Companies Income Tax – NBC Institute

TAX – May 2021 – L1 – SB – Q4a – Companies Income Tax (CIT)

Conditions for the allowability of donations under the Companies Income Tax Act.

Question

Under the provisions of Companies Income Tax Act Cap C21 LFN 2004 (as amended), for an expenditure to be allowable for tax purposes, it should be an expenditure incurred wholly, exclusively, necessarily, and reasonably in earning the income of the company. Despite the above-stated assertion, some donations are still allowable for tax purposes.

Required:
State the conditions that must be met before a donation is allowed for tax purposes.

Answer

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Tags: Companies Income Tax, Donations, Tax Allowability, Tax Compliance
Level: Level 1

Topic: Companies Income Tax (CIT)
Series: MAY 2021

TAX – May 2019 – L2 – Q6 – Companies Income Tax (CIT)

Compute total profit and tax liabilities, describe zero-rated VAT items, and discuss penalties for non-registration for VAT.

Question

Duru Cobbler Limited has been in the business of shoe manufacturing for many years. Information contained in the company’s statement of profit or loss for the year ended November 30, 2018, is as follows:

Details	Amount (N)
Revenue	18,546,000
Other income:
– Rental income (gross)	240,000
– Profit on sale of property, plant, and equipment	120,000
– Interest on bank deposits (net)	234,000
Total Other Income	594,000
Total Revenue	19,140,000
Less:
Staff salaries and wages	6,180,300
Finance cost	1,144,000
General administration expenses	10,585,190
Impairment loss	420,000
Depreciation and amortization	1,690,000
Total Expenses	20,019,490
Loss before tax	(879,490)
Income tax expense	–
Deferred tax provision	(64,380)
Loss after tax	(943,870)

Additional notes provided by the accountant:

Finance costs include bank charges and interest on overdrafts.
General administration expenses include:
- Bad debts of N655,000 from bulk sales of shoes to the managing director’s relations.
- Value added tax of N985,000 not imposed on some invoices.
Capital allowances for the relevant year amount to N1,294,000.

Required:
(a) Compute the total profit and tax liabilities payable by Duru Cobbler Limited for the relevant year of assessment. (10 Marks)
(b) Describe zero-rated goods and services under the Value Added Tax Act Cap VI LFN 2004 (as amended) and identify two transactions that may fall under this category. (3 Marks)
(c) Identify the penalties for non-registration for VAT. (2 Marks)

Answer

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Tags: Companies Income Tax, Penalties, Tax computation, VAT, Zero-Rated Goods
Level: Level 2

Topic: Companies Income Tax (CIT), Value-Added Tax (VAT)
Series: MAY 2019

TAX – May 2019 – L2 – Q1b – Companies Income Tax (CIT)

Calculate profit sharing for the partners of Obi Consults.

Question

ABCEE Limited has been in the business of clearing and forwarding in Nigeria since 2007. The company has a standing policy of declaring dividends to the shareholders and has continued to do so despite the dwindling business activities in recent years. The following information was extracted from the ABCEE Limited’s income tax returns submitted to the Federal Inland Revenue Service for the 2016 year of assessment:

Description	Amount (N)
Total profit per 2016 tax computation	10,899,000
Tax assessed based on total profit @ 30%	3,269,700
Dividend declared	14,000,000

Required:

As the desk officer in charge of ABCEE Limited, compute the revised tax liability of the company in line with Section 19 of the Companies Income Tax Act Cap C21 LFN 2004 (as amended).

Answer

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Tags: Companies Income Tax, Dividend, Section 19, Tax Liability
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: MAY 2019

TAX – Nov 2018 – L2 – SC – Q5a – Companies Income Tax (CIT)

Compute the companies' income tax payable for Mandy Construction Nigeria Limited for the 2017 assessment year.

Question

Mandy Construction Nigeria Limited is an engineering company incorporated on January 1, 2009, and commenced business the same day. The company makes up its accounts to June 30 each year. The company had prepared its tax returns for the 2017 assessment year and was of the opinion that it had no total profit and therefore was not subject to companies income tax.

As a tax consultant, the chief executive officer has requested you to review the tax returns to ascertain if any provision of the tax laws stipulates procedures to determine the tax payable in situations where there is no taxable profit or the total profit results in no tax payable.

