- 4 Marks
Question
Trolex Ltd was incorporated in the United Kingdom. It manufactures watches for sale only in the Asian Markets. The company is a success story from its commercial enterprise in its production of “wonder watches.”
Vielo Ltd, a locally incorporated company with 4 shareholders, scanned the environment with the bid to start a business that would make it successful. The management of Vielo Ltd heard of the “wonder watches” sold by Trolex Ltd. Consequently, the management of Vielo Ltd placed an order for 10 million watches from Trolex Ltd. From the analysis, Trolex Ltd would make £600,000 from this transaction as profit. The sales value to be transferred to Trolex Ltd by Vielo Ltd amounts to £900 million.
The management of Vielo Ltd has written to the Kaneshie Office of the Ghana Revenue Authority on the tax implication of the payment.
Required:
Advise the Commissioner-General through the office manager on the tax implication of the profit and the transfer payment.
Answer
From the available information, Trolex Ltd is not trading in Ghana but with Ghana. The profit generated from the transaction and the payment transferred are not subject to tax in Ghana. Vielo Ltd approached Trolex Ltd for the purchase of the wonder watches, and there is no indication that Trolex Ltd has any presence in Ghana that would make it liable to taxation in Ghana.
Conclusion:
Both the profit (£600,000) and the amount transferred (£900 million) are not liable to tax in Ghana.
(4 marks)
- Topic: International taxation
- Series: MAR 2024
- Uploader: Joseph