Petroleum operations – Page 2

AT – Nov 2018 – L3 – Q5a – Petroleum operations, Capital allowance

Computation of tax payable for a petroleum company, including adjustments for financial gains, costs, and capital allowances.

Question

The following is relevant for the operation of AB Ltd, operating in the upstream petroleum sector for the 2017 year of assessment:

Details	$
Revenue	100,000,000
Cost	80,000,000
Profit	20,000,000

The following additional information forms part of the above:

The revenue includes financial gain from swaps of $1,000,000.
The financial cost of $1,200,000 was added to the cost.
The cost includes depreciation of $200,000.
Research and development (R&D) of $100,000 was added to the cost of operation.
Revenue on 20,000 barrels of oil sold was added to revenue. The price used on the 20,000 barrels was $70 in its tax returns, but the agreed price is now $67, certified by the Petroleum Unit of the Ghana Revenue Authority.
Written down value (WDV) as of 31/12/2016 was $1,800,000 after granting capital allowance the second time as of 2016 year-end. This information is yet to be adjusted.

Required:
i) Compute the tax payable. (6 marks)
ii) Comment on the deductibility of financial cost in petroleum operations. (2 marks)

Answer

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Tags: Capital Allowance, Financial Costs, Petroleum taxation, Tax computation, Taxable Income
Level: Level 3

Topic: Capital allowance, Petroleum operations
Series: NOV 2018

TX – May 2019 – L3 – Q5a – Minerals and mining

Tax computation for a mining company including the treatment of financial costs, depreciation, and mineral royalty, followed by the tax implications.

Question

a) Kaato Mining Company Ltd (Kaato) has been operating in the mining sector for some time now. The following data is relevant to the company’s operations for the 2017 year of assessment:

GH¢

Adjusted profit: 100,000,000
The following additional information is relevant:

Financial cost of GH¢900,000 inclusive of interest on working capital loan of GH¢20,000 was adjusted in arriving at the adjusted profit.
Financial gain from derivatives of GH¢600,000 was adjusted in arriving at the adjusted profit above.
Depreciation of GH¢125,000 was adjusted to the profit above.
Written down value brought forward from 2016 after 1-year capital allowance was granted stood at GH¢1,000,000. This was accordingly certified by the Audit Unit of the Ghana Revenue Authority.
Revenue of GH¢1,200,000,000 was realized on a quantity of gold production of 80,000,000 ounces. A review of the tax returns of Kaato Ltd revealed that Mineral Royalty was not calculated for 2017. Kaato applied for a waiver of penalty and interest on the mineral royalty to which GRA obliged.
Required: i) Compute the taxes payable. (6 marks)

ii) What is the tax treatment of financial cost under mineral operations? (2 marks)

Answer

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Tags: Capital Allowance, Depreciation, Financial cost, Financial Gain, Mineral Royalty, Mining, Tax computation
Level: Level 3

Topic: Petroleum operations
Series: MAY 2019

TX – May 2019 – L3 – Q5b – Petroleum Operations

Compute the royalty payable by a petroleum company and discuss the tax implications of production costs and the relevance of government interest in upstream operations.

Question

b) The following relates to Ablorh Ltd from petroleum operations relating to 2017 year of assessment:

Production (in barrels): 100,000,000
Selling Price per barrel ($): 100
Production cost per barrel ($): 50
Capital allowance agreed ($): 800,000
Required: i) Compute the royalty payable to the Government of Ghana by Ablorh Ltd and state the tax implication of production cost on Royalty. (5 marks)

ii) Explain THREE (3) relevance of initial interest of Government in the Upstream Petroleum Operations. (3 marks)

Answer

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Tags: Government Interest, Petroleum Operations, Production Cost, Royalty, Tax implications, Upstream Petroleum Operations
Level: Level 3

Topic: Petroleum operations
Series: MAY 2019

TF – May 2018 – L3 – Q5a – Petroleum Operations

Computation of revenue from oil sales and asset disposal for Lanandam Ltd.

Question

The following data is relevant to the upstream petroleum operations of Lanandam Ltd for 2017 year of assessment.

200,000 barrels of oil sold internationally at $68 per barrel
An asset bought at the inception of petroleum operations was sold for $1,000,000 in 2017
50,000 barrels lifted and sold to its parent company in the United States at an agreed price of $56 per barrel. The price ruling on the international market on the day of lifting was $60 per barrel.
Required:
Compute the revenue from the above and comment on the treatment of the sale of the petroleum assets as indicated above.

