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- 6 Marks
Question
Tax incentives have traditionally been used by governments as tools to promote a particular economic goal. They are preferential tax treatments offered to a selected group of taxpayers and may take the form of tax exemptions, tax holidays, preferential tax rates, and others.
Required:
Explain the tax implications of the following:
i) A person engaged in Farming activity
ii) A person engaged in Agro-Processing activity
iii) The rental income of a person engaged in Cocoa Farming activity
Answer
i) A person engaged in Farming activity:
- Farming activities such as tree crops, cattle ranching, and livestock farming are eligible for tax holidays.
- For tree crops and cattle farming, there is a 10-year tax holiday, while for other farming activities, there is a 5-year tax holiday.
- During these periods, the taxpayer pays a concessional rate of 1%.
ii) A person engaged in Agro-Processing activity:
- Agro-processing businesses enjoy a 5-year tax holiday. After this period, they are taxed at a concessional rate of 1%.
- Additional locational tax incentives are available based on the region of operation. For example, companies operating in Accra and Tema are taxed at 20%, whereas those in regional capitals are taxed at 15%.
iii) Rental income of a person engaged in Cocoa Farming activity:
- Rental income from residential properties is taxed at 8%, while rental income from commercial properties is taxed at 15%.
- For individuals or companies engaged in cocoa farming, rental income earned from leasing residential properties will be taxed at the standard rate, while commercial rental income is subject to the corporate tax rate of 25%.
- Tags: Agro Processing, Cocoa Farming, Corporate Tax, Farming, Rental Income
- Level: Level 3
- Topic: Business income - Corporate income tax, Tax planning
- Series: APR 2022
- Uploader: Joseph