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 – Nov 2019 – L2 – Q1c – Corporate Tax Liabilities

Determines the amount of tax underpayment for Naab Ltd to be subjected to interest computation.

Question

c) The following data is relevant to Naab Ltd tax affairs for 2018 year of assessment:

Self-assessment returns submitted:

Tax paid on self-assessment: GH¢1,000,000
Chargeable income: GH¢4,000,000
Actual Returns submitted:

Chargeable Income: GH¢6,000,000
Correct amount – Tax payable: GH¢1,500,000

Required:
What is the amount of tax underpayment to be subject to interest computation?
(2 marks)

Answer

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Tags: Interest Computation, Self Assessment., Tax Liability, Tax Underpayment
Level: Level 2

Topic: Tax Administration
Series: NOV 2019

PT – Nov 2019 – L2 – Q1b – Tax Administration

Describes the essential elements included in a tax assessment notice issued by the Commissioner-General.

Question

b) The only tool for communicating a tax liability to a taxpayer is through a notice of assessment.

Required: What are the elements of a notice of tax assessment?
(8 marks)

Answer

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Tags: Notice of Assessment, Tax Assessment, Tax Liability, Taxpayer
Level: Level 2

Topic: Tax Administration
Series: NOV 2019

PT – Nov 2019 – L2 – Q1a – Overview of the Ghanaian Tax System and Fiscal Policy

Explains five purposes of taxation in a developing economy like Ghana.

Question

Economists are unanimous on the view that taxation is an essential tool for mobilizing
resources for economic development and in particular for a middle-income country such as
Ghana.
Required:
i) Describe briefly FIVE (5) purposes of taxation for an economy such as Ghana.
(5 marks)
ii) Explain the use and application of taxation as a tool of fiscal policy to stabilize the economy.
(5 marks)

Answer

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Tags: Economic Development, Economic Stability, Fiscal Policy, Purposes of Taxation, Resource Mobilization
Level: Level 2

Topic: Overview of the Ghanaian Tax System and Fiscal Policy
Series: NOV 2019

PT – May 2020 – L2 – Q5d – Overview of the Ghanaian Tax System and Fiscal Policy

This question asks to explain the key features of the 3-Tier Ghana National Pension Scheme, which applies to both public and private sector workers.

Question

What are the features of the 3-Tier Ghana National Pension Scheme?
(5 marks)

Answer

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Tags: National Pension Scheme, Pensions, Retirement Benefits, Social Security
Level: Level 2

Topic: Ghana National Pension Scheme
Series: MAY 2020

PT – May 2020 – L2 – Q3c – Income Tax Liabilities

Tax rules governing overtime and bonus payments under employment income.

Question

c) What are the taxation rules for overtime payments and bonus payments under employment income?
(7 marks)

Answer

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Tags: Bonus Payments, Employment Income, Overtime Payments, Tax Rules, Taxation
Level: Level 2

Topic: Income Tax Liabilities
Series: MAY 2020

PT – May 2020 – L2 – Q3b – Scope and computation of income tax for individuals and partnerships.

Characteristics of a contract of service from a taxation perspective.

Question

b) It is necessary to find out whether an activity carried out by an individual amounts to a profession (contract for service) or employment (contract of service). From a taxation point of view, there is the existence of employment where there is a contract of service.

Required:
What are the characteristics of a contract of service?
(6 marks)

Answer

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Tags: Characteristics, Contract for Service, Contract of Service, Employment
Level: Level 2

Topic: Income Tax Liabilities
Series: MAY 2020

PT – May 2020 – L2 – Q3a – Scope and computation of income tax for partnerships

Assessable income computation for partners in a partnership business.

Question

a) During the year ended 31 December 2018, the partnership of David, Stella, and Percy reported an adjusted profit of GH¢951,000 before charging partners’ salaries, interest on capital, and cost of traveling for leave.

David Stella Percy
Profit/loss sharing ratio 3 2 1
Salaries GH¢48,000 GH¢72,000 GH¢96,000
Interest on Capital GH¢30,000 GH¢20,000 GH¢10,000
Cost of traveling for leave GH¢20,000 GH¢30,000 GH¢25,000
Required:
Compute the assessable income for each partner.
(7 marks)

Answer

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Tags: Assessable Income, Income Tax, Partnerships, Profit Sharing
Level: Level 2

Topic: Income Tax Liabilities
Series: MAY 2020

PT – May 2020 – L2 – Q4a – Capital Allowance and tax reliefs

Computation of capital allowance for Stella-VD Ltd for the 2017 and 2018 years of assessment.

