Question Tag: Corporate Tax

Search 500 + past questions and counting.

PT – Nov 2024 – L2 – Q4a – Chargeable Income Computation

Compute the chargeable income and tax payable for Amasa Architecture and Building LTD for the 2022 and 2023 years of assessment.

Question

Amasa Architecture and Building LTD has been in business for the past seven years. The following information relates to the company’s operations for the years ending 31 December 2022 and 2023.

DETAILS	2022 (GH¢)	2023 (GH¢)
Profit before tax	795,000	2,110,000
Provision for Depreciation	230,000	115,000
Donation to Manhyia Children Home (Approved by Social Welfare Department)	350,000	210,000
Donation towards 2023 Adae Kese Festival	105,000	150,000
Capital allowance agreed with the Ghana Revenue Authority	1,500,000	1,700,000
Withholding tax paid as contained in certificates received	10,000	25,000

Required:
Using the information provided above, compute the chargeable income and tax payable by Amasa Architecture and Building LTD for the years of assessment 2022 and 2023.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Allowance, chargeable income, Corporate Tax, Financial Statements, Tax adjustments, Tax computation
Level: Level 2

Topic: Corporate Tax Liabilities
Series: Nov 2024

FM – Nov 2024 – L2 – Q2 – Investment Appraisal

Calculate the NPV of launching two new products, Agbui and Loloi, and advise on the investment decision.

Question

Santrofi PLC is a publisher that wants to expand its market share in magazine publications. The company plans to launch two new products, Agbui and Loloi, at the start of January 2025, which it believes will each have a 4-year life span. The sales mix is assumed to be fixed. The information below is relevant:

Expected sales volumes (units) for Agbui:

Year	1	2	3	4
Volume	30,000	55,000	50,000	15,000

The first year’s selling price and direct material costs for each Agbui unit will be GH¢31 and GH¢12, respectively. On the other hand, the company expects to sell 25% more Loloi units than Agbui. Both selling price and direct material cost of Loloi are expected to be 25% less than Agbui’s.
Incremental fixed production costs are expected to be GH¢500,000 in the first year of operation, apportioned based on revenue. Advertising costs will be GH¢250,000 in the first year of operation and then GH¢125,000 per year for the following two years.
To produce the two products, an investment of GH¢1 million in machinery and GH¢500,000 in working capital will be needed, payable at the start of the period. Santrofi PLC expects to recover GH¢600,000 from the sale of machinery at the end of the project life. Investment in machinery attracts a 100% first-year tax-allowable depreciation. The company has sufficient profit to take full advantage of the allowance in Year 1. For the purpose of reporting accounting profit, the company depreciates machinery on a four-year straight-line basis.
Revenue and costs are expected to be affected by inflation after the first year as follows:
- Selling price: 3% a year
- Direct material cost: 3% a year
- Fixed production cost: 5% a year
The company’s real discount rate is 10% for investment appraisal. Average inflation is deemed to be 3%. The applicable corporate tax rate is 25%.

Required:
Calculate the Net Present Value (NPV) of the proposed investment in the two products and advise the company on its investment appraisal.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Tax, Discounted Cash Flow, Inflation, Investment Appraisal, Machinery Investment, Net Present Value
Level: Level 2

Topic: Introduction to Investment Appraisal
Series: Nov 2024

ATAX – May 2019 – L3 – Q7b – Corporate Tax Compliance and Reporting

Compute the total tax liabilities for Alaba Trading Limited for the 2018 assessment year, considering its assessable profit, capital allowances, and dividend payable.

Question

For the assessment year 2018, below are the extracts from the tax computations of Alaba Trading Limited:

Item	Amount (₦)
Assessable profit	8,200,000
Capital allowances	5,400,000
Dividend payable	6,000,000

Required:
Determine the total tax liabilities of Alaba Trading Limited for the assessment year.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital allowances, Corporate Tax, Dividend tax, Tax computation, Tax liabilities
Level: Level 3

Topic: Corporate Tax Compliance and Reporting

ATAX – May 2019 – L3 – Q5c – Double Taxation Reliefs and Credits

Advise on double taxation relief for SOKGlobal Limited and compute the applicable relief.

Question

SOKGlobal Limited is a wholly owned Nigerian company that deals with stationery items. It has a functional business unit in Cape Town, South Africa. The company’s operating results for the year ended December 31, 2017, are as follows:

Profit attributable to South Africa business: ₦8,740
Capital allowances agreed with tax officials for Nigeria and South Africa businesses were ₦5,500,000 and ₦2,210,000, respectively.

