Chargeable Profit – NBC Institute

AT – Nov 2016 – L3 – SC – Q6 – Petroleum Profits Tax (PPT)

Explain associated gas and downstream activities and compute petroleum profits tax for Bivenette Petroleum Company Ltd.

Question

a. The administration of the Petroleum Profits Tax Act is under the charge and management of the Federal Inland Revenue Service with respect to Petroleum Profits Tax Act Cap P13 LFN 2004.

You are required to explain:
i. Associated Gas (2 Marks)
ii. Downstream Activities (2 Marks)

b. Bivenette Petroleum Company Limited has been in the oil prospecting business for some years. Extracts from the financial statements for the year ended December 31, 2013, show the following information:

Details	Amount (₦’000)
Value of oil exported	1,030,000
Domestic sales	842,000
Chargeable gas sales	603,000
Other income	425,000
Operating costs	1,385,000
Intangible costs	142,800
Royalty on export sales	125,000
Royalty on local sales	96,500
Non-productive rent	102,000
Exploration incentives	313,500
Rental	101,200
Interest paid	98,000
Administrative expenses	265,000

Additional Information:
(i) The Petroleum Profits Tax rate is 85%.
(ii) Interest paid included ₦12,000,000 paid to an affiliated company.
(iii) Capital allowances were agreed at ₦253,750,000.
(iv) Included in the operating cost is ₦302,000,000 paid to a company for information on oil prospect in Adamawa State.
(v) The company is entitled to Investment Allowance of ₦173,000,000.

Required:
Determine the Assessable Profit, Chargeable Profit, Assessable Tax, and Chargeable Tax of the company for the relevant Year of Assessment. (11 Marks)

Answer

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Tags: Assessable Profit, Associated Gas, Chargeable Profit, Downstream Activities, Investment Allowance
Level: Level 3

Topic: Petroleum Profits Tax (PPT)
Series: NOV 2016

AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies

Identify NPDC activities, explain the importance of leases in petroleum operations, and compute adjusted profit, chargeable profit, and chargeable tax.

Question

Nigerian National Petroleum Corporation (NNPC) is one of the regulatory agencies in the Oil and Gas sector of the Nigerian economy. NNPC, through its subsidiaries, carries out various regulatory functions.

a. State any FIVE activities of the Nigerian Petroleum Development Company (NPDC), a subsidiary of NNPC. (5 Marks)

b. State the importance of an Oil Mining Lease and an Oil Prospecting Lease. (2 Marks)

c. **Mr. Gillani Azurhi intimated you about his desire to invest in any company engaged in petroleum operations. One of his friends advised him against the petroleum sector in view of the current low price of crude oil in the international market and the high cost of domestic operations. He declined the advice, arguing that the price will not remain at its current low level as Nigeria will not be in recession forever.

On his own, he carried out some research using the internet. He presented you with the following financial extracts of Joji Petroleum Company Limited, which he obtained from the internet:**

Details	Amount (₦’000)
Current year capital allowances	6,080
Previous years’ capital allowances (b/f)	8,901
Custom duty	125
Royalties not included in the accounts	1,638
Loss brought forward	6,250
Petroleum Profits Tax payable	1,336

Assume a tax rate of 85%. You are required to:
i. Compute and explain the significance of Adjusted Profit. (9 Marks)
ii. Compute and explain the significance of Chargeable Profit. (2 Marks)
iii. Compute and explain the significance of Chargeable Tax. (2 Marks)

Answer

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Tags: Adjusted Profit, Chargeable Profit, Chargeable Tax, NPDC Activities, Oil Mining Lease, Oil Prospecting Lease
Level: Level 3

Topic: Taxation of Companies
Series: NOV 2016

ATAX – Nov 2016 – L3 – Q2c – Petroleum Profits Tax (PPT)

Compute and explain the significance of adjusted profit, chargeable profit, and chargeable tax for Joji Petroleum Company.

Question

Mr. Gillani Azurhi is considering investing in a petroleum company and has provided financial extracts of Joji Petroleum Company Limited for analysis.

