is GH¢700.00. He was paid overtime totaling GH¢50.00 during the month of January 2019.

Required:
i) Compute his tax liability on overtime for the month of January 2019. (2 marks)

In the month of February 2019, King Peter was paid overtime totaling GH¢500.00.

ii) Compute his tax liability on the overtime payments for the month of February 2019. (3 marks)

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  • 5 Marks

PT – Nov 2019 – L2 – Q2c – Withholding Tax Administration

Calculates withholding tax due from various contracts awarded to KPP Books & Stationery Ltd. by Ghana Water Company.

c) Below are the various contracts awarded to KPP Books and Stationery Limited by the Ghana Water Company for the 2018 year of assessment:

1st contract: supply of stationery costing GH¢1,000 in January 2018.
2nd contract: supply of Station Diaries costing GH¢900 in March 2018.
3rd contract: supply of additional stationery costing GH¢900 on August 16, 2018.
Required:
What amount of withholding tax is due to the Ghana Revenue Authority in the year 2018 from Ghana Water Company? (5 marks)

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  • 12 Marks

PT – Nov 2019 – L2 – Q2b – Value-Added Tax (VAT)

Calculates withholding VAT, output VAT, and VAT payable by Akorfa Vinyo for equipment hire services.

b) Akorfa Vinyo, an equipment hiring company, raises an invoice in the sum of GH¢500,000.00 in respect of hiring of equipment services to a withholding VAT agent (Sir James Enterprise). This supply excludes Value Added Tax (VAT of 12.5%), National Health Insurance Levy (NHIL of 2.5%), and Ghana Education Trust Fund Levy (GETFL of 2.5%).

Assume that this is the only supply of value-added activity done by Akorfa Vinyo in the period and payments are made in the same period.

Required:
i) Calculate the proportion of VAT that should be withheld by the agent in respect of payment of the invoice (the withholding VAT rate is 7%). (3 marks)
ii) Calculate the output VAT to be shown on the face of Akorfa’s monthly VAT Return. (3 marks)
iii) Calculate the VAT payable by Akorfa, if the total input VAT incurred for the period is GH¢25,000. (3 marks)
iv) Show the payment details by the Withholding Agent for the supply. (3 marks)

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  • 3 Marks

PT – Nov 2019 – L2 – Q2a – Value-Added Tax (VAT)

Describes the procedure to follow when a VAT invoice is lost by the recipient.

a) Percy Cool (Percy) supplied goods to Perry Hot (Perry), both are VAT-registered traders. Percy issued a VAT invoice accordingly on 15 February 2019. On 20 February 2019, Percy received a call from Perry indicating that he has lost the VAT invoice issued to him.

Required:
What should Percy do? (3 marks)

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