Topic: International taxation

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  • 12 Marks

ATAX – May 2017 – L3 – Q4b – International Taxation

Explain the term “Tax Havens”, factors for considering them, and list five countries that are tax havens.

In the words of Benjamin Franklin, “the only things that are certain are death and taxes”. However, in some countries, taxes are not necessarily certain.

Required:
i. Explain briefly the term “Tax Havens”. (4 Marks)
ii. State THREE factors in considering whether a jurisdiction is a Tax Haven. (3 Marks)
iii. State FIVE countries that are Tax Havens. (5 Marks)

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  • 15 Marks

ATAX – Nov 2016 – L3 – Q7 – Tax Planning and Management

Summarizes key points on tax planning, tax evasion, double taxation agreements, and non-tax factors for investment.

As the Chairman of a Tax Summit in Ikeja, Lagos State, the discussion topics were:

  1. Tax Planning, an Effective Method of Tax Avoidance
  2. Tax Evasion in a Growing Economy
  3. Double Taxation – The Provisions and the Impact
  4. Jurisdiction for Investment – Non-Tax Factors

You are required to:

a) Explain briefly Tax Planning and Anti-Avoidance Legislations put in place by the Government. (3 Marks)
b) Summarize situations that may involve Tax Evasion. (4 Marks)
c) Explain Double Taxation Agreement – Provisions and the Main Objectives. (4 Marks)
d) Summarize Non-tax factors that attract investors in choosing a business jurisdiction. (4 Marks)

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  • 15 Marks

ATAX – Nov 2021 – L3 – Q6 – International Taxation

Explains BEPS, its techniques, OECD initiatives, and implications for corporate tax strategies.

At a workshop on “Base Erosion and Profit Shifting (BEPS)” organized by the Federal Ministry of Industries, a resource person explained that BEPS is a corporate tax planning strategy used by multinational corporations to “shift” profits from higher-tax jurisdictions to lower-tax jurisdictions, thereby eroding the tax base of the higher-tax jurisdictions.

One of the participants, an engineer and the General Manager of a leading manufacturing outfit based in Jos, with a head office in a European country, struggled to understand the concepts discussed. After seeking clarification from other participants without success, he approached you as the company’s Tax Manager to explain BEPS and whether it would be beneficial for the company (in collaboration with the head office) to engage in such practices.

Required:

As the company’s Tax Manager, you are to draft a paper addressing the General Manager’s concerns, covering the following:

a. Distinction between base erosion and profit shifting. (3 Marks)
b. Techniques of base erosion and profit shifting. (4 Marks)
c. The six key action initiatives of the Organisation for Economic Co-operation and Development (OECD) against base erosion and profit shifting. (6 Marks)
d. The implications of engaging in base erosion and profit shifting. (2 Marks)

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  • 15 Marks

ATAX – Nov 2021 – L3 – Q5 – International Taxation

Discusses the conditions for significant economic presence and the tax implications for TWITTY Incorporation.

The rapid growth in information and communication technology in Nigeria has brought with it boundless opportunities and changes in the way business activities are conducted. A significant number of transactions in Nigeria, in recent times, are consummated using mobile devices and online payments. In the same vein, the online platforms (mostly operated by international private entities) are perceived by various governments in developing countries (Nigeria inclusive) as undermining the economic interests of their host countries through non-payment of taxes, despite their significant economic presence.

In light of the above, the Finance Act 2019 provides for the treatment of digital and other service providers concerning the significant economic presence of a foreign entity. This provision was followed up with the issuance of Companies Income Tax (Significant Economic Presence) Order 2020 by the Federal Government of Nigeria.

You have been contacted by a foreign online outfit with interest in mobile networking and consultancy, TWITTY Incorporation, California, USA, through its official partner in Nigeria, MAAbioro Partners, to explain issues on the significant economic presence of a foreign entity, deemed to be operating in Nigeria.

Required:

As a tax consultant to TWITTY Incorporation, draft a report explaining the following areas:

a. The objectives of the relevant provisions of Finance Act 2019 and Companies Income Tax (Significant Economic Presence) Order 2020 concerning the significant economic presence of a foreign entity. (3 Marks)
b. Conditions for the determination of significant economic presence for digital activities. (5 Marks)
c. Determination of significant economic presence for technical and consultancy services. (2 Marks)
d. Activities exempted from significant economic presence in Nigeria. (3 Marks)
e. The tax implications of the Order 2020 on the activities of TWITTY Incorporation. (2 Marks)

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  • 20 Marks

ATAX – Nov 2020 – Q5 – International Taxation

Explain issues regarding tax havens, including key factors and competitive strategies.

Tax haven is a state, country, or territory where certain taxes are levied at a low rate or not at all. This has created problems for other countries as their products and services are no longer competitive in international markets. However, various international organizations, governments, and other stakeholders are still handicapped in mitigating or totally eliminating this malaise that is threatening the competitive global market.