Answer

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Tags: Asset Sales, Oil Sales, Petroleum Revenue, Tax Planning
Level: Level 3

Topic: Petroleum operations
Series: MAY 2018

AT – Aug 2022 – L3 – Q5a – Petroleum operations

Compute the tax payable by Alpha Ltd for the 2020 year of assessment in the upstream petroleum sector.

Question

a) Alpha Ltd is a company operating in the upstream petroleum sector and commenced
production in 2020. The Accountant who is new to the industry provided the following extract
for the 2020 year of assessment with basis period 1 January to 31 December, 2020.

Additional information:
i) Production in barrels is 120,000,000.
ii) Finance Lease:
Principal Repayment is GH¢15,000,000.
Finance cost is GH¢1,200,000.
Lease is over 6 years starting from 1/1/2020.

Required:
Compute the tax payable for Alpha Ltd for 2020 year of assessment. (10 marks)

Answer

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Tags: Corporate Tax, Petroleum Operations, Tax computation, Upstream Sector
Level: Level 3

Topic: Petroleum operations
Series: AUG 2022

AT – Nov 2021 – L3 – Q5a – Petroleum operations

Explain taxation concepts in relation to petroleum operations, including surface rentals, stability agreements, and carried interest.

Question

Explain the following concepts in relation to the taxation of petroleum operations:
i) Surface Rentals
ii) Stability Agreements
iii) Carried Interest
iv) Additional Carried Interest
(10 marks)

Answer

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Tags: Carried Interest, Petroleum taxation, Stability agreements, Surface rentals
Level: Level 3

Topic: Petroleum operations
Series: NOV 2021

AT – May 2017 – L3 – Q5c – Petroleum operations

Explain surface rental and carried interest as revenue streams from petroleum operations in Ghana.

Question

c) Ghana has joined its counterparts as an oil-producing country. Discuss fully the following revenue streams due to Ghana from the exploitation of the resource:

i) Surface Rental (2.5 marks)
ii) Carried Interest (2.5 marks)

Answer

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Tags: Carried Interest, Oil and gas, Petroleum taxation, Revenue streams, Surface rental
Level: Level 3

Topic: Petroleum operations
Series: MAY 2017

AT – Nov 2016 – L3 – Q5b – Minerals and mining

Compute the royalty payable by Go-Get Mining Company for the second quarter of its operations in 2015.

Question

b) Compute the Royalty payable on the operation of Go-Get Mining Company from the second quarter of its operations in 2015 from the following financial data:

Item	GH¢
Revenue	100,000
Cost of operation	65,000
Capital allowance agreed	15,000
Royalty (first quarter)	60,000

(3 marks)

Required: 2015 individual income tax rate

Income Bracket	Tax Rate
First 1,584	Nil
Next 792	5%
Next 1,104	10%
Next 28,200	17.5%
Exceeding 31,680	25%

Answer

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Tags: Additional Oil Entitlement, Carried Interest, Revenue Types, Upstream Petroleum
Level: Level 3

Topic: Petroleum operations
Series: NOV 2016

AT – Nov 2016 – L3 – Q5a – Petroleum operations

Discuss the types of revenue generated from upstream petroleum operations, focusing on carried interest, additional carried interest, and additional oil entitlement.

Question

a) Ghana, having found oil in commercial quantity, has joined its counterparts in the world in the production of oil. Fiscal systems have been put in place to bring in various revenue streams to the Government of Ghana.

Required:
Discuss fully the under-listed revenue types from upstream petroleum operations:

i) Carried Interest (3 marks)
ii) Additional Carried Interest (3 marks)
iii) Additional Oil Entitlement (3 marks)

Answer

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Tags: Additional Oil Entitlement, Carried Interest, Revenue Types, Upstream Petroleum
Level: Level 3

Topic: Petroleum operations
Series: NOV 2016

AT – Nov 2023 – L3 – Q5b – Petroleum operations

Compute the government take from royalty, carried interest, and additional participation interest in petroleum operations.

Question

Nananom Petroleum Ghana Ltd produced 3,000,000 barrels of oil per month. The crude oil was sold at $70 per barrel. Royalty due is 5%, Carried Interest of 11%, and Additional Interest of 3.75%.

Required:
Compute the state or government take in the following:
i) Royalty
ii) Carried interest
iii) Additional participation interest

Answer

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Tags: Additional Interest, Carried Interest, Government Take, Petroleum Operations, Royalty
Level: Level 3

Topic: Petroleum operations
Series: NOV 2023

AT – Nov 2019 – L3 – Q5c – Petroleum operations

Compute the tax payable for Kaeka Ltd and comment on the treatment of research and development expenditure.

