QUALITY TUITION CENTRE

ADVANCED TAXATION

ICAG PAST QUESTIONS ON NATURAL RESOURCE TAXATION

2019 NOVEMBER

4c) The following data relates to Nyametsew Mining Company for 2018 year of assessment.

Production - 2,000,000 Ounces

Revenue - GH¢10,000,000
Cost of Production - GH¢4,000,000
Required:
Compute the Royalty Payable. (2 marks)
d) Mining companies are given some benefits in their operations in many countries to help them
create benefits for their host governments and shareholders. One of the benefits of the mineral
operation is the stability agreement that mining companies sign with host governments the world
over.

Required:
What does stability agreement seek to achieve for mining companies in Ghana? (6 marks)
c) Kaeka Ltd operates in the Upstream Petroleum Sector. The following relates to its 2018 year
of assessment:
US$
Profit 230,000,000
Tax paid 7,875,000
The following was adjusted in arriving at the profit above:
Research and development cost incurred 4,500,000
Refreshment 1,500,000
Fines and penalty 20,000
Loss-2017 (unrelieved) 1,200,000
Depreciation 800,000
Acquisition of Drilling Machine 30,000,000
Note: Written Down Value of depreciable assets are as follows:
Balance c/d-2017:
US$21,000,000 with capital allowance granted twice as of 2017.
US$60,000,000 with capital allowance granted once as of 2017.
Required:

i) Compute the tax payable. (8 marks)

ii) Comment on the treatment of research and development expenditure. (2 marks)

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2020 MAY

5b) Compute the royalty payable on the following data of A Ltd, a Mining Company for 2018
year of assessment:

Production of resource (Volumes) 1,000,000

Revenue from sale GH¢10,000,500
Note: the revenue above contains proceeds from sale of scraps amounting to GH¢10,500

Required:

Compute the royalty payable. (2 marks)

2020 November

a) Kaka Ltd is a mining company that has been operating in Ghana for some time now. The
following relates to Kaka Ltd.’s 2019 year of assessment:

GH¢
Revenue 10,200,000
Cost 4,000,000
Profit 6,200,000
The following additional information is relevant and has been adjusted in arriving at the profit
stated above:

GH¢

i) Depreciation, Depletion and Amortization 2,000,000

ii) Cost incurred in overburden stripping and shaft sinking during production to improve access
amounted to GH¢800,000.

iii) Contribution towards worthwhile cause is GH¢10,000. This was in support of a hole-in heart
child. This was duly acknowledged by Ghana Health Service.

iv) Royalty of GH¢80,000 was paid without recourse to the revenue from production.

Additional information:

 An asset (Capital Asset) acquired in 2016 for GH¢1,000,000 was sold for GH¢200,000 in
2019.

 Capital allowance (written down value brought forward) on the assets as at 31 December

2018 was GH¢4,000,000

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 10 fresh graduates were recruited in 2019 year of assessment, 4 of the fresh graduates
completed universities in the United States of America while the others completed University for
Development Studies in Ghana. They were paid GH¢120,000 as salaries.

Total workforce for 2019 year of assessment was 60.

Required:

i) Compute the tax payable by Kaka Ltd. (10 marks)

ii) The mining company indicated that it had an idle cash of GH¢100,000. If it adds it to its
working capital, an additional income of GH¢10,000 would accrue but with an option to
purchase Treasury Bills, the interest would remain at GH¢10,000.

Required:

Advise Management on the tax implication of the proposed investment. (2 marks)

b) A mining Company in Ghana intends buying a vehicle (Pajero) for official use under a finance
lease arrangement or an outright purchase. The cost profile of the vehicle is as follows:

i) Outright Purchase: Cost at GH¢80,000.

ii) Finance Lease Arrangement: Cost inclusive of interest is GH¢105,000, to be paid over three
years. The interest component is GH¢30,000 to be spread over the three years.

Required:

Determine which of the option you would advise to be adopted. (6 marks)

c) Mining companies enter into several agreements. Why do mining companies enter into
development agreement in Ghana and what are the conditions to meet before the agreement is
granted? (2 marks)

2021 MAY
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4. Kanawu Mine Resources Limited was incorporated on 1 January 2017 to mine gold and
diamonds at Prestea in the Western region of Ghana. Various reconnaissance and prospecting
activities took place from 2017 to 2019. Actual production started on 1 January, 2020.

The following were the cost and revenue relative to reconnaissance and prospecting activities
and cost from 2017 to 2019.

The following transactions took place from 1 January, 2020 to 31 December, 2020:
i) The company received a compensation of GH¢3,500,000 from their insurers for destruction of
some gold mined.
ii) Mining and processing cost, including wages and salaries, incurred during the year was GH
¢120,345,000.
iii) Sales of gold and diamonds GH¢378,532,900.
iv) Ground rent paid to the Administrator of Stool Lands GH¢321,500.
v) The company undertook further research and development studies at the cost of GH¢374,300.