The following information relates to the company’s records for the year ended June 30, 2016:

Statement of Profit or Loss for the year ended June 30, 2016:

Particulars	N’000
Revenue	5,656,000
Cost of Sales	(4,404,211)
Gross Profit	1,251,789
Other Income	152,240
Administrative Expenses	(907,906)
Operating Profit	496,123
Investment Income	50,934
Finance Costs	(890,657)
Loss Before Tax	(343,600)
Income Tax	–
Loss for the Year	(343,600)

Additional Information:
(i) Included in administrative expenses are the following:

Loss on disposal of property, plant, and equipment: N4,352,400
Depreciation: N5,184,700

(ii) Capital allowances agreed with the tax office: N1,065,000

The company’s authorized, issued, and fully paid-up share capital of N1 each is provided as follows:

The net assets of the company extracted from the statement of financial position as at June 30, 2016, was N3,441,041,000.

Required:
From the available information, compute the companies income tax payable by Mandy Construction Nigeria Limited for the relevant assessment year.

Answer

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Tags: Capital allowances, Companies Income Tax, Minimum Tax, Tax Returns
Level: Level 1

Topic: Companies Income Tax (CIT)
Series: NOV 2018

TAX – Nov 2018 – L2 – SB – Q2 – Companies Income Tax (CIT)

Compute total profit and companies' income tax payable, calculate tertiary education tax, and identify exempt companies from minimum tax.

Question

Adamu Musa Company Limited is a Nigerian telecommunications company that has been in business for several years. The company’s annual report for the year ended October 31, 2017, provides the following summary of the statement of profit or loss:

Gross profit: N3,062,500
Dividend received from other Nigerian companies (gross): N175,000
Profit on sale of property, plant, and equipment: N160,000
Rents received (gross): N140,000
Expenses:
- Rent paid: N250,000
- Wages and salaries: N725,000
- Lighting and air conditioning: N37,500
- Travelling expenses: N50,000
- Rates: N60,000
- Repairs to premises: N150,000
- Depreciation: N125,000
- Bad debts written off: N50,000
- Income tax provision: N175,000
- Stationery: N75,000
- Postages and telephone: N30,000
- Business name sign post: N10,000
- Legal expenses: N100,000
- General expenses: N200,000
- Expansion of cold room: N500,000

Additional information:

Bad debts include general provisions of N22,500 written off on the sale of trade inventory.
Legal expenses include N25,000 for acquiring a new lease and N12,500 for renewing an old lease.
General expenses include
Travelling expenses include Chief Taragi‟s (managing director) private hotel bill of N11,250

Capital allowances agreed with the tax office total N125,000.
Withholding tax at 10% was deducted from rental income.

Required:
(a) Compute the total profit and companies’ income tax payable.
(b) Calculate tertiary education tax (TET).
(c) State five categories of companies liable to information technology tax.

Answer

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Tags: CIT Computation, Companies Income Tax, Exempt Companies, Tertiary Education Tax
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: NOV 2018

TAX – May 2021 – L1 – SB – Q4a – Companies Income Tax (CIT)

Conditions for the allowability of donations under the Companies Income Tax Act.

Question

Required:
State the conditions that must be met before a donation is allowed for tax purposes.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Companies Income Tax, Donations, Tax Allowability, Tax Compliance
Level: Level 1

Topic: Companies Income Tax (CIT)
Series: MAY 2021

TAX – May 2019 – L2 – Q6 – Companies Income Tax (CIT)

Compute total profit and tax liabilities, describe zero-rated VAT items, and discuss penalties for non-registration for VAT.

Question

Details	Amount (N)
Revenue	18,546,000
Other income:
– Rental income (gross)	240,000
– Profit on sale of property, plant, and equipment	120,000
– Interest on bank deposits (net)	234,000
Total Other Income	594,000
Total Revenue	19,140,000
Less:
Staff salaries and wages	6,180,300
Finance cost	1,144,000
General administration expenses	10,585,190
Impairment loss	420,000
Depreciation and amortization	1,690,000
Total Expenses	20,019,490
Loss before tax	(879,490)
Income tax expense	–
Deferred tax provision	(64,380)
Loss after tax	(943,870)

Additional notes provided by the accountant:

Finance costs include bank charges and interest on overdrafts.
General administration expenses include:
- Bad debts of N655,000 from bulk sales of shoes to the managing director’s relations.
- Value added tax of N985,000 not imposed on some invoices.
Capital allowances for the relevant year amount to N1,294,000.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Companies Income Tax, Penalties, Tax computation, VAT, Zero-Rated Goods
Level: Level 2

Topic: Companies Income Tax (CIT), Value-Added Tax (VAT)
Series: MAY 2019

TAX – May 2019 – L2 – Q1b – Companies Income Tax (CIT)

Calculate profit sharing for the partners of Obi Consults.