You have been invited by a manufacturing outfit to help explain certain issues regarding tax haven in practice.

Required:
a. From the perspective of the Organisation for Economic Co-operation and Development (OECD), explain THREE key factors in deciding whether a jurisdiction is a tax haven or not. (6 Marks)
b. How can a country use its tax jurisdiction to address the issue of competition from a tax haven? (5 Marks)
c. Explain the advantages of and provide the criticisms against tax haven. (9 Marks)

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  • 20 Marks

ATAX – Nov 2020 – Q3 – International Taxation

Provide a report on regional economic integration and trade blocs for Larry Limited’s international market entry.

Larry Limited, Lagos, is a manufacturing company that has been producing household utensils successfully for several years. The company is planning to enter the international market but the management team has little or no information in respect of regional economic integration and trade blocs around the world. The Managing Director of the company has just engaged your professional accounting firm to provide advice on some salient issues in this respect.

Required:
As the Desk Officer in charge of international tax matters in the professional accounting firm, you are to present a report to your principal partner, for his review before sending it to the firm‘s client. Your report should cover the following areas:
a. Distinction between regional economic integration and trade blocs. (4 Marks)
b. Objectives of regional integration. (5 Marks)
c. Benefits of regional economic integration and trade blocs. (4 Marks)
d. Disadvantages of regional economic integration and trade blocs. (3 Marks)
e. Common market and economic union as major types of regional economic integration. (4 Marks)

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  • 5 Marks

ATAX – Nov 2018 – L3 – Q3b – International Taxation

Permanent Establishment (PE) under the Nigeria-UK Double Taxation Agreement

b) Double taxation agreements exist among Nigeria and some foreign countries.

Required:
Explain the term “Permanent Establishment” as contained in the double taxation agreement between Nigeria and the United Kingdom.
(5 Marks)

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  • 15 Marks

ATAX – Nov 2018 – L3 – Q3a – International Taxation

Tax implications for Sadiq Corporation's contracts executed by its Nigerian subsidiary, including PE under Nigeria-UK tax agreement.

(a) Sadiq Corporation was incorporated in Sweden as a limited liability company and has a subsidiary, Omologede Ventures Nigeria Limited located in Akure, Nigeria. Peniel Nigeria Plc awarded a contract to Sadiq Corporation to renovate a rice milling factory in Gboko, Benue State, and another in Abakaliki, Ebonyi State. The contract value for the Gboko factory is $11,064,150, and $7,337,616 for the Abakaliki factory. Sadiq Corporation later sub-contracted the two jobs to its subsidiary in Nigeria. The renovation is expected to be completed within six months.

The following information was submitted to the Federal Inland Revenue Service by Omologede Ventures Nigeria Limited for the year ended December 31, 2017:

Description Amount (N)
Direct materials 962,100,000
Scaffolding 183,538,320
Administrative expenses on hired professionals 33,352,800
Rentals on equipment 18,708,248
Maintenance of equipment 7,431,688
Personnel card (domestic) 28,803,029
Personnel cost (foreign) 14,738,250
Fees to engineers 11,298,689
Other operational costs 6,512,070

Additional Information:

  1. Capital allowance agreed by Omologede Ventures Nigeria Limited with the Federal Inland Revenue Service for the year was N104,418,744.
  2. 60% of the total contract sum was made available to Omologede Ventures Nigeria Limited.
  3. Depreciation is N69,902,092.
  4. 70% of the total contract sum was paid at the beginning of the job, while the balance was paid in September of the same year.
  5. The exchange rate at the time of signing the contract was N180 to $1. The rate changed in August of the same year to N195 to $1.

Withholding tax provisions were fully complied with by the two companies, and the tax remitted to the relevant tax authority as and when due.

Required:
As the local consultancy firm in Nigeria, provide advice to the management of the two companies on the tax implications of the contracts for the relevant year of assessment, clearly showing their tax liabilities (if any).
(15 Marks)

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  • 5 Marks

TAX – Nov 2015 – L2 – Q4a – International Taxation

This question explains the tax treatment of income earned by a non-resident individual who has spent time in Nigeria.

Mr. Alexis Sanchez was employed by Zenon Ltd as Director Commercial, West and Central Africa with effect from 1 March 2011. He entered Nigeria on the date his employment became effective and remained in Nigeria till 25 August 2011. He returned to Nigeria on 15 January 2012, and remained in Nigeria till 31 July 2012.

Required:
Explain the basis for the taxation of income earned by Mr. Alexis Sanchez in Nigeria for the relevant tax years.

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  • 10 Marks

AT – Nov 2018 – L3 – Q3a – Permanent establishment, International taxation

Tax policy implications on the establishment of a permanent entity, finance lease acquisitions, and dividend policies by a foreign company.

