CHARTERED INSTITUTE OF TAXATION (GHANA)

PROFESSIONAL EXAMINATIONS
PROFESSIONAL LEVEL - AUGUST 2016
PAPER 2 INCOME TAXATION

TIME ALLOWED: THREE HOURS

ANSWER ALL QUESTIONS

Question 1

With reference to the Income Tax Act, 2015 (Act 896)

(a) State the Basis Period of the following

(i) An Individual (2 Marks)
(ii) A company (2 Marks)

b) Enumerate any FIVE (5) Employment Benefits that are to be excluded

from the calculation of an employees income (10 Marks)

c) Determine the tax treatment of the following payments

(i) Night Duty Allowance paid to an employee
(ii) Interest paid to an individual on bonds issued by the Government of Ghana

(iii) Lottery Winnings (6 Marks)

(Total: 20 Marks)

Question 2
Below is an extract from the Financial Statement of SURO NYAME LTD, a
General Insurance Company, for the year ended 31st May, 2016
GH
Gross Premium Received - 32,840,000
Premium Returned - 470.000
Reinsurance Recoveries - 25,000,00
Commissions Paid - 38,500
Reinsurance Premium Paid - 4,850,000
Administrative Expenses - 1,780,000
Claims paid to Insured - 43,520,000
Unexpired Risk (Previous Year)- 12,900,000
Investment Income - 3, 500,000
Tax Paid in the Year - 1,895,000

1
NOTE
(i) Reserve for unexpired risk is calculated at 40% of Net Premium Income
(ii) Capital Allowance - GH280,950
(iii) Corporate Tax Rate - 25%

Required:
Determine the Companys Net Tax Liability for 2016 Year of Assessment
(20 Marks)
Question 3
(a) With reference to the Income Tax Act, 2015 (Act 896), list any FIVE (5)
Disallowable Expenses in the ascertainment of a persons income from
business. (10 Marks)

(b) Distinguish between a Commercial Vehicle and a Non Commercial Vehicle

as provided in the Capital Allowance Arrangement under the Third
Schedule of the Income Tax Act, 2015 (Act 896) (10 Marks)

(Total: 20 Marks)

Question 4
Below is an extract of the Profit and Loss Account of Madam Ayele Mensah for
the year ended 31/12/15
GH
Gross Profit 73,000
Interest on Savings Account 1,000
Profit on sale of fixed assets 4,000
Bad Debts recovered 3,500
Dividend (Net of Withholding Tax of 8 %) 1,840
83,340
Less
Salaries - 30,600
Rent - 4,200
Electricity - 1,800
Repairs - 3,900
Telephone - 3,200
Loss on sale of assets - 2,500
Miscellaneous Expenses- 3, 800
Donations - 1,200
Depreciation 3,250
Interest on loan - 1,850
Birthday Expenses 2, 430
Advertisement - 8,900 72,630
Net Profit 10,710
2
NOTES TO ACCOUNTS
(a) Repairs are made up as follows:
GH
Private Residence 2,500
Shop 1, 400
b) Miscellaneous Expenses consist of
Income Tax paid on account - 2, 800
Childrens school fees 1,000
c) Donations
Osu Childrens Home 900
Church Harvest 300
d) Advertisement is made up of the following:
Radio Advert 2,100
Construction of Metal Neon Sign 6, 200
Advertisement Tax 600
e) Salaries
Proprietress 8,300
Employees 22,300
Other charges and Allowances agreed between Madam Ayele Mensah and the
Ghana Revenue Authority were as follows:

Additional Income 3200

Capital Allowance 1500

Required:
Compute the chargeable Income of Madam Ayele Mensah for 2015 Year of
Assessment. (Total: 20 Marks)

Question 5 (a)
WARABEBA LTD commenced business on 1st January 2013 making up
Accounts to 31st December each year.
The following assets were acquired and used in the business.

ASSET DATE OF ACQUISITION COST IN GH

Computers 2/1/13 40,000
Office Equipment 10/2/13 80,500
Building 1/1/13 380,000
Office Furniture 8/1/13 50,000
Motor Van 14/5/13 120,000

3
Required
Compute the companys Capital Allowance for all the relevant Years of
Assessment up to 2015. (12 Marks)

RATES OF CAPITAL ALLOWANCE

POOL 1 - 40%
POOL 2 - 30%
POOL 4 - 20%
CLASS 5 - 10%

QUESTION 5 (b)

List any FOUR (4) Measures introduced by the Income Tax Act, 2015 (Act 896) to
expand the income tax base. (8 Marks)
(Total: 20 Marks)

END OF QUESTIONS