QUESTION 1 Below is the income statement of Global Feed Manufacturing Company Limited, located in Wassa in the Western Region of Ghana. The statement covers the year ended 31/12/2012. GH 000 GH 000 Gross Profit 618,750 Rent Income 156, 250 Other Income 25,000 800,000 Less: Management Salaries 43,750 Staff Salaries 21,250 Hire of Equipment 18,125 Depreciation 7,500 Casual Labour 10,500 Office Rent 9,000 Vehicle Repairs 19,500 Business Promotions 5,250 Donations 11,375 Repairs of Factory Premises 28,500 Office Expenses 22,500 Bad Debts 73,750 Advertisements 1,500 272,500 Net Profit 527,500 Page 1 of 5
Notes to the Accounts: 1. Other income includes profit on disposal of fixtures and fittings amounting to GH 15,000,000. 2. Casual Labour is made up of Factory Hands and Wages of employees in Director s Private Property amounting to GH 6,250,000 and GH 4,250,000 respectively. 3. Vehicle Repairs includes cost of new engine of GH 4,500,000, fuel & lubricants of GH 8,750,000 and Tyres and Tubes of GH 6,250,000. 4. Donations consist of the following: Kotoko Football Club GH 7,500,000, National Trust Fund GH 125,000 and Bereaved members of staff GH 3,750,000 as part of funeral policy approved by the board. 5. Business Promotions: - Wedding reception for Director s wedding day GH 3,500,000 - Cost of entertaining business partners GH 1,750,000 6. Repairs to Factory premises: GH - Cost of New tiles for floor 16, 000,000 - New gates for factory 10,000,000 - Repair of cracks in the wall 2,500,000 7. Office Expenses includes New personal computer and stationary amounting to GH 18,750,000 and GH 3,750,000 respectively. 8. Office rent paid of GH 9,000,000 represents two years rent for the period ending 31 st December 2013. 9. The written value of the company s chargeable assets as at 31/12/2011 were as follows: GH Building (cost 6,250,000) 5,000,000 Motor Vehicles 22, 5000,000 Plant and Machinery 7,500,000 Computers 5,000,000 Page 2 of 5
Required: (a) Determine the Company s Chargeable income for the 2012 year of assessment. (15 marks) (b) Calculate the tax liability of the company for 2012 assessment year, if any (5 marks) QUESTION 2 Mr. Badaru Zimblim was employed by Rising Sun Ltd on a flat salary of GH 5,212,500 per annum as the Managing Director. He was provided with the following as part of his condition of service. 1. Risk allowance of 15% on basic salary 2. Leave allowance of GH 667,500 per annum 3. Medical allowance of GH 1,020,000 per annum 4. Meals allowance of GH 2,700 per month 5. Entertainment allowance of GH 600,000 a year 6. Duty post allowance of GH 168,000 per quarter 7. Two maidservants each on a wage of GH 273,750 per annum. 8. Garden Boy allowance of GH 142,500 per quarter 9. Security / Watchman allowance of GH 258,000 per annum 10. Mr. Badaru Zimblilm was provided with a well furnished accommodation. The building is a property of the Company. 11. He is entitled to a company car, driver and fuel for both official and private use. 12. He has two wives and five children. Four of the children are in Senior High Schools in Accra. 13. He contributes 5.5% of his Basic Salary to SSNIT 14. He has Life Assurance Policy with SIC Insurance Company. Details are as follows: Policy Sum Assured Premium GH 000 GH 000 A 6,000 630 B 4,200 360 C 24,000 2475 D 7,500 788 Page 3 of 5
15. The maid servant, Garden boy and watchman work for Mr. Badaru Zimblilm at the official residence. Required: (a) Compute tax liability for the 2012 year of Assessment and provide brief comments on your solution. (20 marks) QUESTION 3 (a) Mr. Appiah-Kubi is the Managing Director of Dadiaba Company Limited in Ghana. He was employed in 2011 on a Gross Salary of GH 187,500. He contributes 5.5% to Social Security. He has investment in Germany. In 2011, the Gross interest income accrued to him was US$18,000 from which a tax of US$4,500 had been deducted at source. The remainder of US$13,500 has been remitted to him in Ghana. Required: Determine the tax credit relief to be granted to Mr. Appiah-Kubi and net tax payable assuming Ghana has a Double Taxation Agreement with United Kingdom. Notes: Exchange rate in 2011 was GH 1.50 = 1 dollar The following rates are applicable: GH % Rate First 1200 5 Next 420 5 Next 1104 10 Next 23196 17.5 Exceeding 25,920 25 Page 4 of 5
(b) Mr. Kofi Adu, an employee of GHUMCO manufacturing Ltd receives a gift from his employers and classmates. He has contacted you to clearly explain the tax implication of gifts received from employment and friends. Required: Explain to him the tax implication of gifts received from employment and friends. QUESTION 4 (a) Enumerate briefly the difference between Exempt and Zero rated VAT supplies. (b) Write briefly on the Value Added Tax Flat rate scheme. QUESTION 5 (a) Briefly outline the reasons why governments impose taxes on its citizens. (b) Distinguish between Proactive Notes and Private Ruling. Under what circumstance(s) would a tax payer prefer to rely on either of these sources? Page 5 of 5