Question Tag: Tax computation

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  • 5 Marks

PT – April 2022 – L2 – Q3b(i & ii) – Income Tax Liabilities

Compute the tax liability on overtime allowances for Maame Agyeiwaa for January and February 2021.

b) Maame Agyeiwaa is a junior staff member of KayDee Ltd. Her monthly basic salary is GH¢800. She was paid an overtime allowance totalling GH¢100 during the month of January 2021. In February 2021, Maame Agyeiwaa was paid overtime allowance totalling GH¢500.

Required:
i) Compute her tax liability on the overtime allowance for the month of January 2021.
(2 marks)

ii) Compute her tax liability on the overtime allowance payments for the month of February 2021.
(3 marks)

i) Maame Agyeiwaa

  • 3 Marks

PT – April 2022 – L2 – Q3d – Income Tax Liabilities

Calculate the tax liability on Eunice Danso's bonus income for 2021.

Eunice Danso works with Gyidi Ltd and earns an annual basic salary of GH¢50,000. She was paid a bonus of GH¢6,000 in 2021.

Required:
Determine the tax liability on the bonus. (3 marks)

Bonus as a percentage of basic salary:

  • 20 Marks

PT – April 2022 – L2 – Q4 – Corporate Tax Liabilities

Calculate the tax payable for Therry Ltd for the 2020 year of assessment using the provided financial data and adjustments.

The following extract relates to the financial data of Therry Ltd, a company resident in Ghana with a basis period from January to December each year. Therry Ltd has submitted its tax returns to GRA for the 2020 year of assessment:

The following additional information is available:

Interest Charges:
a. Interest on loan for MD’s personal housing project GH¢500,000
b. Foreign exchange loss on loan GH¢320,500
c. Bank charges GH¢75,000
Donations:
a. Osu Children Home GH¢10,000
b. Pastor (Azigi Church) GH¢30,000
c. Labone Senior High School GH¢20,000
d. National Disaster Management Organisation GH¢50,000
e. Political Parties Fundraising GH¢90,000
An amount of GH¢200,000 disclosed in the accounts was paid for repairs and improvements of an old machine bought three years ago. It is hoped that the performance of the machine will be enhanced after the improvements.
Creditors of the company agreed to cancel an amount of GH¢120,000 standing as part of the credit balance as incentive to the company. This has not been taken into account by the company in its tax returns to GRA.
An amount of GH¢300,000 being cost price of goods was issued to a related party outside Ghana at cost. The margin on the goods waived was sighted as GH¢40,000 in a correspondence with the related party.
Tax paid on account was GH¢20,000.
The company booked capital allowance unutilised certified by GRA from 2019 year of assessment as GH¢300,000.
Capital allowance agreed with GRA after taking into account all relevant issues was GH¢1,050,000 for 2020 year of assessment.
The machine (Pool 3 asset) had a written down value of GH¢4,000,000 as at 1 January 2020.
An allowable bad debt included in the selling and distribution expenses for 2019 amounted to GH¢100,000. The company recovered the amount in 2020 but no transaction was recorded in 2020.
Therry Ltd disposed off one of its capital assets for GH¢250,000 to the Managing Director. It cost the company GH¢300,000 to acquire the asset some years ago. An investigation revealed that the market value of the asset at the time of the sale was GH¢350,000. The company has already included the loss of the sale of the asset in administration expenses.
Required:
Determine the tax payable for the 2020 year of assessment. (20 marks)

Therry Ltd
Determination of tax payable for the 2020-year of assessment
Basis period: 01/01/2020 to 31/12/2020

Repairs and improvements:
Pool 3 asset Written down value at 01/01/2020 = GH¢4,000,000
Depreciation allowance (20%) = GH¢800,000
Written down value at 31/12/2020 = GH¢3,200,000
Allowable repairs and improvements (5% x GH¢3,200,000) = GH¢160,000
Disallowed repairs and improvements = GH¢200,000 – GH¢160,000 = GH¢40,000

Gain/Loss on realisation of capital asset:
Consideration received = GH¢350,000
Cost of asset = GH¢300,000
Gain on realisation = GH¢50,000

  • 5 Marks

PT – Nov 2023 – L2 – Q1b – Income Tax Liabilities

Compute tax payable for resident and non-resident individuals for the 2022 year of assessment.

