Question Tag: Exempt persons

i) Computation of Tax Implications:

The thin capitalization rule in Ghana limits the amount of interest that can be deducted for tax purposes based on a company’s debt-to-equity ratio, which should not exceed 3:1 for tax purposes. Any excess interest is disallowed.

ii) What Constitutes an Exempt Person?

An exempt person refers to an individual or entity whose income is not subject to tax under specific provisions of the tax laws. In the context of corporate taxation, an exempt person may be:

1. Government Institutions or Agencies: Government entities that are exempt by statute from paying taxes on their income.
2. Charitable Organizations: Non-profit organizations that engage in charitable activities, which are often exempt from tax on income derived from their operations.
3. Diplomatic Missions and International Organizations: Diplomats and international organizations that enjoy exemptions from tax under treaties or international agreements.
4. Exempt Entities by Statute: Companies or individuals exempt from tax under specific legislative provisions, such as entities operating under certain investment promotion laws (e.g., free zone enterprises).

In this case, Dawadawa Ltd is classified as an exempt person because it is exempt from tax on all its income, as mentioned in the scenario.