Question Tag: chargeable income

Search 500 + past questions and counting.
Professional Bodies Filter
Program Filters
Subject Filters
More
Tags Filter
More
Check Box – Levels
Series Filter
More
Topics Filter
More
  • 10 Marks

PT – April 2022 – L2 – Q1c – Tax Administration

Calculate the taxes payable for each quarter for Bumu Manufacturing Company based on estimated chargeable income and tax paid.

c) You have been offered an appointment by Bumu Manufacturing Company (BMC) as Tax Manager responsible for preparing and filing tax returns on behalf of the company. BMC files its returns with the Osu Medium Taxpayers Office of the Ghana Revenue Authority. The company’s Tax Identification Number is C0000261178. The company prepares accounts to 31 December each year.

BMC estimated its chargeable income for the 2019 year of assessment as GH¢3,000,000. Subsequently, the company secured a Government contract and anticipates in the third (3rd) quarter that its chargeable income would be GH¢4,500,000.

Additional Information:
Tax paid on account:
1st quarter GH¢100,000
2nd quarter GH¢120,000
3rd quarter GH¢200,000

Required:
Compute the taxes payable for BMC for each quarter.
(10 marks)

c) Taxes payable for BMC for each quarter

Where A = Tax payable (Annual tax payable),
B = All withholding up to the end of the
respective quarter + any other taxes paid in respect of that annual tax payable,
C = the number quarters remaining
1st Instalment
A = 25% X GH¢3,000,000 = GH¢750,000
B = 100,000
C = 4
Instalment payment = (750,000 – 100,000)/4 = GH¢162,500

2nd Instalment
A = GH¢750,000
B = 100,000 + 120,000 +162,500= 382,500
C = 3
Instalment payment = (750,000 – 382,599)/3 = GH¢122,500

3rd Instalment
A = 25% x GH¢4,500,000 = 1,125,000
B = 100,000 + 162,500 + 120,000 + 122,500 + 200,000 = 705,000
C = 2
Instalment payment = (1,125,000 – 705,000)/2 = GH¢210,000

4th Instalment
A = GH¢1,125,000
B = 705,000 + 210000 = 915,000
C = 1
Instalment payment = (1,125,000 – 915,000)/1 = GH¢210,000

(Marks are evenly spread = 10 marks)

  • 20 Marks

PT – Nov 2023 – L2 – Q3a – Income Tax Liabilities

Computation of chargeable income for a physically challenged employee with various benefits and allowances.

Mr. Antitom (physically challenged) was employed as a Chief Accountant of Nangode Ltd on 1 April 2020 on an annual basic salary of GH¢60,000 x 10,000 – GH¢100,000. He was entitled to the following monthly allowances and benefits:

Allowances & Benefits Monthly Amount (GH¢)
Responsibility Allowance 4,400
Professional Allowance 6,600
House Help Allowance 8,200
Utilities 4,200
Overtime Allowance 6,000
Provision of furnished accommodation by the employer for which he paid 5% of his basic salary.
Provision of vehicle and fuel by the employer for both official and private use.
Bonus payment amounting to 25% of his basic salary.
He contributed 5.5% of his basic salary to the Mandatory Pension Scheme and an additional 10% to a Voluntary Pension Scheme approved by the National Pension Regulatory Authority.
Married with 3 children, 2 in approved Senior High Schools in Ghana, 1 at the University of South Africa.
Earned interest of GH¢4,000 on a savings account with Kilma Bank.
Received a net dividend of GH¢20,480 from an investment with Enoga Securities.
Required:
Compute the chargeable income of Mr. Antitom for the 2022 year of assessment.
(20 marks)

Antitom Computation Of Chargeable Income Year Of Assessment: 2022
Basis Period: January to December, 2022

Add Other Cash Benefits:

Less Reliefs and Deductions:

Note: Candidates who considered the non-taxation of interest and dividend income correctly were awarded marks.
(20 marks evenly spread using ticks)

  • 10 Marks

PT – Nov2019 – L2 – Q4a – Corporate Tax Liabilities

This question asks to compute the chargeable income of Valentine Ghana Limited for the 2018 tax year based on the provided financial statements and additional information.

Valentine Ghana Limited is a producer of love greeting cards, and the following was extracted from its financial statements for the year ended 31 December 2018.
a) Valentine Ghana Limited is a producer of love greeting cards and the following was
extracted from its financial statements for the year ended 31 December,2018.