Required:
Advise the company on the double taxation relief applicable to the company, showing the necessary computations.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Tax, Double Taxation, Foreign Tax Credit, International Taxation, Tax Relief
Level: Level 3

Topic: Double Taxation Reliefs and Credits, Taxation of Companies

ATAX – May 2019 – L3 – Q3 – Taxation of Companies

Prepare capital allowance computations and tax liabilities for Pardo Nigeria Limited based on its financial data and asset acquisitions.

Question

Pardo Nigeria Limited is a manufacturer of polythene bags. It was incorporated on January 1, 2013, but commenced business operations on March 1, 2013. The following is the summary of its adjusted profits for the respective years:

Period Ended	Adjusted Profit (₦’000)
December 31, 2013	7,200
December 31, 2014	10,700
December 31, 2015	12,650
December 31, 2016	15,220
December 31, 2017	19,850

The company acquired the following assets:

Date	Asset Type	Amount (₦’000)
April 5, 2013	Factory building	5,400
January 17, 2014	Office furniture	2,750
December 1, 2014	Motor vehicle	4,500
January 3, 2015	Production plant	1,820

The company sold some of its assets on December 31, 2017 as follows:

Asset Type	Cost (₦’000)	Proceeds (₦’000)
Office furniture	250,000	35
Production plant	650,000	60

As the newly appointed tax consultant to the company, the managing director sought your advice on both capital allowances available to the company and the tax liabilities resulting from them for the relevant years. He, however, informed you during the finalization of the engagement that the factory building was purchased second-hand from a company that had ceased operation six months earlier.

Required:
Prepare a report addressed to the managing director of the company showing, for all the relevant years:

a. Capital allowance computations (9 Marks)
b. Tax liabilities payable (11 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Asset Disposal, Capital Allowance, Corporate Tax, Tax Compliance, Tax liabilities
Level: Level 3

Topic: Taxation of Companies

ATAX – Nov 2016 – L3 – Q4b – Corporate Tax Compliance and Reporting

Compute the relevant tax liabilities for Gringrin Nigeria Ltd. in scenarios with different accounting dates

Question

Gringrin Nigeria Limited is proposing to embark on two courses of action:

i) Change its accounting date from March 31 to June 30; or
ii) Change its accounting date from March 31 to December 31.

The adjusted profits in each scenario are as follows:

Change to June 30:

Period	Adjusted Profits (N’000)
Year ended March 31, 2011	30,000
Year ended March 31, 2012	33,000
Period ended June 30, 2013 (15 months)	78,000
Year ended June 30, 2014	34,000

Change to December 31:

Period	Adjusted Profits (N’000)
Year ended March 31, 2011	50,000
Year ended March 31, 2012	60,000
Period ended December 31, 2013 (21 months)	180,000
Year ended December 31, 2014	70,000

As the Tax Consultant, you are required to:

Compute the relevant tax liabilities. (15 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Date Change, Adjusted Profit, Basis Period, Corporate Tax, Tax implications
Level: Level 3

Topic: Corporate Tax Compliance and Reporting

FM – Nov 2021 – L3 – Q7 – Financing Decisions and Capital Markets

Analyze the effects of a 1-for-5 rights issue for James Obasi plc, calculate theoretical ex-rights price, and assess investor options and impacts.

Question

James Obasi plc, a medium-sized drone manufacturing firm, is considering a 1-for-5 rights issue at a 15% discount to the current market price of N4.00 per share. Expected issue costs are N2 million, payable from the funds raised. The proceeds from the rights issue will be used to redeem some of the company’s existing bonds at par.

Financial Information:

Statement of Financial Position (N’000):

Required:

a. Ignoring issue costs and any use of the funds raised by the rights issue, calculate: i. The theoretical ex-rights price per share. ii. The value of rights per existing share. (4 Marks)

b. Identify the alternative actions available to an owner of 1,500 shares in James Obasi plc concerning the rights issue and determine the effect of each action on the investor’s wealth. (6 Marks)

c. Calculate the current earnings per share and the revised earnings per share if the rights issue funds are used to redeem some of the existing bonds.
(5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Tax, Debt Redemption, Debt-equity ratio, Ex-Rights Price, Financial Position, Interest Cover, Investor Options, Rights Issue, Shareholder Wealth
Level: Level 3

Topic: Financing Decisions and Capital Markets

ATAX – Nov 2021 – L3 – Q1 – Corporate Tax Compliance and Reporting

Calculation of tax liabilities, corporate tax compliance, and adjustments in financial reporting.

