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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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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)
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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)
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Section 133 of the Income Tax Act, 2015 (Act 896) provides for the interpretation of capital assets, depreciable assets, and investment assets.
Required:
What are the distinguishing features of capital assets, depreciable assets, and investment assets under the above-mentioned legislation? (5 marks)
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Bansey Enterprise received a vehicle from Unilever as the best distributor of Unilever products.
Required:
Explain to the Managing Director of Bansey Enterprise how to treat the gift of the vehicle for tax purposes. (5 marks)
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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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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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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)
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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)
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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:
Required:
a) Compute the appropriate capital allowance for 2017 and 2018 year of assessment. (8 marks)
b) Calculate the chargeable income of the company for assessment year 2018.
(12 marks)
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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)
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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:
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:
Required:
Compute the capital allowance and the assessable income of the company for the relevant years of assessment. (12 marks)
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Fridays Ltd is a resident company. It provides cleaning services across the country. The following is available from its tax returns for the 2020 year of assessment.
Other relevant information:
Required:
i) Compute the tax payable assuming its tax rate is 25%. (6 marks)
ii) Explain the treatment of the following:
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Chahuncha Ghana Branch declares a profit before tax of GH¢6,000,000 in 2020 year of assessment after charging depreciation of GH¢680,000 and a loss of GH¢1,500,000 which was incurred in 2012. The capital allowance for the year amounted to GH¢750,000, yet to be adjusted. The corporate tax rate is 25%.
Required:
Compute the Branch Profit Tax for the 2020 year of assessment.
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According to Act 896, the Commissioner-General shall not allow a deduction in respect of domestic expenditure and excluded expenditure incurred by a person.
Required:
Explain what constitutes domestic expenditure and excluded expenditure in line with the provisions in the Income Tax Act, 2015 (Act 896). (10 marks)
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A Nigerian investor (Niger Ltd) in Ghana has the following information relating to its business:
| Year | Revaluation Reserves (GH¢) | Share Capital (GH¢) | Retained Earnings (GH¢) |
|---|---|---|---|
| 2021 | 250,000 | 1,000,000 | 1,200,000 |
| 2020 | 100,000 | 600,000 | 1,350,000 |
Required:
With relevant computations, comment on the tax implication of the transfer from Retained Earnings to Share Capital. (8 marks)
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