Kinky Ltd is a manufacturing entity resident in Ghana. Mr. Andre Camil, a citizen and resident of France owns 90% of the company’s shares. Mrs. Claude Camil, a citizen and resident of France and wife of Mr. Andre Camil also owns 5% of the shares of the company. Mr. Francois Camil, the son of Mr. Andre Camil holds the remaining 5% of the shares in the company. As at 1 June, 2021, the company had a share capital of GH¢400,000. A report submitted by the management to the Board of Directors indicated that the company needs to acquire a plant valued at GH¢1,000,000 to enable the company increase its production capacity. Mr. Andre Camil who is the majority shareholder has offered to finance the purchase of a plant for the company but his challenge is whether to provide the asset to the company as a loan or as equity. 

Required: 

Advise Mr. Andre Camil on: 

i) The income tax treatment of providing the asset to the company as equity contribution.

 ii) The income tax treatment of providing the asset to the company as a loan. 

iii) The preferable option for providing the asset to the company in order to derive the maximum tax benefits.

Answer rating: 100% (QA)

The income tax treatment of providing an asset to a company as equity contribution or a loan can vary significantly depending on the specific tax laws and regulations in Ghana and other relevant juris... View the full answer