Question

Carrol Nigeria Limited, a medium-sized company, commenced business in 2011. The company has three subsidiaries in the manufacturing of household utensils and baby products. Over the last three years, its fortunes have dwindled due to high costs of imported raw materials, overheads, low patronage from customers, and increasing demands from the host communities for social amenities.

Due to the challenging business environment, the board decided in 2016 to reduce workforce and permanently close one of its subsidiaries. This led to the appointment of a young accountant with limited taxation and fiscal policy knowledge as the Group Accountant after two Finance Department staff were affected.

In the past three years, the company faced challenges with tax authorities on tax compliance. The Group Managing Director was embarrassed when informed by the tax officer that essential records necessary for determining tax liabilities were not maintained. Gaps were also observed in the annual returns filed by the company, and the Revenue Service is conducting a back duty audit.

The Group Managing Director has sought assistance in addressing these challenges and provided documents for recomputation of the company’s income tax liabilities for the year ended December 31, 2020.

The statement of profit or loss for the year ended December 31, 2020, is as follows:

Additional Information:

Other income included ₦320,000 realized from the disposal of an old plant.
Administrative expenses included ₦250,000 paid to a legal practitioner for the defense and release of the company’s driver caught by traffic officers.
30% of motor running expenses was expended on the personal expenses of the Managing Director.
20% of the donation was paid to a State Government fund assisting insurgent victims.
Repairs and maintenance included ₦215,000 for erecting a gate destroyed during a youth protest.
Allowance for doubtful debts comprised ₦600,000 in general provision and ₦400,000 in specific provision.
Miscellaneous expenses included ₦450,000 for hamper gifts to customers during Sallah and Christmas.
A review revealed the gross turnover was understated by ₦750,000.

The following is the schedule of qualifying capital expenditure on property, plant, and equipment:

Nature	Date of Acquisition	Amount (₦’000)
Factory building	September 8, 2016	3,800
Furniture & fittings	October 12, 2016	1,600
Motor van	June 19, 2018	4,200
Factory building	March 8, 2020	6,500
Furniture & fittings	April 15, 2020	2,000
Industrial plant	July 1, 2020	5,700
Motor van	December 20, 2020	4,240

Unutilized capital allowances brought forward was ₦1,500,000, with a balancing charge of ₦155,000 on disposal of the old plant.

Required:
As the company’s tax consultant, prepare a report to the Group Managing Director covering the following:

a. Provisions of the Companies Income Tax Act CAP C21 LFN 2004 (as amended) and Finance Act 2020 regarding maintenance of books or records of accounts (4 Marks)

b. Back duty audit and its implications (4 Marks)

c. Computation of the company’s tax liabilities (with supporting schedules) for the relevant tax year (22 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjusted Profit, Capital Allowance, Corporate Tax, Financial Statements, Reporting, Tax Compliance, Tax liabilities
Level: Level 3

Topic: Corporate Tax Compliance and Reporting

ATAX – Nov 2020 – Q1 – Taxation of Companies

Analyze tax implications for Sunchi Limited's operations in Nigeria and corporate tax obligations for resident and non-resident companies.

Question

The recent trade tariff war on goods exported between the United States and China has opened a vista for corporate players in the two countries and their allies to venture into new areas considered to be business-friendly.

Sunchi Limited, Shanghai, is a computer accessories company that was incorporated in China in 2003. The company established its subsidiary outlet, Sunchi West Africa Holdings, in Ibadan, Nigeria, on January 1, 2018. The Nigerian company adopted December 31, annually (same as the parent company) as its end of financial year.

The first set of consolidated accounts was audited by a reputable audit firm based in China. Taxes for both business operations were also paid in China.

The Nigerian tax inspectors from the Federal Inland Revenue Service demanded for annual returns and tax computations from the subsidiary company but the General Manager of the company claimed that the company had paid personal income tax of its employees and directors, value-added tax on imported equipment, and relevant custom duties. Furthermore, since the parent company is not registered in Nigeria, there is no reason why it should be liable to companies’ income tax. The issue is yet to be resolved.

The Managing Director of the subsidiary company in Nigeria, with the permission of the head office in China, appointed you as the company‘s tax consultant to help unravel the issue of payment of companies’ income tax by resident and non-resident companies operating in Nigeria. He also submitted to you the statement of profit or loss for the year ended December 31, 2018, after conversion of the transactions in head office‘s Chinese currency (Yuan) to Nigerian Naira.

(i) Miscellaneous income:
This consists of income realised from the sale of component parts to the head office. The transaction was made at open market price.