Financial Data Provided:

Item	N’000
Current year capital allowances	6,080
Previous years’ capital allowances b/f	8,901
Custom duty	125
Royalties not included in accounts	1,638
Loss brought forward	6,250
Petroleum Profits Tax payable	1,336

Tax Rate: 85%

Required:

Compute and explain the significance of each of the following:

i) Adjusted profit (9 Marks)
ii) Chargeable profit (2 Marks)
iii) Chargeable tax (2 Marks)

Answer

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Tags: Adjusted Profit, Capital Allowance, Chargeable Profit, Chargeable Tax, Petroleum Tax
Level: Level 3

Topic: Petroleum Profits Tax (PPT)

AT – May 2018 – L3 – SB – Q2b – Petroleum Profits Tax (PPT)

Calculate assessable profit, chargeable profit, chargeable tax, and total tax liability for Ibrahim Oil Nigeria Ltd.

Question

Ibrahim Oil Nigeria Limited is an oil prospecting company which commenced production in commercial quantity in 2008. Its accounting year end is December 31. The company has provided the following Statement of Profit or Loss for the year ended December 31, 2016:

Description	Amount (N’000)
Revenue (value of oil produced)	2,455,200
Operating costs	(952,500)
Non-productive rent	(63,200)
Royalty on export sales	(14,775)
Depreciation of Property Plant and Equipment	(65,400)
Tangible drilling cost	(53,800)
Donation	(2,500)
Stamp duties	(1,250)
Repairs and renewal of machinery	(2,000)
Exploration and drilling costs	(100,300)
Custom duties on Plant and Machinery	(1,130)
Bad and doubtful debts	(26,500)
Pension and provident funds	(30,600)
Interest paid	(26,200)
General expenses	(11,050)
Income tax provision	(120,000)
Net Profit	983,995

Additional Information:

Exploration and drilling costs are itemized for various wells totaling 100,300 N’000.
A breakdown of bad debts shows 16,500 N’000 as specific provision.
Capital allowances are agreed at N88,100,000.

Required: Determine for the relevant assessment year, the following:

(i) Assessable Profit (9 Marks)
(ii) Chargeable Profit (3 Marks)
(iii) Chargeable Tax (2 Marks)
(iv) Total Tax Liability (1 Mark)

Answer

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Tags: Assessable Profit, Capital allowances, Chargeable Profit, Chargeable Tax, Export Sales, Petroleum Profits Tax Act
Level: Level 3

Topic: Petroleum Profits Tax (PPT)
Series: MAY 2018

AT – Nov 2017 – L3 – Q2 – Taxation of Companies

Compute assessable profit, chargeable profit, and tax for Skkye Petroleum Plc.

Question

Skkye Petroleum Plc. began operations over ten years ago and uses December 31 as its accounting date. The following details were extracted from the accounting records for the year ended December 31, 2016:

Crude oil exported – 3,500,000 barrels
Crude oil used locally – 1,200,000 barrels at N100 per barrel
Incidental income from petroleum operations – ₦26,750,000
Exploration and drilling costs – ₦30,000,000
Management and administration expenses – ₦240,500,000
Non-productive rents – ₦8,300,000
Provision for bad debts:
- General – ₦7,500,000
- Specific – ₦11,200,000
Depreciation – ₦7,250,000
Losses brought forward – ₦13,200,000

Qualifying capital expenditures:

Pipeline and storage tanks (March 2016, Continental Shelf, 190 meters depth) – ₦48,000,000
Plant and machinery (June 2014, Territorial Waters, 90 meters depth) – ₦63,800,000
Furniture and fittings (May 2013, Territorial Waters, 95 meters depth) – ₦21,000,000
Buildings (April 2015, onshore) – ₦71,000,000

Breakdown of Management and Administration expenses:

Donations to XYZ Political Party – ₦8,500,000
Expenditure on information regarding petroleum deposits – ₦4,700,000
Companies income tax of an associated company – ₦5,000,000
Interest on inter-company loans (market terms) – ₦2,600,000
Staff salaries – ₦175,000,000
Royalties on export sales – ₦6,200,000
Repairs and renewals on PPE for petroleum operations – ₦2,900,000
Rent for land/buildings under an Oil Prospecting License – ₦3,600,000
Other administrative expenses – ₦32,000,000

The international market price of crude oil in 2016 was USD $75 per barrel, with an exchange rate of USD $1 = ₦280.

