b) Shares of a resident company are classified as chargeable assets under capital gains tax. Under what circumstances will shares not be described as chargeable assets under capital gains tax provision? (4 marks)
View Solution
Shares are classified as chargeable assets under section 97 (1) (a) and (b). However, under the following provisions, shares are not classified as chargeable assets:
i. Securities (shares) of a company listed on the Ghana Stock Exchange during the twenty-five years after the establishment of the Ghana Stock Exchange. It was established in 1990. Section 97 (3) (a) of the Internal Revenue Act, 2000 Act 592. (2 marks)
ii. Also, realization involving the disposal of shares in the course of liquidation (section 96 (2) of the Internal Revenue Act 2000 Act 592 as amended. (2 marks)
c) Staff of ABC Bank Ghana Limited; have been issued shares by ABC Bank Limited -United Kingdom (the Parent company). The shares have been vested and are available to be sold immediately by the beneficiary staff.
Requirement:
With the support of the provisions of the relevant tax laws, how will the above be treated for tax purpose, if any? (7 marks)
View Solution
Section 63 of the Internal Revenue Act 2000 Act 592 states, the gains or profits from any employment of a person shall be treated as accruing in or derived from Ghana to the extent to which the employment is exercised in Ghana, regardless of the place of payment. (2 Marks)
Under section 8(3) any amount, allowance, or benefit is a gain or profit from employment if it
a. Is provided by the employer, an associate of the employer, or a third party under an arrangement with the employer or an associate of the employer
b. Is provided to an employee or an associate of an employee; and
c. Is provided in respect of past, present, or prospective employment. (3 marks)
Conclusion:
ABC Bank Limited -United Kingdom (the Parent Company) is an associate of ABC Bank Ghana Limited. Therefore the shares issued to the staff constitute a benefit paid by the Associate of their employer and should be added to its income and tax appropriately using the graduated tax rate. (2 marks)