Deduct:

Net Profit: GH¢346,110
Additional Information:
i) Capital allowances for the year were GH¢204,000, as agreed with the Ghana Revenue Authority (GRA).
ii) The figures for repairs and maintenance include an amount of GH¢33,150 for the cost of erecting a new gate to the factory.
iii) 50% of other income was the personal rental income of the Managing Director.
iv) One-third of vehicle running expenses was expended on the personal car of the Managing Director, used for the company’s operation based on company policy.

Required:
Calculate the chargeable income of Valentine Ghana Limited for 2018 Year of Assessment.
(8 marks)

Computation of Chargeable Income for 2018 Tax Year for Valentine Ghana Limited

(8 marks to be allocated using ticks)

  • 6 Marks

PT – Nov2019 – L2 – Q3c – Income Tax Liabilities

This question focuses on determining the chargeable income and tax liability of an expatriate working in Ghana.

Lord Pakro was seconded to Ghana from the Crops Scientists Institute in USA as a Crop Scientist to Crop Research Institute in Ghana, for a period of 5 months, starting from 1 August, 2018. He was based at Nyankpala (Northern part of Ghana), one of the farming sites of the Crop Research Institute.

His conditions of service were as follows:
GH¢

Salary: 6,000 per month
Expatriate allowance: 2,000 per month
Risk allowance: 1,000 per month
He was provided with a furnished bungalow and a Toyota Pick-up vehicle with driver and fuel for both official and private activities.

In addition to the above, the parent company agreed to meet his commitment at home during his six-month stay in Ghana at $1,200 per month. The average exchange rate has been $1=GH¢5.00.

Required:
Determine Lord Pakro’s chargeable income and tax liability, if any, during his stay in the country. Produce the related notes guiding your determination.
(6 marks)

Computation of Chargeable Income for Assessment Year 2019

Related Notes:

  • The basic salary and allowances (expatriate and risk) are added to the total cash emoluments.
  • Non-cash benefits such as the use of a vehicle, driver, and fuel for both official and personal use are calculated as a percentage of the total cash emoluments.
  • The foreign commitment paid in dollars is converted to cedis and added to the income.

(6 marks evenly spread using ticks)

  • 12 Marks

PT – May 2020 – L2 – Q4b – Special considerations for taxation of gifts and capital allowances.

Calculation of the chargeable income for Stella-VD Ltd for the 2018 year of assessment.

The Company’s assets include the following:

Type of Assets Date of Acquisition Cost (GH¢)
Factory Building 01/10/2017 300,000
Plant and Machinery 25/10/2017 171,000
Delivery Van 01/11/2017 50,000
Computers 01/10/2017 40,000
Furniture and Fittings 10/12/2017 150,000
Other Office Equipment 01/10/2017 200,000
Office Building 30/06/2018 500,000
Required:
Required:
a) Compute the appropriate capital allowance for 2017 and 2018 year of assessment. (8 marks)
b) Calculate the chargeable income of the company for assessment year 2018.
(12 marks)

Computation of chargeable income for Stella-VD Ltd for the 2018 year of assessment:

(12 marks evenly spread using ticks)

  • 20 Marks

PT – March 2023 – L2 – Q4 – Income Tax Liabilities

Compute the chargeable income and capital allowance for Adwoa Mansa based on her accounts.

Adwoa Mansa is self-employed and has not filed her tax returns to the Ghana Revenue Authority. She applied for a tax clearance certificate in February 2023, and the head of her Tax Office insisted that she submit her accounts for the 2022 year of assessment. Below are the details from her auditors for the year ended 31 December 2022.

Details Amount (GH¢)
Gross Profit 5,200,000
Expenses:
Utilities 70,000
Travelling expenses 43,000
Depreciation 30,500
Rent 21,200
Maintenance 25,260
Donations 60,250
Bad debts 52,000
Sanitation 20,000
Business promotion 25,620
Salaries 86,000
Net profit 4,766,170

Additional Information from Adwoa Mansa in response to queries raised by the tax official:

  1. Utilities and Rent:
    Adwoa Mansa and her husband occupy the apartment next to the shop. 25% of the expenditure on utilities and rent relates to her home.
  2. Travelling Expenses:
    28% of the travelling expenses were for private journeys.
  3. Maintenance:
    The maintenance figure includes GH¢11,500 for furniture and fittings bought for the shop and GH¢10,000 for painting her apartment.
  4. Donations:
    • Donation to Covid-19 fund: GH¢32,250
    • Donation to Mallam Atta Women’s Association: GH¢19,500
    • Donation to Farmers Day celebration: GH¢8,500
  5. Bad Debts:
    • General provision: GH¢26,000
    • Specific provision: GH¢10,000
    • Loan to husband written off: GH¢16,000
  6. Sanitation:
    GH¢1,000 was spent on acquiring equipment for cleaning the office premises.
  7. Business Promotion:
    • Permanent billboard: GH¢8,000
    • Television advertisement: GH¢6,620
    • Entertainment of customers: GH¢11,000
  8. Dividend and Interest:
    Adwoa Mansa received a dividend of GH¢18,800 (net) from her investment with Tarzan Ltd and interest of GH¢15,600 from Government Treasury bills. These amounts were included in her gross profit.
  9. Assets Purchased in 2022:
    • Computers: GH¢300,000
    • Warehouse: GH¢330,000
    • Air conditioners: GH¢100,700
      All assets are depreciable for capital allowance purposes.

Required:

a) State the circumstances under which bad debt will be allowable.
(4 marks)

b) Calculate the chargeable income of Adwoa Mansa for the 2022 year of assessment.
(16 marks)

a) Circumstances under which bad debt will be allowable:

  1. The bad debt must be specific, not general.
  2. The bad debt must have arisen in the ordinary course of business.
  3. The amount of the bad debt should have been included in income for previous years.
  4. Necessary steps should have been taken to recover the debt before it is classified as bad.

(4 marks)

b) Computation of Chargeable Income for Adwoa Mansa for the 2022 Assessment Year

Details GH¢ Explanation
Net Profit per accounts 4,766,170
Less:
Dividend (Tarzan Ltd) (18,800) Non-taxable
Interest (Government Treasury bills) (15,600) Non-taxable
Adjusted Net Profit 4,731,770
Addbacks:
Utilities (25% personal use) 17,500 25% relates to personal use
Depreciation 30,500 Non-deductible
Travelling expenses (28% personal use) 12,040 28% relates to personal use
Rent (25% personal use) 5,300 25% relates to personal use
Maintenance: Furniture & fittings (capital) 11,500 Capital expenditure
Maintenance: Painting (personal use) 10,000 Relates to personal use
Donations: Mallam Atta Women’s Association 19,500 Non-allowable donation
Bad debts: General provision 26,000 Non-allowable
Bad debts: Loan to husband 16,000 Non-allowable
Sanitation (equipment) 1,000 Non-allowable (capital expenditure)
Business Promotion: Permanent billboard 8,000 Non-allowable (capital expenditure)
Business Promotion: Entertainment of customers 11,000 Non-allowable
Total Addbacks 168,340
Adjusted Net Profit 4,900,110
Less: Capital Allowance (176,440) See working below
Chargeable Income 4,723,670

Capital Allowance Calculation:

Class Cost (GH¢) Capital Allowance Rate Allowance (GH¢)
Class 1 300,000 40% 120,000
Class 3 113,200 20% 22,640
Class 4 338,000 10% 33,800
Total 176,440

Total Capital Allowance: GH¢176,440

(16 marks)

  • 14 Marks

PT – Aug 2022 – L2 – Q3b – Income Tax Liabilities

Compute the chargeable incoPartnership Income, Chargeable Income, Capital Allowanceme for three partners for the years 2018, 2019, and 2020.

Elorm and Eyram entered into a partnership on 1 January 2018 to produce hair products. They agreed to share profit and losses equally after charging:

  • Annual Salaries: Elorm: GH¢10,000,000, Eyram: GH¢14,000,000.
  • Interest on capital of 5% p.a. was deducted from the profit.
  • Depreciation deducted from the profits for the various years of assessment were GH¢80,000 (2018), GH¢60,000 (2019), and GH¢180,000 (2020).
  • Capital contributed by the partners: Elorm: GH¢100,000,000, Eyram: GH¢80,000,000.
  • To introduce a new product, they invited Elinam to join the partnership on 1 January 2019. Elinam was to receive a salary of GH¢6,000,000 annually in addition to an equal share of profit. He will not be entitled to interest on his capital of GH¢60,000,000.
  • Elorm resigned as a partner on 30 June 2020 after being elected as a Member of Parliament.
  • Operational profit/loss of the partnership: GH¢500,000,000 (2018), GH¢(180,000,000) (2019), GH¢1,000,000,000 (2020).
  • Capital allowance of GH¢60,000 has been granted by Ghana Revenue Authority for each year of assessment.

