Nov 2016 Q4 a.
Pearl House Ltd is a company incorporated in Ghana and contemplates applying for a licence to operate within the Free Zone environment from the Free Zone Board as opposed to an earlier decision to run a Micro Finance Business. Management has been at a crossroads on the decision to make.
Required:
As a Tax Consultant, the Management of Pearl House Ltd has approached you to join them at a breakfast meeting and convince them on the tax benefits if any that Pearl House Ltd stands to gain from the operations in the Free Zone milieu. (10 marks)
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The following are benefits the Free Zone persons stand to gain and would accrue to Pearl House Ltd if it operates as a free zone company:
- Both foreigners and nationals can own 100% shares without restrictions. Pearl House Ltd shareholders alone can own the shares as they are no restrictions on the shareholding structures.
- Pearl House Limited would be exempt from value added tax and import duties on imports of raw materials and equipment for the use by Pearl House Ltd in its business operations.
- Exempt from payment of corporate tax for the first 10 years of its operation.
- Exports of goods and services shall be taxed @ 15% as opposed to 25% to Domestic market.
- Dividend paid to shareholders of Pearl House Limited shall be exempt from withholding tax.
- Can obtain inputs for its operation from national custom controlled territory which are relief from Value Added Tax
- Can obtain permission to sell up to 30% to the Domestic Market.
- Faulty goods which fall short of meeting international market standards shall form part of the up to 30% for the domestic market.
- Custom Division of Ghana Revenue Authority does not control the Free Zone Enterprise but monitors it to ensure it operates within the rule.
- The Free Zone board facilitates the acquisition of other permits for the operation of the Free Zone Enterprise which may be essential for the operation of the Free Zone Enterprise. (Any 5 points)