The following has been extracted from the tax records of Mbangba Ltd relating to 2018 year of assessment, which it intends to benefit in terms of tax outcome from 2019 year of assessment.
. GH¢
Tax loss recorded for the first time in 2018 Y/A 400,000
Financial Cost carried forward from derivatives- 2018 100,000
Bad Debts from Customers crystallized but not utilized in 2018 1,200,000
Lawomba Ltd in March 2019, acquired 68% equity shares of Mbangba Ltd and rebranded the name as Lawomba Ltd and conveyed the circumstance after the deal was clinched to the Ghana Revenue Authority to amend its records accordingly and recognize as the legitimate persons in control of Mbangba Ltd.
The management of Lawomba Ltd has written to you making available the above disclosures for your tax opinion.
Required:
What is the tax implication of the above transactions in the records of Lawomba Ltd? (6 marks)
View Solution
The acquisition of 68% of Mbangba ltd will result in change in underlying ownership of Mbangba ltd by more than 50%.
Tax implication:
- The period before the change and the period after the change in underlying ownership in the assets shall be treated as separate years of assessment.
- The tax loss GH¢400,000 incurred in 2018 year of assessment cannot be utilized by Lawomba ltd.
- Financial cost of GH¢100,000 from derivatives brought forward from 2018 cannot be benefited by Lawomba.
- Bad debts of GH¢1,200,000 cannot be taken account of by Lawomba ltd.
- Gain on realization is taxable. (4 points @ 1.5 marks each =6 marks)