Required:
Compute the chargeable income of Elorm, Eyram, and Elinam for the 2018, 2019, and 2020 years of assessment. (14 marks)

ELORM, EYRAM AND ELINAM
COMPUTATION OF CHARGEABLE INCOME

  • 20 Marks

PT – Dec 2023 – L2 – Q3 – Income Tax Liabilities

Calculate chargeable income for a Finance Manager based on detailed employment benefits and allowances.

Abotsi has been in employment at Asempa Ltd since 1 August 2019 as Finance Manager on a salary scale of GH¢32,000 by GH¢8,000 to GH¢48,000.

His service conditions include the following:
i) Responsibility allowance of 18% of basic salary
ii) Utilities allowance per annum of 10% of basic salary
iii) Risk allowance of 20% on basic salary and car maintenance allowance of 5% of basic salary
iv) Leave allowance of GH¢1,900 per annum
v) Medical allowance per annum of GH¢3,500
vi) Meals allowance of GH¢700 per month
vii) Two house helps on GH¢500 wages per month each. The amount is paid to Abotsi in cash directly by the company
viii) Bonus of 25% of annual basic salary
ix) Annual Overtime allowance of GH¢18,000
x) Unaccountable entertainment allowance of GH¢2,000 a year
xi) Provision of a well-furnished bungalow in respect of which he pays GH¢400 per month as rent by way of deduction at source
xii) Provision of a vehicle with driver and fuel for both official and private purposes
xiii) Special retirement package by way of a provident fund of which he contributes 9% of his basic salary, while the company contributes 11%. (The scheme is approved by the regulatory body)
xiv) Social Security and National Insurance Trust contribution of 5.5% and the employer contributes 13% of basic salary
xv) On 1 January 2021, he was given a car loan of GH¢20,000 to purchase a car for his mother at a simple interest rate of 15% per annum. The institution gives similar facilities to other customers at the rate of 28% but the statutory rate (Bank of Ghana rate) is 25%. The loan is to be paid within the period of 24 months
xvi) He is married to Abotsiwaa and Abotsimaa who are unemployed and contribute little or no financial support to their husband. Their responsibilities are limited to the management of the house
xvii) He has six (6) children, four (4) of whom are in Silicon Valley International School, Accra-Ghana, while the rest are working
xviii) He is also responsible for the upkeep of four (4) aged relatives of his
xix) He is currently pursuing MPHIL in Finance at UPSA where he incurred GH¢25,000 by way of educational expenses in 2021
xx) He is a director of Adwoa Mansa Ltd and receives a director’s emolument of GH¢24,450 (net of taxes)
xxi) He received a dividend of GH¢20,000 (net of taxes) from the Afia Manu Bank. The dividend was taxed at 8%.

Required:
Calculate his chargeable income for the 2021 Year of Assessment. (20 marks)

Abotsi – Computation of Chargeable Income
Year of Assessment: 2021
Basis Period: January to December

Description GH¢
Basic Salary (August 2019 – July 2020) 32,000.00
Basic Salary (August 2020 – July 2021) 40,000.00 (7/12) = 23,333.33
Basic Salary (August 2021 – July 2022) 48,000.00 (5/12) = 20,000.00
Total Basic Salary: 43,333.33

Cash Allowances:

  • Responsibility Allowance (18% of GH¢43,333.33) = GH¢7,800.00
  • Utility Allowance (10% of GH¢43,333.33) = GH¢4,333.33
  • Risk Allowance (20% of GH¢43,333.33) = GH¢8,666.67
  • Car Maintenance Allowance (5% of GH¢43,333.33) = GH¢2,166.67
  • Total Cash Allowances: GH¢22,966.67

Other Cash Benefits:

  • Leave Allowance: GH¢1,900.00
  • Medical Allowance: GH¢3,500.00
  • Meals Allowance (GH¢700 x 12) = GH¢8,400.00
  • Househelps (GH¢500 x 2 persons x 12 months) = GH¢12,000.00
  • Bonus (Excess 10% of GH¢43,333.33) = GH¢4,333.33
  • Overtime Pay: GH¢18,000.00
  • Unaccountable Entertainment Allowance: GH¢2,000.00
  • Total Other Cash Benefits: GH¢50,133.33

