Kankoka is registered with the Registrar General Department of Ghana as a Non-Governmental Organisation (NGO) and had income amounting to GH¢30,000,000 in 2018 year of assessment.
A detailed analysis reveals the following composition of the income:
Support from Benefactor based in Germany GH¢10,000,000
Transport business GH¢10,000,000
Government afforestation project disbursement GH¢10,000,000
Required:
Determine the tax payable if any by Kankoka and comment on your answer and state any relevant assumption. (5 marks)
View Solution
- Introduction
An NGO is a charitable organization that is exempt from tax on its NGO activities. When an exempt entity engages in business activities, that business activities shall be subject to tax. - Income from Benefactor of GH¢ 10,000,000
Following from the above, the support from the Benefactor based in Ghana is not a business activity after all NGOs run their activities based on funds from Benefactors and like-minded persons. - Transport business income of GH¢ 10,000,000
Transport business is income from business for which Kankoka shall be subject to tax. Therefore, the income of GH¢10,000,000 from the transport business shall be subject to tax using the marginal tax rate of 25%. - Income from Government Afforestation
The funds from Government on afforestation is income that is meant for a dedicated purpose. This income is therefore exempt from tax in the hands of Kankoka. - Tax computation:
GH¢
Income from Transport business 10,000,000
Tax charged @ 25% 2,500,000
The assumption is that the income of GH¢10,000,000 has taken into account all cost associated with the transport business
(5 points for 5 marks)