ADVANCED TAX MAY 2013

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SOLUTION 1

KOJO APIO

Year of Assessment 2012 (1/1/2012 – 31/12/2012

GHC

Basic salary

Medical allowance

Entertainment

Responsibility

Bonus

Provident Fund

Total cash emoluments

Add: Rent element

Less: Amount paid

Add: Car element

Assessable income

Less: Bonus

Less reliefs:

Social Security

Marriage

Life policy

Provident Fund

Chargeable income

Tax GHC5,340.95

3,690

3,500

1,320

100

4,069

1,900

20,000

4,000

2,000

3,000

6,000

1,900

36.900

190

3600

40,690

3,000

37,690

7,169

30,521

Computation of take home pay

GHC

Total cash emoluments

Less

Provident Fund

Rent

Social Security

Income tax

5% Tax on Bonus

:. Take Home Pay

1,90.00

3,500.00

1,100.00

5,340.95

150.00

36,900.00

11,990.95

24.906.05

ADVANCED TAX MAY 2013

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SOLUTION 2

Chuki Insurance Ltd

Computation of Chargeable Income

Year of Assessment – 2012

Basis period – 01-01-2012 - 31-12-2012

GHC GHC

Gross Premium

Less: Premium Returned

Re-insurance Premium

Net Premium

Less: Unexpired Risk (40% x 941,000)

Previous Year Risk

Less: Claims Settled and Paid

Less: Re-insurance Recoveries

Commission to Agents

General & Administration Expenses

Less: Capital allowance

Chargeable Income

14,000

25,000

376,400

474,500

400,000

43,000

357,000

18,000

44,800

980,000

39,000

941,000

98,100

1,039,100

419,800

619,300

137,800

481,500

Information to be submitted by the recipient of a taxable gift are:-

i. The description of the taxable gift,

ii. The location of the taxable gift,

iii. The total value of the gift and how it was calculated,

iv. The tax payable with respect to that gift,

v. The full name and address f the donor of the gift,

vi. Any other information required by the Commissioner.

ADVANCED TAX MAY 2013

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SOLUTION 3

A. The circumstances are:

i. The supply is exempt from VAT.

ii. A period of three years (3 years) has expired from the date of the deduction of

VAT.

iii. The person cannot produce VAT invoices to support payment of VAT.

iv. The input VAT was incurred on the purchase or import of motor vehicles or

vehicle spare parts unless the person is in the business of trading in motor

vehicles or motor vehicles spare parts.

v. Where the items involved are in respect of entertainment, unless the person

involved is in the entertainment business.

vi. Where the item involved has been used for a private purpose.

vii. Where the item ceased to be known as a taxable transaction before the end of

its life.

B. The Act defines taxable supply of goods to mean any arrangement under which the

owner of the goods parts with or will part with possession of the goods including the

provision of goods by sale, barter, lease, transfer, exchange, gift or similar disposition.

C. i. The rates of VAT currently in force are:

a. Standard Rate 12.5%. This is the normal VAT rate charged on taxable goods

and services that are not exempt from tax. One should however note that the

2.5% National Health Insurance Levy is not a VAT rate.

b. Zero Rated. This is a rate of VAT charged on zero rated goods. Zero rated

goods like, exports, goods supplied as stores for vessels, locally manufactured

agricultural implements. It is a rate of VAT but at 0%.

c. Flat Rate Scheme 3%. This was designed for traders in the non-formal retail

sector of the Ghanaian economy. A person authorised to operate this system

cannot operate and charge the normal standard rate of 12.5%. The VAT rate

also do not allow for the deduction of import VAT.

d. The expenditure must be wholly, exclusively and necessarily incurred for the

produce of the person’s income.

ADVANCED TAX MAY 2013

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SOLUTION 4

a. i. Administrative Review:

In this case, the Commissioner considers matters of fact rather than purely legal issues.

