THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) PRINCIPLES AND PRACTICE OF TAX QUESTION PAPER NOVEMBER 2014

Transcription

1 QUESTION 1 THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) (a) Ebo Pinkrah, a Ghanaian resident in the U. S. A., returned to Ghana on 1 st January He decided to be self-employed and has contacted you to explain the following: - PAYE - Corporate tax - 5% withholding tax - Excise duty - Capital gain tax - Rent tax - Gift tax (14 marks) (b) Kofi Enterprise is a VAT registered entity. Kofi Enterprise acquired goods (on wholesale basis) from a manufacturer at VAT inclusive price of GH 235,000 in July Kofi Enterprise sold these goods to a retailer, Mr. Adom at a VAT inclusive price of GH 282,000. Mr. Adom sold these goods to a customer at a VAT inclusive price of GH 317,250. The manufacturer, Kofi Enterprise and Mr. Adom are all VAT registered persons/entities. The standard VAT rate is 17.5%. Calculate the net VAT payable to Ghana Revenue Authority by each of the persons/entities within the distribution chain. (6marks) Page 1 of 5

2 QUESTION 2 (a) Alhaji Isakah completed the construction of a building at a cost of GH 450,000 at Pramso-Nkran on 1 st January In July 2012, as a result of flooding, he undertook a major renovation on the building costing GH 50,000. He has insured the building with SIC Company Limited at a premium of GH 20,000. Alhaji Isakah decided to relocate to Assin-Nkran and thus sold the house to Kwame Okumukom for GH 800,000 on 31 st December Agency fee amounted to 1% of the consideration. You are required to: (i) (ii) Calculate the capital gains tax payable by Alhaji Isakah if any on the building disposed of. If Alhaji Isakah used 75% of the sales proceeds to acquire a new house at Assin- Nkran on 1 st August 2013, what would be the capital gains tax payable by him? (12 marks) (b) Ghana has signed a number of double taxation agreements with some countries. State briefly the benefits of entering into these agreements. (8 marks)

3 Page 2 of 5 QUESTION 3 (a) State any four (4) exclusive powers of the Commissioner-General of the Ghana Revenue Authority. (4 marks) (b) Modern tax practice gives taxpayers the opportunity to challenge decisions by the tax administration and ensure that the law is applied consistently and fairly. Explain the options and procedures to a taxpayer who is not satisfied with an assessment made under the Internal Revenue Act (Act 2000). (16 marks)

4 QUESTION 4 Page 3 of 5 (a) Distinguish between contract of service and contract for service in four (4) ways. (8 marks) (b) Radix Company Limited has been in business for several years and prepares Accounts to 31 st August each year. The written down value of its assets as at 31/08/07 were as follows: Class 1 GH 10,500 Class 2 GH 23,100 Class 4 GH 5,200 Class 5 GH 37,000 The following assets were purchased in 2008 year of assessment: Computers & accessories GH 5,000 Toyota Camry GH 15,000 In 2011 the following assets were sold: Car GH 3,600 Computer GH 1,800 Compute its capital allowances for (12 marks) Page 4 of 5

5 QUESTION 5 THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) (a) Distinguish between Excise Duty and Customs Duty. (5 marks) (b) Mr. Dogood transferred a Nissan Premera saloon car to his granddaughter Faafa when she graduated with first class honours in Economics in September, The original cost of the vehicle was GH 18,500 but at the time of transfer, the vehicle was valued at GH 21,456. What are the obligations of both Mr. Dogood and Faafa under the Internal Revenue Act 2000 (Act 592)? (5 marks) (c) Mr. Kojo Ehun constructed a house at Kasoa in 1990 at a cost of GH 35,555. He renovated the house in June 2005 at a cost of GH 21,445 and transferred the house to his son Kobina Ehun on his thirtieth birthday on 31 st July The market value of the house was GH 88,000 at the time of transfer. Kobina sold the house to Alhaji Bio in May 2010 for a consideration of GH 150,000. Kobina used all the money realized (GH 150,000) to purchase a house at Madina in February Kobina got married to Kuukuwa who was domiciled in the United Kingdom in May 2012 and they decided to sell the house and settle in the United Kingdom for good. The house was sold to Madam Fremah in July 2012 for a consideration of GH 200,000. Explain the tax implication of these transactions in relation to these persons: Mr. Kojo Ehun Mr. Kobina Ehun (10 marks) Page 5 of 5