Question

Kaeka Ltd operates in the Upstream Petroleum Sector. The following relates to its 2018 year of assessment:

Required:
i) Compute the tax payable. (8 marks)
ii) Comment on the treatment of research and development expenditure. (2 marks)

Answer

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Tags: Capital Allowance, Research and Development, Tax computation, Upstream Petroleum
Level: Level 3

Topic: Petroleum operations
Series: NOV 2019

Topic: Petroleum operations

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AT – Nov 2018 – L3 – Q5a – Petroleum operations, Capital allowance

Computation of tax payable for a petroleum company, including adjustments for financial gains, costs, and capital allowances.

TX – May 2019 – L3 – Q5a – Minerals and mining

Tax computation for a mining company including the treatment of financial costs, depreciation, and mineral royalty, followed by the tax implications.

TX – May 2019 – L3 – Q5b – Petroleum Operations

Compute the royalty payable by a petroleum company and discuss the tax implications of production costs and the relevance of government interest in upstream operations.

TF – May 2018 – L3 – Q5a – Petroleum Operations

Computation of revenue from oil sales and asset disposal for Lanandam Ltd.

AT – Aug 2022 – L3 – Q5a – Petroleum operations

Compute the tax payable by Alpha Ltd for the 2020 year of assessment in the upstream petroleum sector.

AT – Nov 2021 – L3 – Q5a – Petroleum operations

Explain taxation concepts in relation to petroleum operations, including surface rentals, stability agreements, and carried interest.

AT – May 2017 – L3 – Q5c – Petroleum operations

Explain surface rental and carried interest as revenue streams from petroleum operations in Ghana.

AT – Nov 2016 – L3 – Q5b – Minerals and mining

Compute the royalty payable by Go-Get Mining Company for the second quarter of its operations in 2015.

AT – Nov 2016 – L3 – Q5a – Petroleum operations

Discuss the types of revenue generated from upstream petroleum operations, focusing on carried interest, additional carried interest, and additional oil entitlement.

AT – Nov 2023 – L3 – Q5b – Petroleum operations

Compute the government take from royalty, carried interest, and additional participation interest in petroleum operations.

AT – Nov 2019 – L3 – Q5c – Petroleum operations

Compute the tax payable for Kaeka Ltd and comment on the treatment of research and development expenditure.

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AT – Nov 2018 – L3 – Q5a – Petroleum operations, Capital allowance

Computation of tax payable for a petroleum company, including adjustments for financial gains, costs, and capital allowances.

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TX – May 2019 – L3 – Q5a – Minerals and mining

Tax computation for a mining company including the treatment of financial costs, depreciation, and mineral royalty, followed by the tax implications.

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TX – May 2019 – L3 – Q5b – Petroleum Operations

Compute the royalty payable by a petroleum company and discuss the tax implications of production costs and the relevance of government interest in upstream operations.

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TF – May 2018 – L3 – Q5a – Petroleum Operations

Computation of revenue from oil sales and asset disposal for Lanandam Ltd.

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AT – Aug 2022 – L3 – Q5a – Petroleum operations

Compute the tax payable by Alpha Ltd for the 2020 year of assessment in the upstream petroleum sector.

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AT – Nov 2021 – L3 – Q5a – Petroleum operations

Explain taxation concepts in relation to petroleum operations, including surface rentals, stability agreements, and carried interest.

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AT – May 2017 – L3 – Q5c – Petroleum operations

Explain surface rental and carried interest as revenue streams from petroleum operations in Ghana.

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AT – Nov 2016 – L3 – Q5b – Minerals and mining

Compute the royalty payable by Go-Get Mining Company for the second quarter of its operations in 2015.

You're reporting an error for "AT – Nov 2016 – L3 – Q5b – Minerals and mining"

AT – Nov 2016 – L3 – Q5a – Petroleum operations

Discuss the types of revenue generated from upstream petroleum operations, focusing on carried interest, additional carried interest, and additional oil entitlement.

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AT – Nov 2023 – L3 – Q5b – Petroleum operations

Compute the government take from royalty, carried interest, and additional participation interest in petroleum operations.

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AT – Nov 2019 – L3 – Q5c – Petroleum operations

Compute the tax payable for Kaeka Ltd and comment on the treatment of research and development expenditure.

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