At the preliminary stage it serves as an opportunity to the taxpayer to object to a

decision made by the Commissioner in relation to his tax obligation.

ii. Judicial Review:

This is where the matter of dispute is a question of law. That is, it relates to

interpretation of the tax law.

b i. This expenditure will be disallowed because it is a domestic and private expenditure.

The managing proprietor is the owner of the business. (Section 23 (i) (a))

ii. Expenses incurred as a result of infraction of the tax law are not deductible. The

expenses will be disallowed.

i. The cost of goods withdrawn by the proprietor will not be allowed as a deductible

expenditure. Instead, the goods will be valued and charged to the proprietor. It will

be treated as a normal sale.

ii. This expenditure is an allowable deduction from the income of the business. The

expenditure has been incurred for use of the property in carrying on the business of the

enterprise.

iii. This expenditure will be disallowed as a private and domestic expenditure. The

proprietor’s mother is not in any way involved in carrying on of the business.

c. TERRISCO LIMITED

Computation of Penalty Payable on Self Assessment

GHC

Estimated Chargeable Income

Tax at 25%

Actual Chargeable Income

Tax at 25%

90% of actual chargeable income

Tax at 25%

Penalty:

Tax on 90% of actual chargeable income

Less tax on estimated income

Amount of tax underestimated

Penalty payable at 30%

187,500

381,250

343,125

GHC46,687.50

750,000

1,525,000

1,372,500

GHC

343,125

187,500

155,625

ADVANCED TAX MAY 2013

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Solution 5

HYPEC MANUFACTURING COMPANY LTD

Capital Allowance Computations Pool 1

40%

Pool 2

30%

Pool 4

20%

Pool 5

(a) 10%

Pool 5

(b) 10%

Totals

2008 (245 days)

Capital allowance

Written down value c/f

2009 Additions

Capital allowance

Written down value

2010 Less disposals

Capital allowance

2011 Written down value b/f 2011

Additions

Capital allowance

400,000

107,397

292,603

-___

292,603

117,041

175,562

-___

175,562

70,225

105,337

90,000

195,337

78,135

117,202

25,000

5,034

19,966

50,000

69,966

20,990

48,976

(46,000)

2,976

893

2,083

95,000

97,083

29,125

37,958

15,000

2,014

12,986

8,000

20,986

4,197

16,789

(17,000)

NIL

-___

-

9,000

9,000

1,800

7,200

200,000

13,425

186,575

-___

186,575

20,000

166,575

-___

166,575

20,000

146,575

-___

146,575

20,000

126,575

-

-

-

-

-

-

20,000

20,000

2,000

18,000

127,870

162,228

91,118

131,060

GHC

Year of Assessment 2008:

Profit as per accounts

Less: Capital allowance b/f

Amount utilized

Capital allowance c/f

Chargeable income

Tax

Year of Assessment 2009

Profit as per accounts

Less: Capital allowance b/f

Current

Utilized

c/f

Chargeable income

Tax

Year of Assessment 2010

Profit as per accounts

Additional income 17,000 – 16,789

Assessable income

Less: Capital allowance b/f 10,098

Current 91,118

Chargeable income

Tax

27,870

100,000

27,870

NIL_

27,870

162,228

190,098

180,000

10,098

NIL__

GHC1,891.50

100,000

100,000

NIL_

180,000

180,000

NIL_

108,571

211

108,782

101,216

7,566

ADVANCED TAX MAY 2013

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Tax Liability:

Export 600,000 x 7,566 688

6,600,000

Tax thereon at 8% GHC55.00

Domestic 600,000 x 7,566 6,878

6,600,000

Tax thereon 0.25% GHC1,720

Less Rebate 860

860

Total tax due (55 + 860) = 915

Year of Assessment 2011 (1/1/11 – 31/12/11)

Profit per accounts 450,000

Less Capital allowance 131,060

Chargeable income 318,940

Tax thereon at 8% 2,552

Domestic 9,000,000 x 318,940 287,046

10,000,000

Tax thereon 25% 71,762

Tax rebate 50% 35,881 35,881

38,433