Question Tag: Personal tax

a)

BRIEFING PAPER ON: Tax Planning Options Available to John Zookay and His Companies
From: Final Level Candidate
To: John Zookay
Date: August 2022

Introduction:
Further to your request for tax planning options available for your personal tax situation and your companies, I provide below matters for consideration:

OPTIONS FOR PERSONAL TAX PLANNING

• Global Income of a Resident Person:
  Section 111 of the Income Tax Act, 2015 (Act 896) provides that the global income of a resident person derived from any source is taxable in Ghana.
• Resident Status:
  Even though you were in Liberia, you are still considered a resident person in Ghana because you are a Ghanaian citizen, and you have not been outside the country for more than 365 consecutive days.
• Employment Income:
  Since you have now returned to Ghana, your employment income as the Managing Director of Glofix Ltd will be taxable in Ghana. However, under Section 111(2) of the Act, income from employment exercised outside Ghana is exempt from tax if it satisfies specific conditions, such as being with a non-resident employer.
• Interest Income:
  Interest earned from resident financial institutions is exempt from tax under Section 7(1)(c) of the Income Tax (Amendment) Act, 2016 (Act 907). Thus, any interest income you earn from Bank of Africa, Ghana, will be tax-exempt.

OPTIONS FOR COMPANY TAX PLANNING

• Agro-processing Business:
  If any of your companies engage in agro-processing, their income will benefit from a concessionary tax rate of 1% for the first five years of operation.
• Dividends:
  Dividends received by a resident company from another resident company are exempt from tax if the recipient company holds at least 25% of the voting power in the company paying the dividend, under Section 59(3) of the Income Tax Act.

Conclusion:
These planning strategies will help minimise tax liabilities for both your personal and corporate income. Kindly review them and feel free to seek further clarification where necessary.

Yours faithfully,
Final Level Candidate

b)

Compliance obligations of companies under self-assessment

•  Section 122 (1) of the ITA provides that a person (individual, company or trusts) who
  is an installment payer for a year of assessment shall file with the CommissionerGeneral (CG) by the date for payment of the first installment (i.e. end of the first
  quarter of the company’s accounting or basis period), an estimate of tax payable for
  the year;
• An installment taxpayer is one that is required to pay tax by quarterly instalment if
  the person derives or expects to derive assessable income during a year of assessment
  from a business or investment or from an employment where the employer is not
  required to withhold tax;
•  Except where the CG instructs to the contrary, the estimate filed must be on a
  prescribed form which indicates the estimate of the following:
• The assessable income of the person for the year of assessment from each
  employment, business and investment and the source of that income; and
• The chargeable income of the person for the year and the tax to become payable with
  respect to that income;
• Any other information that the CG may require shall be attached to the estimate;
• The tax charged on the chargeable income of a person is the estimated tax payable for
  the year of assessment. In estimating the tax payable, a person may take into account:
• A foreign tax credit to be claimed; and
•  Foreign income tax, only if the person has paid the tax or the person reasonably
  estimates that the tax will be paid during the year
•  The estimate of an installment payer remains in force for the whole of the basis period
  unless the person files a revised estimate with the CG together with a statement of
  reasons for the revision.
• A revised estimate is the estimated tax payable by that person for the year of
  assessment, and shall be used in calculating the quarterly installments payable only
  after it has been filed with the CG;
• An installment taxpayer shall pay tax instalments:
•  Where the basis period of that instalment payer is a 12-month period beginning at the
  start of a calendar month, on or before the last day of the 3rd, 6th, 9th & 12th months of
  the basis period; or
•  In any other case, at the end of each 3-month period commencing at the beginning of
  each year of assessment, unless it coincides with the end of one of the 3-month
  periods. (10 marks)