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- 5 Marks
Question
b) Bossman Ltd acquired assets for GH¢10,000 from outside Ghana but failed to claim Value Added Tax (VAT) on imports of the assets in accordance with the Value Added Tax provisions and later sold the assets for GH¢12,000.
Required:
What is the tax implication of the transaction (if any) in the light of the provisions of the VAT Act 2013 (Act 870)?
(5 marks)
Answer
b) Input VAT paid for goods and services is claimable by a VAT registered trader, and by the same token, the trader is required to account for output VAT when it parts with ownership of the assets.
Under section 48(4)(b) of Act 2013 Act 870, input tax deduction shall not be made after the expiration of a period of six months after the date the deduction accrues.
The taxpayer’s right to claim is extinct under the above situation, if it is not exercised at the right time—that is, after 6 months.
Conclusion:
For failure to claim the input tax within 6 months, Bossman Ltd has lost the right to claim but must charge and account for VAT on the sale of the assets accordingly, as the failure to claim is not a denial of the right to pay output VAT.
(5 marks)
- Tags: Asset sale, Input Tax, Output Tax, Tax implications, VAT, VAT Act 2013
- Level: Level 3
- Topic: Business income - Corporate income tax
- Series: MAY 2017
- Uploader: Kwame Aikins