The information below relates to individuals who earned income in the 2022 year of assessment:
Resident individuals:
Mr. Agandi and Mr. Yonny are resident employees in Ghana. The chargeable income earned per annum by Mr. Agandi and Mr. Yonny amounts to GH¢300,000 and GH¢650,000 respectively.

Non-Resident individuals:
Mrs. Zindana and Mrs. Maleda are non-resident individuals. Mrs. Zindana and Mrs. Maleda have earned chargeable incomes to the tune of GH¢300,000 and GH¢650,000 per annum respectively.

Required:
Compute their respective taxes payable for the 2022 year of assessment.

Computation of tax payable – Mr Agandi

Computation of tax payable – Mr Yonny

Non-Residents
The chargeable income of non-resident individuals is taxed at a flat rate of 25%.

Tax Payable Mrs. Zindana: 25% x 300,000 = GH¢75,000
Tax Payable Mrs. Maleda: 25% x 650,000 = GH¢162,500

  • 5 Marks

PT – Nov2019 – L2 – Q5a – Taxation of Capital Gains

This question asks to compute the capital gains tax payable on the disposal of a land asset.

Mamavi Dekey (Mamavi) purchased land in Ho in the Volta Region for a cost of GH¢200,000 in 2010. In 2011, she spent GH¢8,000 for grading the land. In March 2019, she spent another GH¢10,000 to reshape the land with the intention to sell it. Mamavi engaged Kobina Ebo, a Valuer, in June 2019 to value the land, and he charged GH¢2,000. In July 2019, she placed an advert at ‘Ho Bankoe FM’ on the sale of the land and paid GH¢1,000. In October 2019, she sold the land through an agent for GH¢300,000 to Kalika, and the agent’s commission was 2% of the sale value. Mamavi also paid GH¢600 for stamp duty and legal permit for conveyance of the land to Kalika.

Required:
Compute any tax payable.
(5 marks)

a)
Tax Payable = 15% x GH¢72,400 = GH¢10,860
(5 marks to be allocated)

  • 3 Marks

PT – Nov 2019 – L2 – Q3b – Income Tax Liabilities

This question asks to calculate the tax implications of overtime payments for a senior staff member.

Amos is a Senior Staff member of Sims Company Limited. His monthly basic salary is GH¢1,490.00. He was paid an overtime totalling GH¢650.00 during the month of January, 2019.

Required:
What is the tax implication? (3 marks)

Amos is a senior staff member, and therefore, irrespective of the salary paid to him (i.e., GH¢1,490), which is less than GH¢1,500, all of the overtime payment shall be considered as part of the chargeable income and taxed using the graduated rates.

  • 5 Marks

PT – May 2020 – L2 – Q5a – Taxation of Capital Gains

Computation of capital gains tax on the sale of a house by Papa Dekey in 2019.

a) Papa Dekey purchased a house in the Madina area of Greater Accra Region in the year 2010 for GH¢400,000. The acquisition expenses incurred by the company amounted to GH¢50,000.

In June 2019, Papa Dekey sold the house for GH¢700,000 while the incidental expenses incurred were as follows:
Description GH¢
Agent’s Commission 10,000
Solicitors Fees 8,000
Advertising 3,000
Accountant’s Fees 10,000
Income Tax on Rent 6,000
Valuation Fees 20,000
Required:
Compute the Capital Gains Tax payable by Papa Dekey.
(5 marks)
Papa Dekey also sold for GH¢1,000,000 in September 2019, Ghana Government Securities
which cost GH¢800,000 in the year 2010. The incidental selling expenses amounted to
GH¢50,000 in respect of Government Securities.