The management of Smith Plc, a UK-based company, is considering the possibility of launching its presence in Ghana and it is not sure of the tax implication of the following under 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 United Kingdom to work in Ghana who will be paid half salary in Ghana and the other half paid directly to their accounts in the United Kingdom as against paying their full salary in Ghana.
iv) Management intends to acquire shares in many companies in Ghana as part of efforts to create value for shareholders through dividend receipts as against granting loans to interested companies in Ghana if it is unable to make its presence in Ghana.

Required:
Evaluate the above policy interventions and advise on the tax implication of each to enable the management of Smith Plc to make a decision.

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  • 4 Marks

AT – May 2021 – L3 – Q1b – International Taxation

Evaluate the accuracy of the statement about withholding tax on global payments for goods, works, and services.

At a public symposium, a tax administrator made a statement to the effect that withholding taxes must be exacted from any payment made to persons around the world for goods, works, and services.

Required:
Evaluate the extent to which this statement is true in the light of the tax provisions of the Income Tax Act, 2015 (Act 896) as amended.

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  • 20 Marks

AT – Aug 2022 – L3 – Q3 – Tax planning | International taxation

Provide a briefing paper on tax planning options available for an individual and their companies.

John Zookay is a Ghanaian Citizen who has lived in the Republic of Liberia for many years.
He is also a citizen of Liberia. He is an employee of a Multinational Company that has a
subsidiary company in Ghana and Liberia. He works for the Ghanaian subsidiary company,
but his role makes him work for the other subsidiary in Liberia as well. John has chosen Ghana
as a place of his permanent home even though his immediate family is based in the Republic
of Liberia and he visits Ghana anytime during the year.
In 2018, John spent more than 184 days outside Ghana working for the Liberia office. In
addition to his employment income in Ghana, he earned some income from a high yielding
fixed deposit accounts maintained with Bank of Africa, Ghana. His gross interest income for
the year 2018 was GH¢10,000 from Bank of Africa. A few years back, whilst studying in the
United Kingdom, he maintained some high yielding interest bearing account from which he
earned £3,500 in 2018. John does not know how the current income tax law “Income Tax Act,
2015 (Act 896)” will affect his incomes earned from Ghana and elsewhere in the United
Kingdom and is worried that he would be liable to tax on all his incomes in Ghana. He is keen
on getting tax planning advice from you to enable him reduce his tax liability (if any).
John also had serious business interests in Ghana. In view of this interests, he set up two
companies limited by shares in Ghana in which he implemented his business ideas. The
following are the objects of his two companies:
1) farming and production of palm fruits on commercial scale; and
2) processing of palm fruits into oil for both the local and international market

John together with his management team strategically decided that each of the companies
maintains equity in each other in order to avoid difficulties with sourcing for external funding
thus using income from dividends within his companies effectively. John intends that at some
point, he will merge the two companies into one to avoid all the legal compliance obligations
and duplication of cost associated with running separate companies. All the two companies are
instalment taxpayers and are required to file their self-assessment estimate at their various tax
offices.
John desperately needs your assistance to enable him structure his personal and business
interest so as to minimise his tax liability.
Required:
a) Prepare a briefing paper to John on the tax implications on him and his companies. (10 marks)
b) Advise him on the compliance obligations of his companies under self-assessment. (10 marks)

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  • 10 Marks

AT – Aug 2022 – L3 – Q2a – International taxation

Discuss whether bilateral double taxation conventions are essential for resolving international tax problems.

Despite the growing number of contributions to bilateral double taxation, some tax analysts have questioned whether bilateral double taxation conventions relating to the taxation of income and capital are essential for the resolution of international tax problems.

Required:
Discuss the above statement.
(10 marks)

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  • 4 Marks

AT – Aug 2022 – L3 – Q1a – International taxation

Tax treatment for a non-resident company using a subsidiary to execute a project.

Jantua Ltd (Jantua) is a company incorporated in the Republic of Israel with subsidiaries across other countries, including Frankaa Company Ltd (Frankaa) in Ghana. All subsidiaries were incorporated in their respective countries by Jantua.

Jantua won a contract with the Ministry of Roads and Highways to construct a road in Ghana. Jantua used its subsidiary, Frankaa, to carry out the project. Jantua billed the Ministry of Roads and Highways for the work done. Likewise, Frankaa billed Jantua for management and technical services on the road project.

Required:
What is the tax treatment of this arrangement?
(4 marks)

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  • 6 Marks

AT – NOV 2021 – L3 – Q2c – International taxation | Business income – Corporate income tax

Advise on tax implications of loan forgiveness between a Korean parent company and its Ghanaian subsidiary.

Yelbateng Ltd is a Korean company and has a subsidiary in Ghana, by the name Yelbateng Ghana Ltd.

