Tax Implications for Farming and Agro-processing:

1. Farming:
   Farming businesses, particularly those engaged in tree crops, livestock, and cash crops, benefit from special tax incentives and temporary concessions in Ghana.
   • Tree Crops: For tree crops (such as cocoa, rubber, oil palm), there is a 10-year tax concession starting from the year of harvest, during which the company pays a reduced tax rate of 1%.
   • Livestock (other than cattle) and cash crops benefit from a 5-year tax concession starting from the commencement of operations, with a 1% tax rate during the concession period.
   • Cattle farming enjoys a 10-year tax concession starting from the commencement of operations, during which the company pays 1% tax.
     After the concession period, farming operations are taxed at the standard corporate tax rate, subject to locational incentives if applicable.
2. Agro-processing:
   Companies engaged in agro-processing (the transformation of agricultural products into semi-finished or finished goods) enjoy a 5-year temporary tax concession.
   • During the concession period, the company is taxed at a reduced rate of 1% on its profits.
   • After the concession period, standard corporate tax rates apply, but locational incentives may reduce the tax burden based on the area of operation. For example:
     • Accra/Tema: Tax rate of 20%
     • Regional capitals (outside Accra/Tema): Tax rate of 15%
     • Other areas outside regional capitals: Tax rate of 10%
     • Northern Savannah Ecological Zone: Tax rate of 5%
3. Locational Incentives:
   After the temporary concessions for both farming and agro-processing, companies can benefit from locational tax incentives that reduce the standard corporate tax rate depending on their location.
   • Companies operating in Accra/Tema face a standard tax rate of 20%.
   • Companies located in regional capitals (outside Accra/Tema) enjoy a reduced tax rate of 15%.
   • Companies located in rural areas outside regional capitals enjoy a further reduction, with a tax rate of 10%.
   • Those located in the Northern Savannah Ecological Zone benefit from a significant tax reduction, with a tax rate of 5%.

Summary:
Adom Ltd, by engaging in either farming or agro-processing, will benefit from significant tax incentives and temporary tax concessions in the early years of operation. These incentives include reduced tax rates and tax holidays, which will help minimize the company’s tax liability, particularly if the business is located outside Accra and Tema.

(Marks evenly spread – 4 marks)