Question

Description	Amount (N)
Total profit per 2016 tax computation	10,899,000
Tax assessed based on total profit @ 30%	3,269,700
Dividend declared	14,000,000

Required:

As the desk officer in charge of ABCEE Limited, compute the revised tax liability of the company in line with Section 19 of the Companies Income Tax Act Cap C21 LFN 2004 (as amended).

Answer

Find Related Questions by Tags, levels, etc.

Tags: Companies Income Tax, Dividend, Section 19, Tax Liability
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: MAY 2019

TAX – Nov 2018 – L2 – SC – Q5a – Companies Income Tax (CIT)

Compute the companies' income tax payable for Mandy Construction Nigeria Limited for the 2017 assessment year.

Question

The following information relates to the company’s records for the year ended June 30, 2016:

Statement of Profit or Loss for the year ended June 30, 2016:

Particulars	N’000
Revenue	5,656,000
Cost of Sales	(4,404,211)
Gross Profit	1,251,789
Other Income	152,240
Administrative Expenses	(907,906)
Operating Profit	496,123
Investment Income	50,934
Finance Costs	(890,657)
Loss Before Tax	(343,600)
Income Tax	–
Loss for the Year	(343,600)

Additional Information:
(i) Included in administrative expenses are the following:

Loss on disposal of property, plant, and equipment: N4,352,400
Depreciation: N5,184,700

(ii) Capital allowances agreed with the tax office: N1,065,000

The company’s authorized, issued, and fully paid-up share capital of N1 each is provided as follows:

The net assets of the company extracted from the statement of financial position as at June 30, 2016, was N3,441,041,000.

Required:
From the available information, compute the companies income tax payable by Mandy Construction Nigeria Limited for the relevant assessment year.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital allowances, Companies Income Tax, Minimum Tax, Tax Returns
Level: Level 1

Topic: Companies Income Tax (CIT)
Series: NOV 2018

TAX – Nov 2018 – L2 – SB – Q2 – Companies Income Tax (CIT)

Compute total profit and companies' income tax payable, calculate tertiary education tax, and identify exempt companies from minimum tax.

Question

Gross profit: N3,062,500
Dividend received from other Nigerian companies (gross): N175,000
Profit on sale of property, plant, and equipment: N160,000
Rents received (gross): N140,000
Expenses:
- Rent paid: N250,000
- Wages and salaries: N725,000
- Lighting and air conditioning: N37,500
- Travelling expenses: N50,000
- Rates: N60,000
- Repairs to premises: N150,000
- Depreciation: N125,000
- Bad debts written off: N50,000
- Income tax provision: N175,000
- Stationery: N75,000
- Postages and telephone: N30,000
- Business name sign post: N10,000
- Legal expenses: N100,000
- General expenses: N200,000
- Expansion of cold room: N500,000

Additional information:

Bad debts include general provisions of N22,500 written off on the sale of trade inventory.
Legal expenses include N25,000 for acquiring a new lease and N12,500 for renewing an old lease.
General expenses include
Travelling expenses include Chief Taragi‟s (managing director) private hotel bill of N11,250

Capital allowances agreed with the tax office total N125,000.
Withholding tax at 10% was deducted from rental income.

Answer

Find Related Questions by Tags, levels, etc.

Tags: CIT Computation, Companies Income Tax, Exempt Companies, Tertiary Education Tax
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: NOV 2018

Question Tag: Companies Income Tax

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TAX – May 2021 – L1 – SB – Q4a – Companies Income Tax (CIT)

Conditions for the allowability of donations under the Companies Income Tax Act.

TAX – May 2019 – L2 – Q6 – Companies Income Tax (CIT)

Compute total profit and tax liabilities, describe zero-rated VAT items, and discuss penalties for non-registration for VAT.