The parent company in 2008 gave a loan facility to the subsidiary to support its operations. However, interest on the loan from 2009 to 2019 came to $8,000,000 after applying a thin capitalisation rule in taxation. As a result, the total amount was accrued by Yelbateng Ghana Ltd, as the company did not have money to pay the interest as agreed in the loan contract.

The total amount of the loan was $20 million. In the year 2020, the Board took a decision to relief the subsidiary of the loan obligation, meaning the loan with its interest was not going to be repaid by the subsidiary.

Required:

You have been invited as a final level candidate to advise the company on the tax implication of this arrangement. (6 marks)

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  • 4 Marks

AT – NOV 2021 – L3 – Q2b – International taxation

Explain the underlying principle of transfer pricing in international taxation.

What is the principle underlying the concept of Transfer Pricing? (4 marks)

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  • 10 Marks

AT – May 2020 – L3 – Q2b – International taxation

Analyze tax implications for an Italian company constructing a fuel depot in Ghana, distinguishing between trading in Ghana and trading with Ghana

XYZ Parks Ltd, an Italian Company, had a contract for the construction of a fuel depot in Ghana. It was clear from the contract agreement that the production and fabrication costing $500,000 would be carried out outside Ghana. The installation works in Ghana and related services would cost $200,000 and GH¢2,400,000 respectively.

XYZ Parks Ltd has asked of your professional advice on the above transaction.

Required:
i) What is the tax implication of trading in Ghana and trading with Ghana? (4 marks)
ii) What will be your professional advice to XYZ Parks Ltd on the tax implication of other contract? (6 marks)

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  • 20 Marks

AT – May 2020 – L3 – Q1 – International taxation

Explanation of the concept of permanent establishment in Ghana and the differences between economic and juridical double taxation.

The spectrum of investment opportunities in Ghana has heightened and this has attracted some investors who intend to visit next month to assess the potential for investment. The Ministry of Finance has written to your Tax Consulting Firm to make a presentation on behalf of the Ministry to these Investors. The letter from the Ministry contains in part the following:

“International trade has given persons the ability to carry out separate aspects of their business operations in different countries. Even though it will be inconceivable to compel a person to pay taxes in every country where that person carries out business operations, the level of business activity carried on by a person in a particular country may expose that person to tax liabilities under the laws of that country. In Ghana, assessable income of a non-resident person includes income effectively connected with a Ghanaian permanent establishment of the person irrespective of the source of the income…”

Required: Prepare a report highlighting the following:

a) What constitutes a Ghanaian permanent establishment with reference to the Income Tax Act, 2015 (Act 896)?
(4 marks)

b) Explain the taxation rules on Ghanaian permanent establishment as enshrined in the Income Tax Act, 2015 (Act 896).
(10 marks)

c) There are economic double taxation and juridical double taxation. Explain these TWO (2) concepts of double taxation.
(6 marks)

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  • 8 Marks

AT – NOV 2021 – L3 – Q1b – Permanent Establishment | International Taxation

Discusses the tax implications of establishing a permanent establishment or a subsidiary in Ghana.

Muda Atesigbe is a major shareholder of Malka Ltd, a company based in Dubai–United Arab Emirates. As part of giving the company a global outlook, it intends to have a presence in Ghana. What is not too clear to the company’s management is the mode of entry into the country that would serve its business interests. It is contemplating establishing a company in Ghana or using the Permanent Establishment route to make its presence in Ghana.

Required:
He has tasked you, as a final level student of the Institute of Chartered Accountants, Ghana, to advise him on the tax implications of both routes and which is a better option. (8 marks)

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  • 6 Marks

AT – NOV 2021 – L3 – Q1a – Business income – Corporate income tax | International taxation

Compute tax payable for a Free Zone Enterprise based on income from local and export sales and determine the treatment of certain adjustments.

Orga Ltd has the following information relating to its operation as a Free Zone Enterprise for the 2020 year of assessment with a basis period from January to December each year:

Description Amount (GH¢)
Revenue 35,000,000
Cost (21,000,000)
Profit 14,000,000

Additional information:

  • Depreciation of GH¢200,000 has been added to the cost above.
  • Revenue: Local sales GH¢25,000,000; Exports GH¢10,000,000.
  • The Managing Director was provided with a mini bar and a swimming pool as part of his employment package costing GH¢1,200,000 in his private residence. The employer added only GH¢200,000 as part of the employment income for tax purposes. The total cost has been adjusted to the cost above.
  • The dividend received from the United States of America net of taxes of 10% was GH¢22,500. This income has not yet been recorded, although it has been credited in the bank statement.
  • The excess proceeds from the sale of a depreciable asset over the written down value amount to GH¢300,000. This has not yet been recorded in the company’s accounts.

Required:
i) Compute the tax payable. (6 marks)
ii) Explain the tax treatment of the cost of the swimming pool and mini bar. (2 marks)

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