Nov 2016 Q1 a&b
You have been appointed as the Tax Manager of Samada Insurance Company. The Executive Director has expressed his persistent worry with the Chief Accountant to accurately calculate the company’s tax obligations to agree with what is assessed by the Ghana Revenue Authority each year. He has thus, provided you with the Income Statement below for your consideration and advice.
Note 3
i) Capital allowance agreed for the year 2014 was GH¢2,450,000
ii) Reserve is calculated at 40% of Net premium.
Required:
a) Compute the tax due the GRA for 2014 year of Assessment. (8 marks)
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b) Support your computations with relevant explanations. (2 marks)
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- Premium received relating to 2015 in the year 2014 has been deducted from the gross premium.
- Interest on commercial papers has been assumed to be gross, hence withholding tax deducted in arriving at the net tax payable.
- It is assumed that the insurance company has a stake in the company paying dividend of 25% hence
- no withholding tax but dividend added to income in line with section 44 of Act 2000 Act 592.
- It could also be assumed that the dividend should suffer a final withholding tax hence should not be added in the determination of assessable income.
- Tax charged on investment as business income is negative