TAX – May 2019 – L2 – Q1b – Companies Income Tax (CIT)

Calculate profit sharing for the partners of Obi Consults.

TAX – Nov 2018 – L2 – SC – Q5a – Companies Income Tax (CIT)

Compute the companies' income tax payable for Mandy Construction Nigeria Limited for the 2017 assessment year.

TAX – Nov 2018 – L2 – SB – Q2 – Companies Income Tax (CIT)

Compute total profit and companies' income tax payable, calculate tertiary education tax, and identify exempt companies from minimum tax.

TAX – May 2021 – L1 – SB – Q4a – Companies Income Tax (CIT)

Conditions for the allowability of donations under the Companies Income Tax Act.

TAX – May 2019 – L2 – Q6 – Companies Income Tax (CIT)

Compute total profit and tax liabilities, describe zero-rated VAT items, and discuss penalties for non-registration for VAT.

TAX – May 2019 – L2 – Q1b – Companies Income Tax (CIT)

Calculate profit sharing for the partners of Obi Consults.

TAX – Nov 2018 – L2 – SC – Q5a – Companies Income Tax (CIT)

Compute the companies' income tax payable for Mandy Construction Nigeria Limited for the 2017 assessment year.

TAX – Nov 2018 – L2 – SB – Q2 – Companies Income Tax (CIT)

Compute total profit and companies' income tax payable, calculate tertiary education tax, and identify exempt companies from minimum tax.

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TAX – May 2021 – L1 – SB – Q4a – Companies Income Tax (CIT)

Conditions for the allowability of donations under the Companies Income Tax Act.

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TAX – May 2019 – L2 – Q6 – Companies Income Tax (CIT)

Compute total profit and tax liabilities, describe zero-rated VAT items, and discuss penalties for non-registration for VAT.

You're reporting an error for "TAX – May 2019 – L2 – Q6 – Companies Income Tax (CIT)"

TAX – May 2019 – L2 – Q1b – Companies Income Tax (CIT)

Calculate profit sharing for the partners of Obi Consults.

You're reporting an error for "TAX – May 2019 – L2 – Q1b – Companies Income Tax (CIT)"

TAX – Nov 2018 – L2 – SC – Q5a – Companies Income Tax (CIT)

Compute the companies' income tax payable for Mandy Construction Nigeria Limited for the 2017 assessment year.

You're reporting an error for "TAX – Nov 2018 – L2 – SC – Q5a – Companies Income Tax (CIT)"

TAX – Nov 2018 – L2 – SB – Q2 – Companies Income Tax (CIT)

Compute total profit and companies' income tax payable, calculate tertiary education tax, and identify exempt companies from minimum tax.

You're reporting an error for "TAX – Nov 2018 – L2 – SB – Q2 – Companies Income Tax (CIT)"

TAX – May 2021 – L1 – SB – Q4a – Companies Income Tax (CIT)

Conditions for the allowability of donations under the Companies Income Tax Act.

You're reporting an error for "TAX – May 2021 – L1 – SB – Q4a – Companies Income Tax (CIT)"

TAX – May 2019 – L2 – Q6 – Companies Income Tax (CIT)

Compute total profit and tax liabilities, describe zero-rated VAT items, and discuss penalties for non-registration for VAT.

You're reporting an error for "TAX – May 2019 – L2 – Q6 – Companies Income Tax (CIT)"

TAX – May 2019 – L2 – Q1b – Companies Income Tax (CIT)

Calculate profit sharing for the partners of Obi Consults.

You're reporting an error for "TAX – May 2019 – L2 – Q1b – Companies Income Tax (CIT)"

TAX – Nov 2018 – L2 – SC – Q5a – Companies Income Tax (CIT)

Compute the companies' income tax payable for Mandy Construction Nigeria Limited for the 2017 assessment year.

You're reporting an error for "TAX – Nov 2018 – L2 – SC – Q5a – Companies Income Tax (CIT)"

TAX – Nov 2018 – L2 – SB – Q2 – Companies Income Tax (CIT)

Compute total profit and companies' income tax payable, calculate tertiary education tax, and identify exempt companies from minimum tax.

You're reporting an error for "TAX – Nov 2018 – L2 – SB – Q2 – Companies Income Tax (CIT)"

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