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ADVANCED TAX MAY 2013 SOLUTION 1 KOJO APIO Year of Assessment 2012 (1/1/2012 31/12/2012 GHC 20,000 4,000

0 2,000 3,000 6,000 1,900 36.900 3,690 3,500 190 3600 40,690 3,000 37,690

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

1,320 100 4,069 1,900

7,169 30,521

Computation of take home pay Total cash emoluments Less Provident Fund Rent Social Security Income tax 5% Tax on Bonus :. Take Home Pay GHC 36,900.00 1,90.00 3,500.00 1,100.00 5,340.95 150.00

11,990.95 24.906.05

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ADVANCED TAX MAY 2013 SOLUTION 2 Chuki Insurance Ltd Computation of Chargeable Income Year of Assessment 2012 Basis period 01-01-2012 - 31-12-2012 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 GHC 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. ii. iii. iv. v. vi. The description of the taxable gift, The location of the taxable gift, The total value of the gift and how it was calculated, The tax payable with respect to that gift, The full name and address f the donor of the gift, Any other information required by the Commissioner.

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ADVANCED TAX MAY 2013 SOLUTION 3 A. The circumstances are: i. ii. iii. iv. The supply is exempt from VAT. A period of three years (3 years) has expired from the date of the deduction of VAT. The person cannot produce VAT invoices to support payment of VAT. 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. Where the items involved are in respect of entertainment, unless the person involved is in the entertainment business. Where the item involved has been used for a private purpose. Where the item ceased to be known as a taxable transaction before the end of its life.

v. vi. vii.

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. i. a. The rates of VAT currently in force are: 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. 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%. 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. The expenditure must be wholly, exclusively and necessarily incurred for the produce of the persons income.

C.

b.

c.

d.

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ADVANCED TAX MAY 2013 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. interpretation of the tax law. b i. That is, it relates to

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 proprietors mother is not in any way involved in carrying on of the business.

c.

TERRISCO LIMITED Computation of Penalty Payable on Self Assessment GHC 750,000 187,500 1,525,000 381,250 1,372,500 343,125 GHC 343,125 187,500 155,625 GHC46,687.50 Page 4 of 6

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%

ADVANCED TAX MAY 2013 Solution 5 HYPEC MANUFACTURING COMPANY LTD Capital Allowance Computations
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 Pool 1 40% 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 Pool 2 30% 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 Pool 4 20% 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 Pool 5 (a) 10% 200,000 13,425 186,575 -___ 186,575 20,000 166,575 -___ 166,575 20,000 146,575 -___ 146,575 20,000 126,575 Pool 5 (b) 10% Totals

127,870

162,228

91,118 20,000 20,000 2,000 18,000

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 100,000 27,870 100,000 27,870 NIL_ 180,000 27,870 162,228 190,098 180,000 10,098 NIL__ 108,571 211 108,782 101,216 7,566 GHC1,891.50 Page 5 of 6 100,000 NIL_

180,000 NIL_

ADVANCED TAX MAY 2013 Tax Liability: Export 600,000 x 7,566 6,600,000 Tax thereon at 8% Domestic 600,000 x 7,566 6,600,000 688

GHC55.00 6,878

Tax thereon 0.25% Less Rebate Total tax due (55 + 860) Year of Assessment 2011 (1/1/11 31/12/11) Profit per accounts Less Capital allowance Chargeable income Tax thereon at 8% Domestic 9,000,000 x 318,940 10,000,000 Tax thereon 25% Tax rebate 50% =

GHC1,720 860 860 915

450,000 131,060 318,940 2,552 287,046

71,762 35,881

35,881 38,433

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