Question

Stella-VD Company Limited, manufacturers of fruit juice for local consumption, commenced business on 1/10/2017, with an accounting year-end at 31 December. The company submitted its accounts for 2017 and was assessed accordingly. The company submitted its tax returns for the 2018 year of assessment to the Ghana Revenue Authority on 30/04/2019. Below are the details:

iii) Staff Welfare

Staff Medical Bills: 3,700
Safety Wear for Staff: 10,500
Canteen Equipment purchased on 30/11/2018: 12,000
iv) Donation and Subscription

Goods given as Gratis to Customs Officials: 13,000
Donation of Goods to SOS Children Village: 10,000
Subscription to Association of Ghana Industries: 5,000
v) Wages and Salaries

Old Staff: 120,000
Fresh Graduates employed by Stella-VD Ltd: 26,000
Fresh Graduates constitute 0.9% of the total workforce
vi) Other Income

Compensation from a Customer for Cancellation of Sale Order: 8,000
Compensation for Loss of Trading Stock of the Company: 10,000
Compensation for Cancellation of Purchase Order by Supplier: 5,000
The Company’s assets include the following:

Type of Assets Date of Acquisition Cost (GH¢)
Factory Building 01/10/2017 300,000
Plant and Machinery 25/10/2017 171,000
Delivery Van 01/11/2017 50,000
Computers 01/10/2017 40,000
Furniture and Fittings 10/12/2017 150,000
Other Office Equipment 01/10/2017 200,000
Office Building 30/06/2018 500,000
Required:
a) Compute the appropriate capital allowance for the 2017 and 2018 years of assessment.
(8 marks)

Answer

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Tags: Capital allowances, Corporate Tax, Depreciation, Fixed Assets
Level: Level 2

Topic: Capital allowance, Corporate Tax Liabilities
Series: MAY 2020

PT – May 2020 – L2 – Q2e – Corporate Tax Liabilities

Determines the tax treatment for dividends received by a resident company holding significant voting power in another resident company.

Question

Zealow Ltd, a car battery dealer, holds 26% voting power of Aboye Ltd, an energy and power distribution company. Both companies are resident in Ghana. Aboye Ltd declared a dividend, and the portion of the dividend that should be credited to the accounts of Zealow Ltd is GH¢78,900.

Required:
Determine the taxes payable, if any, and comment on the treatment of dividend to Zealow Ltd.
(5 marks)

Answer

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Tags: Corporate Tax, Dividend, Resident companies, Tax exemption
Level: Level 2

Topic: Corporate Tax Liabilities
Series: MAY 2020

PT – May 2020 – L2 – Q2d – Value-Added Tax (VAT)

Discusses the conditions under which a small business can apply for VAT registration without meeting the threshold requirements.

Question

Abah Enterprise is a small business but intends to bid for government contracts. It has a very small cash flow, with turnover unable to be registered under the compulsory registration arrangement for Value Added Tax. The proprietor of Abah Enterprise feels that if the enterprise is not registered for Value Added Tax, it will be difficult to be able to bid for government contracts.

Required:
Under what condition can Abah Enterprise apply to Ghana Revenue Authority for Value Added Tax Registration without meeting the threshold registration requirements under section 6 of the Value Added Tax Act 2013 (Act 870)?
(5 marks)

Answer

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Tags: Small Business, Tax Administration, Threshold, VAT Registration
Level: Level 2

Topic: Value-Added Tax (VAT), Customs, and Excise Duties
Series: MAY 2020

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 – Nov 2019 – L2 – Q1c – Corporate Tax Liabilities

Determines the amount of tax underpayment for Naab Ltd to be subjected to interest computation.

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PT – Nov 2019 – L2 – Q1b – Tax Administration

Describes the essential elements included in a tax assessment notice issued by the Commissioner-General.

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PT – Nov 2019 – L2 – Q1a – Overview of the Ghanaian Tax System and Fiscal Policy

Explains five purposes of taxation in a developing economy like Ghana.

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PT – May 2020 – L2 – Q5d – Overview of the Ghanaian Tax System and Fiscal Policy

This question asks to explain the key features of the 3-Tier Ghana National Pension Scheme, which applies to both public and private sector workers.

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PT – May 2020 – L2 – Q3c – Income Tax Liabilities

Tax rules governing overtime and bonus payments under employment income.

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PT – May 2020 – L2 – Q3b – Scope and computation of income tax for individuals and partnerships.

Characteristics of a contract of service from a taxation perspective.

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PT – May 2020 – L2 – Q3a – Scope and computation of income tax for partnerships

Assessable income computation for partners in a partnership business.

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PT – May 2020 – L2 – Q4a – Capital Allowance and tax reliefs

Computation of capital allowance for Stella-VD Ltd for the 2017 and 2018 years of assessment.

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PT – May 2020 – L2 – Q2e – Corporate Tax Liabilities

Determines the tax treatment for dividends received by a resident company holding significant voting power in another resident company.

You're reporting an error for "PT – May 2020 – L2 – Q2e – Corporate Tax Liabilities"

PT – May 2020 – L2 – Q2d – Value-Added Tax (VAT)

Discusses the conditions under which a small business can apply for VAT registration without meeting the threshold requirements.

You're reporting an error for "PT – May 2020 – L2 – Q2d – Value-Added Tax (VAT)"

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