Required:
a. Compute the assessable profit.
b. Compute the chargeable profit.
c. Compute the assessable tax.
d. Compute the chargeable tax.
e. Compute the Tertiary Education Tax.

Answer

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Tags: Assessable Profit, Chargeable Profit, Petroleum Operations, Tax computation, Tertiary Education Tax
Level: Level 3

Topic: Taxation of Companies
Series: NOV 2017

AT – Nov 2016 – L3 – SC – Q6 – Petroleum Profits Tax (PPT)

Explain associated gas and downstream activities and compute petroleum profits tax for Bivenette Petroleum Company Ltd.

Question

a. The administration of the Petroleum Profits Tax Act is under the charge and management of the Federal Inland Revenue Service with respect to Petroleum Profits Tax Act Cap P13 LFN 2004.

You are required to explain:
i. Associated Gas (2 Marks)
ii. Downstream Activities (2 Marks)

Details	Amount (₦’000)
Value of oil exported	1,030,000
Domestic sales	842,000
Chargeable gas sales	603,000
Other income	425,000
Operating costs	1,385,000
Intangible costs	142,800
Royalty on export sales	125,000
Royalty on local sales	96,500
Non-productive rent	102,000
Exploration incentives	313,500
Rental	101,200
Interest paid	98,000
Administrative expenses	265,000

Required:
Determine the Assessable Profit, Chargeable Profit, Assessable Tax, and Chargeable Tax of the company for the relevant Year of Assessment. (11 Marks)

Answer

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Tags: Assessable Profit, Associated Gas, Chargeable Profit, Downstream Activities, Investment Allowance
Level: Level 3

Topic: Petroleum Profits Tax (PPT)
Series: NOV 2016

AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies

Identify NPDC activities, explain the importance of leases in petroleum operations, and compute adjusted profit, chargeable profit, and chargeable tax.

Question

a. State any FIVE activities of the Nigerian Petroleum Development Company (NPDC), a subsidiary of NNPC. (5 Marks)

b. State the importance of an Oil Mining Lease and an Oil Prospecting Lease. (2 Marks)

On his own, he carried out some research using the internet. He presented you with the following financial extracts of Joji Petroleum Company Limited, which he obtained from the internet:**

Details	Amount (₦’000)
Current year capital allowances	6,080
Previous years’ capital allowances (b/f)	8,901
Custom duty	125
Royalties not included in the accounts	1,638
Loss brought forward	6,250
Petroleum Profits Tax payable	1,336

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjusted Profit, Chargeable Profit, Chargeable Tax, NPDC Activities, Oil Mining Lease, Oil Prospecting Lease
Level: Level 3

Topic: Taxation of Companies
Series: NOV 2016

ATAX – Nov 2016 – L3 – Q2c – Petroleum Profits Tax (PPT)

Compute and explain the significance of adjusted profit, chargeable profit, and chargeable tax for Joji Petroleum Company.

Question

Mr. Gillani Azurhi is considering investing in a petroleum company and has provided financial extracts of Joji Petroleum Company Limited for analysis.

Financial Data Provided:

Item	N’000
Current year capital allowances	6,080
Previous years’ capital allowances b/f	8,901
Custom duty	125
Royalties not included in accounts	1,638
Loss brought forward	6,250
Petroleum Profits Tax payable	1,336

Tax Rate: 85%

Required:

Compute and explain the significance of each of the following:

i) Adjusted profit (9 Marks)
ii) Chargeable profit (2 Marks)
iii) Chargeable tax (2 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjusted Profit, Capital Allowance, Chargeable Profit, Chargeable Tax, Petroleum Tax
Level: Level 3

Topic: Petroleum Profits Tax (PPT)

AT – May 2018 – L3 – SB – Q2b – Petroleum Profits Tax (PPT)

Calculate assessable profit, chargeable profit, chargeable tax, and total tax liability for Ibrahim Oil Nigeria Ltd.

