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- 5 Marks
Question
Kawukudi Ltd intends to increase its capital requirement. Therefore, it applied to the Registrar General with the following:
Retained Earnings Account (GHȼ)
- Balance b/fwd: 100,000
- Transfer from income statement: 1,200,000
- Transfer to stated capital: (600,000)
- Balance c/fwd: 700,000
Required:
Assess with explanation the tax payable under this circumstance.
Answer
The transfer of GH¢600,000 as income from the income surplus account to the stated capital is referred to as ‘deemed dividend’. This implies that a tax at the rate of 8% shall be imposed on the transfer. Thus, 600,000 X 8% = GH¢48,000.
There will also be a stamp duty payment of 0.5%. Thus, 0.5% x 600,000 = GH¢3,000.
- Tags: Capital Transfers, Deemed Dividend, Ghana tax law, Retained Earnings, Tax computation
- Level: Level 2
- Topic: Income Tax Liabilities
- Series: NOV 2021
- Uploader: Theophilus