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vi) Royalties amounting to GH¢11,355,987 was paid to the government.
vii)The company acquired a new Mineral Right at a cost of GH¢5,000,000. Bonus payment
made in respect of grant of the new mineral right was GH¢300,000. The legal and other
professional fees paid with respect of the acquisition of the new right was GH¢121,800.
viii) Stope preparation and development cost paid was GH¢884,300. The total cost of the stope
preparation and development incurred was GH¢1,021,700.
ix) The total cost of business operating permits was GH¢5,563,200. This amount includes GH
¢400,000 provision for 2021.
x) Other general and administrative expense totaled GH¢190,467,100. This includes construction
of a huge iron gate at the entrance of the mine at a cost of GH¢421,600.
xi) Selling and distribution cost paid was GH¢172,554,700.
xii)Finance charge of operations, including interest on loans and bank charges, incurred was GH
¢211,500,000.
Required:
a) Compute capital allowance claimable in 2020. (6 marks)
b) Compute the chargeable income of the company and the tax payable for the year 2020. (10
marks)
c) Comment on the tax treatment of Royalty Payment and acquisition of new mineral rights. (4
marks)

2021 NOVEMBER

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4. Akwatia Gold Mines was established ten years ago. For the year ended 31 December 2020, the
following income statement was prepared and submitted to the Ghana Revenue Authority as part
of its financial statement.

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5 a) Explain the following concepts in relation to the taxation of petroleum operations:
i) Surface Rentals
ii) Stability Agreements
iii) Carried Interest
iv) Additional Carried Interest (10 marks)

2022 APRIL
4 b) Explain of the following sources of revenue accruing to the Government of Ghana from the
upstream petroleum operations in Ghana:
i) Royalty.
ii) Carried Interest.
iii) Additional Interest.
iv) Additional Oil Entitlement. (6 marks)

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2022 AUGUST
5 a) Alpha Ltd is a company operating in the upstream petroleum sector and commenced
production in 2020. The Accountant who is new to the industry provided the following extract
for the 2020 year of assessment with basis period 1 January to 31 December, 2020.

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2022 DECEMBER
5 a) Lakeside Exploration Ghana Ltd and Gasoil Energy Extraction Ltd are joint venture partners
who have 50% and 35% interest respectively in the Volta Offshore Field Ghana Ltd. The
agreement between the joint venture partners and the Government of Ghana provides for Royalty
of 5%, Initial Carried Interest of 10%, Additional Participating Interest of 5%, and corporate tax
rate of 35%.
Production commenced in the Volta Offshore Field Ghana Ltd in 2021. Information available on
the Volta Offshore Field Ghana Ltd is as follows:

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2023 MARCH
Crystal mining Ltd is a resident mining company operating in two mining areas in the
Eastern and Western parts of Ghana under the name Alpha Ltd and Beta Ltd respectively.
Crystal mining Ltd has a shared processing facility for the two mining areas.
As part of efforts to increase its market share in the sector, it acquired 40% stake in the
operation of Omega Ltd, also a mining company in the Western part of Ghana.
Omega Ltd’s operations are in their early years hoping to start production in the next three
years. Crystal mining Ltd commenced commercial operations in 2021.
The operational activity of Crystal mining Ltd for 2021 year of assessment is as follows:
Required: a) Compute the taxes payable by Crystal mining Ltd and state any assumptions if any. (16
marks) b) Advise the management of the company on when it must pay its taxes to the Ghana Revenue
Authority. (2 marks) c) What are the sanctions for non-adherent to the obligation of payment of taxes?
(2 marks)

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Required:
a) Compute the taxes payable by Crystal mining Ltd and state any assumptions if any. (16
marks)
b) Advise the management of the company on when it must pay its taxes to the Ghana Revenue
Authority. (2 marks)
c) What are the sanctions for non-adherent to the obligation of payment of taxes? (2 marks)

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2023 November
5 a) ACM Mining Ltd has commenced mining operations in Ghana. It procured heavy duty
machinery and equipment for use in its operations.
Required:
Advise ACM Mining Ltd on what constitutes the cost of asset at commencement of commercial
production in respect of mineral operations. (5 marks)
b) Nananom Petroleum Ghana Ltd produced 3,000,000 barrels of oil per month. The crude oil
was sold at $70 per barrel. Royalty due is 5%, Carried Interest of 11% and Additional Interest of
3.75%.
Required:
Compute the state or government take in the following:
i) Royalty
ii) Carried interest
iii) Additional participation interest (5 marks)

2024 March
5 a) You have been invited as a student of Taxation to speak at a stakeholder workshop on
mining and mineral operations in the extractive industry. In the letter of invitation, the
Organisers indicated that you are to submit a detailed write-up of your presentation on the
following issues.
Required:
Comment on the following:
i) Allowable deduction peculiar to the extractive industry. (3 marks)
ii) Approved Rehabilitation Fund and the tax treatment of contributions into the fund and
expenses incurred in respect of rehabilitation under the Income Tax Act, 2015 (Act 896).
(3 marks)
iii) The tax treatment of relevant financial costs included in the costs incurred in respect of
minerals and mining operations under the Income Tax Act, 2015 (Act 896). (4 marks)

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