Question

Description	Amount (N’000)
Revenue (value of oil produced)	2,455,200
Operating costs	(952,500)
Non-productive rent	(63,200)
Royalty on export sales	(14,775)
Depreciation of Property Plant and Equipment	(65,400)
Tangible drilling cost	(53,800)
Donation	(2,500)
Stamp duties	(1,250)
Repairs and renewal of machinery	(2,000)
Exploration and drilling costs	(100,300)
Custom duties on Plant and Machinery	(1,130)
Bad and doubtful debts	(26,500)
Pension and provident funds	(30,600)
Interest paid	(26,200)
General expenses	(11,050)
Income tax provision	(120,000)
Net Profit	983,995

Additional Information:

Exploration and drilling costs are itemized for various wells totaling 100,300 N’000.
A breakdown of bad debts shows 16,500 N’000 as specific provision.
Capital allowances are agreed at N88,100,000.

Required: Determine for the relevant assessment year, the following:

(i) Assessable Profit (9 Marks)
(ii) Chargeable Profit (3 Marks)
(iii) Chargeable Tax (2 Marks)
(iv) Total Tax Liability (1 Mark)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Capital allowances, Chargeable Profit, Chargeable Tax, Export Sales, Petroleum Profits Tax Act
Level: Level 3

Topic: Petroleum Profits Tax (PPT)
Series: MAY 2018

AT – Nov 2017 – L3 – Q2 – Taxation of Companies

Compute assessable profit, chargeable profit, and tax for Skkye Petroleum Plc.

Question

Crude oil exported – 3,500,000 barrels
Crude oil used locally – 1,200,000 barrels at N100 per barrel
Incidental income from petroleum operations – ₦26,750,000
Exploration and drilling costs – ₦30,000,000
Management and administration expenses – ₦240,500,000
Non-productive rents – ₦8,300,000
Provision for bad debts:
- General – ₦7,500,000
- Specific – ₦11,200,000
Depreciation – ₦7,250,000
Losses brought forward – ₦13,200,000

Qualifying capital expenditures:

Pipeline and storage tanks (March 2016, Continental Shelf, 190 meters depth) – ₦48,000,000
Plant and machinery (June 2014, Territorial Waters, 90 meters depth) – ₦63,800,000
Furniture and fittings (May 2013, Territorial Waters, 95 meters depth) – ₦21,000,000
Buildings (April 2015, onshore) – ₦71,000,000

Breakdown of Management and Administration expenses:

Donations to XYZ Political Party – ₦8,500,000
Expenditure on information regarding petroleum deposits – ₦4,700,000
Companies income tax of an associated company – ₦5,000,000
Interest on inter-company loans (market terms) – ₦2,600,000
Staff salaries – ₦175,000,000
Royalties on export sales – ₦6,200,000
Repairs and renewals on PPE for petroleum operations – ₦2,900,000
Rent for land/buildings under an Oil Prospecting License – ₦3,600,000
Other administrative expenses – ₦32,000,000

The international market price of crude oil in 2016 was USD $75 per barrel, with an exchange rate of USD $1 = ₦280.

Required:
a. Compute the assessable profit.
b. Compute the chargeable profit.
c. Compute the assessable tax.
d. Compute the chargeable tax.
e. Compute the Tertiary Education Tax.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profit, Chargeable Profit, Petroleum Operations, Tax computation, Tertiary Education Tax
Level: Level 3

Topic: Taxation of Companies
Series: NOV 2017

Question Tag: Chargeable Profit

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AT – Nov 2016 – L3 – SC – Q6 – Petroleum Profits Tax (PPT)

Explain associated gas and downstream activities and compute petroleum profits tax for Bivenette Petroleum Company Ltd.

AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies

Identify NPDC activities, explain the importance of leases in petroleum operations, and compute adjusted profit, chargeable profit, and chargeable tax.

ATAX – Nov 2016 – L3 – Q2c – Petroleum Profits Tax (PPT)

Compute and explain the significance of adjusted profit, chargeable profit, and chargeable tax for Joji Petroleum Company.

