Mergers and acquisitions have blessings for the predator(s) and may equally bring losses to the predator. Therefore, under section 62 of Act 896 (Act 2015), the following shall not be benefitted by the new owners that are Farmer ltd in this.

• The financial cost incurred under section 16 cannot be beneficial to the new owners.
• Shall not benefit from any loss incurred under section 17
• Shall not claim any bad debts incurred by previous managers
• Shall not carry back loss if it is in a long term contract.
• Shall file two tax returns, one before and one after the change in underlying ownership.
• Will benefit from new values of depreciable assets
• Can rebrand to create a value-added image for the entity

• It is to promote investment both local and foreign
• It is to set guidelines on what foreigners can execute in Ghana
• It is to define activities which can be executed by indigenes only and the
• It is to provide incentives for businesses which register with them
• It is to show case the investment potentials of Ghana (Any 3 points for 3 marks)

Percy-Perry Construction
Computation of Tax Payable
Y/A 1st January-31st December 2019

Alternative solution
Alternative solution with the assumption that the hire of equipment and staff costs between the USA and Ghana are incomparable in view of the geography and the economic climate of both jurisdiction.
Percy-Perry Construction
Computation of Tax Payable
Y/A 1st January-31st December 2019

Percy- Perry USA
Computation of tax Payable
Y/A 2019
                                                                                                          GH¢
Profit (9,000,000-7,000,000)                                                         2,000,000
Tax Charged @25%                                                                         500,000
Less withholding Tax (9,000,000*5%)                                            450,000
Net Tax Payable                                                                                 50,000

Issues:
The Parent Company based in the USA is using its subsidiary in Ghana to perform the task. Assuming it had no subsidiary, technically, it would have been considered a Permanent Establishment (PE) since construction for 90 days or more makes a non-resident person a PE in Ghana.

Hire of equipment
There is no indication that the subsidiary in Ghana tried finding out if any entity in the USA could hire the equipment for a lower amount or at best the GH¢600,00 being quoted by the Subsidiary

Staff Cost
There is no indication that other person that is uncontrolled in the USA could collect an amount lower than what the Parent Company is asking.
In any case, Citizens of other States that come to Ghana are paid slightly higher than their counterparts in Ghana.

Contract award
By winning the contract for GH¢9m and subletting it for GH¢7m, making a profit of GH¢2m, the profit will be subject to tax in Ghana as profit attributable to operations in Ghana.

Kaek Consult
Box 4
Accra

12th December 2020

The Manager
Gona Jon Ltd

Dear Sir,

HOW TO ACCESS WORTHWHILE CONTRIBUTION/DONATION AND BENEFITS

Following your request for us to furnish you with the benefits of worthwhile causes and how an entity can access them, I forward as follows for your study and decision making:

Nature of worthwhile causes
The worthwhile causes are in the nature of donation or contribution towards any of the following:

• A charitable organisation
• A scheme of scholarship for an academic, technical, professional or other course of study
• Development of any rural or urban area
• Sports development or sports promotion and
• Any other worthwhile cause approved by the Commissioner-General

Benefits of the worthwhile causes
The benefits of such are as follows:
The entity is able to enjoy good will from such donation and additionally, will be used as a deduction from income before tax is imposed. This reduces the tax payable of the entity.

How to access them
Approval should be sought from the Commissioner-General or from the sector ministry to be able to enjoy the deduction from income.

Conclusion
It is hoped that the above would help you in your decision making.
In case you need further clarification on the above, do not hesitate to get in touch with the undersigned.
Thank you.

Yours faithfully,

Boys Abre3

Mining Companies which indicate to spend over 500 million USD may request for development agreement with Ghana Government. This allows them to bargain for incentives which will create value for their shareholders.
The following conditions must be met:

• Must be prepared to invest over 500 million United States Dollars
• It must be ratified by Parliament                                      (2 marks)

The law limits or restricts capital allowance in respect of a vehicle which is not commercial vehicle to GH¢75,000. The Pajero shall accordingly be restricted to GH¢75,000.