Indirect Cash Payments:

  • Provident Fund (Employer 11% of GH¢43,333.33) = GH¢4,766.67
  • Social Security (Employer 13% of GH¢43,333.33) = GH¢5,633.33
  • Total Indirect Cash Payments: GH¢10,400.00

Total Cash Employment Income: GH¢126,833.33

Non-Cash Benefits:

  • Accommodation (10% of GH¢126,833.33) = GH¢12,683.33
    • Less Rent (GH¢400 x 12) = GH¢4,800.00
    • Net Accommodation Benefit: GH¢7,883.33
  • Car Benefit (12.5% of GH¢126,833.33) = GH¢15,854.17
    • Restricted to (GH¢600 x 12) = GH¢7,200.00
    • Net Car Benefit: GH¢7,200.00
  • Loan Benefit:
    • Statutory Interest (25% of GH¢20,000) = GH¢5,000.00
    • Actual Interest (15% of GH¢20,000) = GH¢3,000.00
    • Taxable Benefit (¼ of GH¢2,000.00) = GH¢500.00
    • Net Loan Benefit: GH¢500.00
  • Total Non-Cash Benefits: GH¢15,583.33

Qualifying Employment Income: GH¢142,416.66

Less: Reliefs and Deductions:

  • Provident Fund (Employee 9% of GH¢43,333.33) = GH¢3,900.00
  • Social Security (Employee 5.5% of GH¢43,333.33) = GH¢2,383.33
  • Marriage Responsibility Allowance: GH¢1,200.00
  • Child Education Allowance (3 children x GH¢600): GH¢1,800.00
  • Aged Dependence (2 aged relatives x GH¢1,000): GH¢2,000.00
  • Total Deductions: GH¢21,683.33

Net Employment Income: GH¢120,733.33

Other Income:

  • Director’s Fee (GH¢24,450 / 0.8) = GH¢30,562.50
  • Chargeable Income: GH¢151,295.83
  • 10 Marks

PT – Aug 2022 – L2 – Q1c – Income Tax Liabilities

Calculate interest for underestimation of tax for Vito Ltd for the 2019 year of assessment.

The estimated chargeable income for Vito Ltd for the 2019 year of assessment was GH¢50,000,000, but its actual chargeable income declared at the end of the year was GH¢80,000,000. The company prepares accounts to 31 December each year. The company submitted its returns on 30 April, 2020. The BOG prevailing discount rate is 25%.

Required:
Calculate the interest for underestimation of tax.

Percentage Difference Calculation:

  • 8 Marks

AT – Nov 2018 – L3 – Q5b – Business income – Corporate income tax

Computation of taxes payable by a mining support services company, including adjustments for dividends, tax losses, and investment deductions.

Manla Ltd, since its incorporation, has been providing Mining Support Services (MSS) in line with its mandate, and the following is relevant to its operations for the 2017 year of assessment:

Details GH¢
Chargeable income 240,000,000
Loss from investment deducted in arriving at the chargeable income 700,000
Dividend (gross) received from A Ltd (a mining company) where Manla Ltd has 26% voting power 20,000
Provision for bad debts written off 400,000
Tax loss from 2014 deducted 20,000
Net dividend received from a US-based company after 5% withholding tax 9,500
Items worth GH¢ 60,000 granted to a powerful shareholder were adjusted in arriving at chargeable income 60,000

(Note: Manla Ltd has a basis period from January to December.)

Required:
i) Compute the taxes payable by Manla Ltd. (6 marks)
ii) Comment on the treatment of the investment loss of GH¢700,000. (2 marks)

ii) Treatment of Investment Loss (GH¢ 700,000):

  • The investment loss of GH¢ 700,000 should not have been deducted when determining the business’s chargeable income. According to Section 17 of the Income Tax Act, losses from investments are not deductible from business income but may be carried forward to offset future investment gains. The loss should be carried forward and deducted from future investment income only.

Take control of your business data with insight and in-depth understanding by taking this course. 

Services

Contact Info

  • +233203701923
    +233543919232
  • info@noohrabusiness.com

Get In Touch

Follow us on our social media and get daily updates.

Facebook-f Twitter Linkedin-in Envelope