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 In the year 2019, the business employed 6 fresh graduates out of the total work force of 750 in the bank. During the year ended 31 December, 2019, the business deducted the following expenditures from the business income. GHC Fresh Graduate Staffs 350,000 Other Staffs 750,000 SSNIT Contributions 400,000 Total 1,500,000 . Finance Lease The interest expense deducted before arriving at the above profit includes sum of GH 12,000 paid to Big Joe Plant Pool ltd under finance lease agreement. Big Joe Plant Pool ltd gave Amafiman Rural Bank an option of either buying a plant outright cash of GHC 45,492 or leasing it for 5 years. Under the lease terms, Amafiman Rural Bank will pay an annual rental of GH 12,000 at the beginning of each year for five years. The implicit interest rate of the lease is 10% and the expected useful life of the plant is 5 years. Amafiman Rural Bank is required to insure the plant and can renew the lease contract for an insignificant amount. Amafiman Rural Bank leased the plant on 1" January, 2018. The accountant of Amafiman Rural Bank did not charge any depreciation on the plant because he thinks Big Joe should rather charge the depreciation Required Compute the Chargeable Income and tax payable by Amafiman Rural Bank for 2019 year of assessment (9 marks) Provide notes to support your answer in (i) above (17 marks) (Total: 30 marks)