Option 1 outright purchase amounting to GH¢80,000. Capital allowance shall be granted on only GH¢75,000 and not the full amount of GH¢80,000.                (2 marks)
With the second option: Capital allowance shall be granted on the principal repayment in respect of an amount of GH¢25,000 each year for three years totaling GH¢75,000 and GH¢10,000 shall be granted as allowable deduction each year for the 3 years totaling GH¢30,000. In effect the whole amount shall be allowable.
The whole amount of GH¢105,000 shall be allowable deduction.                     (2 marks)

Conclusion
Option 2 is better on the following grounds:
All the amount shall be granted as capital allowance/ deduction as follows:
75,000 shall be granted as capital allowance for the entire period
Interest of GH¢30,000 shall be granted as allowable deduction over the three years
The payment shall be spread which will not affect the cash flow of the mining company greatly as opposed to the outright cash payment.        (2 marks)

With the option to add the idle cash of GH¢100,000 to working capital, a tax of 35% shall be imposed on the income of GH¢10,000 as the outcome as opposed to a tax of 25% to be imposed as tax on an investment income of GH¢10,000.
Following from the above, management is advised to rather buy Treasury bills and pay a lower tax at the rate of 25% instead of additional mining income at the rate of 35%.

ICAG
Accra

12th December, 2020

COMMISSIONER-GENERAL
GHANA REVENUE AUTHORITY
ACCRA
SIR,
COMPARABILITY FACTORS

Introduction
The sale of two vehicles with the same model and brand at USD84,500 and USD 91,000 to two differently buyers by Success Vehicles Ltd raises tax issues especially transfer pricing on the surface. In order to draw meaningful conclusion for the Commissioner-General, the following factors shall be considered:

Contractual terms
The price will be the same if the contractual terms are the same. Different contractual terms will create different pricing

Nature of the vehicles
There is the need to look at the vehicles critically and determine if the price differential is as a result of the nature of each vehicle.

FAR analysis
The FAR analysis looks at the following:
Function
Asset
Risk

Function
The function performs in each of the vehicle is worth noting to determine if there is an abuse in the pricing.

Asset
The asset used will also determine. In this case, the place of manufacture is worth taking into account.

Risk
The risk assumed in the manufacture of the vehicle is very important and can explain the price differentials

Economic condition at the time of producing each vehicle
What was the state of the economy at the time they were manufactured? Inflation, Interest and foreign exchange situation if different can explain the price differentials

Market penetration

New products hitting the market for the first time unknown to the market must be priced below its counterparts in order to get known before the price starts to see an increase.

Conclusion
The analysis of the factors above will help in the determination of the rationale for the price differentials.

Yours faithfully,

Boys Abre3 (Final Level Student)                                                                                  (6 marks evenly spread using ticks)

Andrew Soweah
Computation of Tax payable

Loan Secured:                                  USD 1,500,000
Interest on the loan                              GH¢300,000
Foreign Exchange loss                        GH¢105,000
Exchange Rate GH¢5.73 to USD 1

Equity:
Share Capital                            GH¢ 150,000
Retained Earnings                    GH¢ 300,000
Total Equity                              GH¢ 450,000

Safe Harbour Rule is Debt: Equity Ratio 3: 1 respectively
Translation of loan into Ghanaian Cedis
USD 1,500,000 x 5.73 =GH¢8,595,000

Allowable debt = 3 times equity
3* 450,000= 1,350,000

Tax implication

• Interest of 8% shall be imposed on 300,000 (8% *300,000) = GH¢ 24,000
• Interest allowable is (300,000-252,879.58) = GH¢ 47120.42
• Foreign Exchange allowable (105,000-88,507.85)= GH¢ 16,492.15
  (6 marks evenly spread using ticks)