AT – May 2018 – L3 – SB – Q2b – Petroleum Profits Tax (PPT)

Calculate assessable profit, chargeable profit, chargeable tax, and total tax liability for Ibrahim Oil Nigeria Ltd.

AT – Nov 2017 – L3 – Q2 – Taxation of Companies

Compute assessable profit, chargeable profit, and tax for Skkye Petroleum Plc.

AT – Nov 2016 – L3 – SC – Q6 – Petroleum Profits Tax (PPT)

Explain associated gas and downstream activities and compute petroleum profits tax for Bivenette Petroleum Company Ltd.

AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies

Identify NPDC activities, explain the importance of leases in petroleum operations, and compute adjusted profit, chargeable profit, and chargeable tax.

ATAX – Nov 2016 – L3 – Q2c – Petroleum Profits Tax (PPT)

Compute and explain the significance of adjusted profit, chargeable profit, and chargeable tax for Joji Petroleum Company.

AT – May 2018 – L3 – SB – Q2b – Petroleum Profits Tax (PPT)

Calculate assessable profit, chargeable profit, chargeable tax, and total tax liability for Ibrahim Oil Nigeria Ltd.

AT – Nov 2017 – L3 – Q2 – Taxation of Companies

Compute assessable profit, chargeable profit, and tax for Skkye Petroleum Plc.

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AT – Nov 2016 – L3 – SC – Q6 – Petroleum Profits Tax (PPT)

Explain associated gas and downstream activities and compute petroleum profits tax for Bivenette Petroleum Company Ltd.

You're reporting an error for "AT – Nov 2016 – L3 – SC – Q6 – Petroleum Profits Tax (PPT)"

AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies

Identify NPDC activities, explain the importance of leases in petroleum operations, and compute adjusted profit, chargeable profit, and chargeable tax.

You're reporting an error for "AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies"

ATAX – Nov 2016 – L3 – Q2c – Petroleum Profits Tax (PPT)

Compute and explain the significance of adjusted profit, chargeable profit, and chargeable tax for Joji Petroleum Company.

You're reporting an error for "ATAX – Nov 2016 – L3 – Q2c – Petroleum Profits Tax (PPT)"

AT – May 2018 – L3 – SB – Q2b – Petroleum Profits Tax (PPT)

Calculate assessable profit, chargeable profit, chargeable tax, and total tax liability for Ibrahim Oil Nigeria Ltd.

You're reporting an error for "AT – May 2018 – L3 – SB – Q2b – Petroleum Profits Tax (PPT)"

AT – Nov 2017 – L3 – Q2 – Taxation of Companies

Compute assessable profit, chargeable profit, and tax for Skkye Petroleum Plc.

You're reporting an error for "AT – Nov 2017 – L3 – Q2 – Taxation of Companies"

AT – Nov 2016 – L3 – SC – Q6 – Petroleum Profits Tax (PPT)

Explain associated gas and downstream activities and compute petroleum profits tax for Bivenette Petroleum Company Ltd.

You're reporting an error for "AT – Nov 2016 – L3 – SC – Q6 – Petroleum Profits Tax (PPT)"

AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies

Identify NPDC activities, explain the importance of leases in petroleum operations, and compute adjusted profit, chargeable profit, and chargeable tax.

You're reporting an error for "AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies"

ATAX – Nov 2016 – L3 – Q2c – Petroleum Profits Tax (PPT)

Compute and explain the significance of adjusted profit, chargeable profit, and chargeable tax for Joji Petroleum Company.

You're reporting an error for "ATAX – Nov 2016 – L3 – Q2c – Petroleum Profits Tax (PPT)"

AT – May 2018 – L3 – SB – Q2b – Petroleum Profits Tax (PPT)

Calculate assessable profit, chargeable profit, chargeable tax, and total tax liability for Ibrahim Oil Nigeria Ltd.

You're reporting an error for "AT – May 2018 – L3 – SB – Q2b – Petroleum Profits Tax (PPT)"

AT – Nov 2017 – L3 – Q2 – Taxation of Companies

Compute assessable profit, chargeable profit, and tax for Skkye Petroleum Plc.

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