Question

a QUESTION THREE Ghana has not entered into Double Taxation Agreement (DTA) with the government of Nigeria. Kumuga, a resident person of Ghana approached you this morning to explain to him whether foreign tax credit relief covers those residents trading in Nigeria Required State your responses to Kumuga on the above issue? (4 marks) b. Amafiman Rural Bank commenced operation on 1st January, 2018, preparing account to 31 December each year. The Income statement for the year ended 31st December, 2019 is shown below. Income statement for the year ended 31st December, 2019 GHC Profit before tax 700,000 Additional Information Investment The business invested in two portfolios, a foreign investment with In-charge Ltd, and Domestic investment with Blue Rose Limited. Blue Rose Ltd is located in Buduburum-Ghana. Amafiman has 8% shares for GH¢ 1,200,000 in In-charge Ltd and 26% shares for GH4 653,000 in Blue Rose Limited. During the year ended 31st December, 2019, In-charge Limited paid an amount of GH 400,000 after 5% tax to the bank whiles Blue Rose Ltd paid a gross amount of GH€ 42,500. The management realised that Blue Rose Ltd is not profitable investment, so they sold the shares for GH¢ 800,000 in December, 2019, and acquired a new shares in Gidimadjor Ltd costing GHC 723,000 in the same month. The only amount included by the accountant before arriving at the profit before tax was GH¢ 442,500 being the dividends received from Blue Rose Ltd and In-charge Ltd. • Depreciation Amafiman Rural Bank charged Depreciation before arriving at the above profit. The bank depreciated the asset on straight line method. The business acquired the following asset on 1st January, 2018 Depreciate Rate (%) Cost GH Premises (Land element GH¢ 40,000) 20% 100,000 Computer servers 25% 60,000 The bank acquired a trade mark valued at GH¢ 50,000 with an economic useful life of 8years in the year 2018. The accountant ignored the trade mark and Land in computation of the depreciation because he thinks these assets are not depreciable asset. Research and development The banks conducted research amounted to GH¢ 10,000. The research was carried out to acquire the computer server. The whole GH¢ 10,000 was added to cost in arriving at the profit • Uncollectible debt and Refund Specific bad debt and General bad debt on loans amounted to GHC 12,000 and GH€ 23,000 respectively. And these amounts were added to cost in arriving at the profit. Interest of GH 13,000 received from Apex Rural Bank was refunded back to them on 1 December, 2019 because of a legal obligation to refund. • Salary paid to Staff

Answer 1

Double Taxation Agreement (DTA) is AN agreement countries enter into with one another to confirm that their residents don't got to pay double taxes on financial gain attained by them in international transactions. This involves exchange of trade data/information between the 2 countries and putting in of a mechanism to avoid double taxation. for instance, if taxes square measure subtracted at supply on financial gain attained in foreign country, then the house country might offer foreign step-down (FTC) to its resident individual against the taxes already subtracted at supply in foreign country, rather than subjecting this foreign financial gain once more to domestic taxes.

In the case, since Ghana doesn't have double taxation accord with African country, it'll not offer its residents any foreign step-down against taxes paid on financial gain attained by them from commerce in African country

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