Required:
Compute the Capital Gains Tax payable by Papa Dekey.

a)
(5 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)

  • 12 Marks

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

Explain the principles and computation of overtime tax under the Income Tax Act.

Kaakyire, the Finance Director of Dwarf Ltd, is on a monthly basic salary of GH¢1,400. She was paid overtime amounting to GH¢500 during the month of April 2022.

Required:

i) State the principles underpinning the computation of overtime in accordance with the Income Tax Act, 2016 (Act 896).
(6 marks)

ii) State how her overtime will be taxed and compute the tax for the month of April 2022.
(6 marks)

i) Principles Underpinning the Computation of Overtime:

  • Overtime is subject to withholding tax when paid to a qualifying junior employee. A qualifying junior employee refers to a junior staff whose annual qualifying employment income does not exceed GH¢18,000.
  • The employer withholds tax from overtime payments as follows:
    • Where the overtime payment does not exceed 50% of the employee’s basic salary for the month, it is taxed at a rate of 5%.
    • Where the overtime payment exceeds 50% of the employee’s basic salary, the portion of the overtime up to 50% of the basic salary is taxed at 5%, and any amount exceeding 50% is taxed at 10%.
  • For employees who do not qualify as junior staff, overtime payments are added to their basic salary and taxed at the graduated rates under the first schedule.

(3 points @ 2 marks each = 6 marks)

ii) Tax Treatment of Kaakyire’s Overtime:

Since Kaakyire is the Finance Director (not a junior employee), her overtime payment will be added to her basic salary and taxed at the graduated rate.

Tax Computation for April 2022:

Details Amount (GH¢)
Basic Salary 1,400
Overtime 500
Chargeable Income 1,900

Tax Liability Calculation:

Income Brackets Tax Rate (%) Tax (GH¢)
First 1,200 0% 0
Next 420 5% 21
Next 280 10% 28
Total 49

Total Tax Payable: GH¢49

(6 marks)

  • 12 Marks

PT – July 2023 – L2 – Q4a – Corporate Tax Liabilities

Calculation of capital allowance and assessable income for Karma Ltd for three years of assessment.

Karma Ltd commenced business on 1 March 2020 preparing accounts to December each year. The following assets were acquired for use in the business:

Asset Date of Acquisition Cost (GH¢)
Industrial Building 15/10/2019 2,500,000
Plant & Machinery 20/11/2019 1,600,000
Computers 03/01/2020 80,000
Office Equipment 10/01/2020 138,000
Motor Van 15/02/2020 220,000
Toyota Saloon Car 30/09/2020 180,000

Additional assets acquired during 2022:

  • Computers and accessories – GH¢105,000
  • Office Equipment – GH¢78,000

The Toyota Saloon Car was written off in an accident on 31 October 2022, and the company received GH¢120,000 as compensation.

Profits declared by Karma Ltd for the first three years of assessment:

  • Period to 31/12/2020: GH¢600,000
  • Year to 31/12/2021: GH¢1,500,000
  • Year to 31/12/2022: GH¢2,680,000

Required:
Compute the capital allowance and the assessable income of the company for the relevant years of assessment. (12 marks)

Computation of Capital Allowance for Karma Ltd

Y/A POOL 1 (40%) POOL 2 (30%) POOL 3 (20%) POOL 4 (10%) Total Capital Allowance
2020 GH¢80,000 GH¢1,895,000 GH¢138,000 GH¢2,500,000 GH¢736,160
2021 GH¢53,173 GH¢1,418,395 GH¢114,861 GH¢2,290,411 GH¢719,760
2022 GH¢136,904 GH¢872,876 GH¢169,889 GH¢2,040,411 GH¢600,603

Karma Ltd
Computation of Assessable Income

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