CHARTERED INSTITUTE OF TAXATION, GHANA

FINAL LEVEL 1 PAPER 8 - OIL AND GAS EXAMINATION PAPER

FEBRUARY 2015

Q1. Gold Ltd. is a mining company operating in the Terra mining area in Ghana for the past
twenty years. It has disposed of 25% of its exploration and production rights in the Terra mining area
for a sum of GH50,000,000 in 2014. In the same year Gold Ltd acquire 10% exploration and
production rights in the Sunshine mining area for GH25,000,000.

The highlights of 2014 revenue and expenditure disclosed in tax returns filed by Gold Ltd. Include the
following:

Revenue GH
Consideration received from sale of exploration and production rights 50,000,000
Gross income from its operations in 2014 200,000,000
Gross Dividend from a resident company in which it has 35% voting rights 50,000
Total Revenue 250,050,000

Expenses include the following:

Operating Cost 70,000,000
Depreciation 10,000,000
Exploration and production rights (Sunshine mining area) 25,000,000
Administrative Expenses 5,000,000

Profit before tax 40,000,000

The written down values of classes of assets brought forward from 2013 are as follows:
Class 1 assets 2,000,000
Class 2 assets 4,500,000
Class 3 Assets 5,000,000
Class 4 Assets 600,000

Identify the tax types that Gold Ltd will be liable to pay in 2014 and also compute the liability for
each tax type. State the assumptions underlying your calculations.

Additional Information

The capital allowance rates for the classes of assets are as follows:

Class 1 40% on reducing balance basis

Class 2 30% on reducing balance basis
Class 3 20% on straight line basis
Class 4 20% on reducing balance basis

Gold Ltd. claimed GHC1,000,000 as capital allowances for class 3 assets in 2013.

TAX RATES
Corporate - 25% or 35%
Capital Gains Tax 15%
Gift Tax 15%
Branch Profit 10%
Withholding Tax Rates
Royalty 5%
Dividends and Interest - 10%
Natural Resource Payments 10%
Technical Services Fee 15%
Management Fee 20%

Q2. Explain briefly the following and state their tax treatment under the relevant tax laws of
Ghana.

(a) Ring Fencing;

(b) Finance Lease; and
(c) Thin Capitilisation

Q3 (a) Special Carried Interest Allowance is an allowable deduction under the Petroleum Income
Tax Law, 1987 (PNDC Law 188). Please define or explain what is meant by the Special Carried
Interest Allowance.

(b) Under what circumstances can an assessment be regarded as final and conclusive under
the provisions of the Petroleum Income Tax Law, 1987 (PNDC Law 188).

(c) Explain the tax treatment of proceeds realised from the sale of an asset in the year of
commencement and after the year of commencement as provided under PNDC Law 188.
Please note that the sale of an asset here does not refer to assignment of interest in a
petroleum agreement.

Q4 Under the Petroleum Revenue Management Act, 2011 (Act 815) the Ghana Revenue
Authority has been mandated to assess, collect and account for petroleum revenue. Please
mention and write short notes on what constitutes petroleum revenue under Act 815.

Q5 Each Petroleum Agreement provides for the establishment of a Joint Management

Committee. Outline the provisions of a petroleum agreement relating to a Joint Management
Committee.