(ii) Legal expenses comprise:

Description	Amount (N’000)
Debt collection	800
Preliminary expenses	2,100
Land acquisition	550
Retainership fee	750
Total	4,200

Required:
As the company‘s tax consultant, you are to prepare a report to the management of Sunchi Limited taking into consideration the following:
a. Resident and non-resident companies (4 Marks)
b. Circumstances under which profit of a non-resident company will be liable to tax in Nigeria. (10 Marks)
c. Relationship between a:

Nigeria branch and the parent company (3 Marks)
Nigeria subsidiary and the parent company (3 Marks)
d. Overseas branch of a Nigerian company (3 Marks)
e. Overseas subsidiary of a Nigerian company (3 Marks)
f. Advise on, if any, the companies income tax payable by the two business operations in Nigeria. (14 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Tax, Income Tax, Non-Resident Companies, Tax Compliance
Level: Level 3

Topic: Taxation of Companies

AT – May 2024 – L3 – SA – Q1 – Tax Administration and Dispute Resolution

Provide professional tax advice for the management of Soft Farm and Agro-Allied Ltd, focusing on deductible interest, adjusted profit, and tax liabilities.

Question

Soft Farm and Agro-Allied Limited, a subsidiary of Emperor Agro Incorporated, Italy, was incorporated in Nigeria in January 2018. Soft Farm and Agro-Allied Limited produces palm kernel for domestic use and export to the European market. The Managing Director of the company has just received a letter from the head office (parent company) about an impending visit due to poor business performance (below the group’s return on investment benchmark of 25%) since the business commenced, despite financial and technical support from the parent company.

In January 2022, the parent company granted a loan of N100 million to Soft Farm and Agro-Allied Limited for business expansion.

The Board has scheduled a special meeting for next month to consider the financial report of Soft Farm and Agro-Allied Limited for the year ended December 31, 2022, and to review past financial reports and tax assessments. As the newly engaged Tax Consultant to the company, you have been invited to participate in the meeting to provide a professional opinion on tax-related issues.

The Financial Accountant has been directed by the Managing Director to provide you with financial statements for all periods under review, books of accounts, returns filed with tax authorities, and other supporting documents.

From your preliminary review of the financial report for the year ended December 31, 2022, you noted an item that requires further discussion with management. This issue relates to interest paid on a loan obtained from the parent company.

Extract from Financial Statements for the Year Ended December 31, 2022

Item	N’000
Gross turnover:
– Domestic sales	147,500
– Export sales	200,100
– Other operating income	3,300
Total Gross Turnover	350,900
Deduct:
– Staff salary	122,600
– Ground rent paid to State government	3,200
– Motor running expenses	1,750
– Audit and accountancy fees	1,000
– Repairs and maintenance	5,800
– Depreciation of assets	38,240
– Rent paid	1,850
– Power and lighting	5,400
– Legal cost	5,000
– Rates (water)	2,100
– Allowance for doubtful debts	10,500
– Donations	4,000
– Interest and other finance costs paid	15,600
– Income tax provision	23,400
– General expenses	5,900
Total Deductions	246,340
Net Profit	104,560

Additional Information:

Export Sales:
20% of export sales were made to the parent company at the prevailing international market price.
Other Operating Income:

Description N’000

Dividend received (net) 2,700

Profit from disposal of non-current asset 600

Total 3,300
Repairs and Maintenance:

Description N’000

Repairs of plantation equipment 1,200

Repairs to premises (non-industrial building) 900

Expansion to warehouse (industrial building) 3,700

Total 5,800
Rent Paid:
This amount is for accommodation for the newly employed General Manager, whose basic salary is N4,800,000.
Legal Cost:

Description N’000

Cost of income tax appeal 850

Cost of debt collection 1,300

Cost of acquiring new lease 1,700

Renewal of old lease 1,150

Total 5,000
Allowance for Doubtful Debts:

Description N’000

Specific provisions 5,230

General provisions 7,870

Bad debts recovered (2,600)

Total 10,500
Donations:

Recipient N’000

Palm Oil Research Institute 1,400

National Library 600

Cocoa Research Institute of Nigeria 1,000

Women Society of the host community 1,000

Total 4,000
Interest and Other Finance Costs Paid:
In January 2022, the company obtained a loan facility of N100 million from the parent company for business expansion at a competitive interest rate of 12% per annum. The loan duration is 10 years, with interest payable for the first three years, and principal and interest repayments due from the fourth year onward. The balance in the financial statements includes other finance costs and bank charges paid to domestic banks on various accounts.
General Expenses:

Description N’000

Wedding gift to staff 350

Fine imposed on company driver for traffic offense 150

Haulage expenses 3,200

Transport and travelling 2,200

Total 5,900
Schedule of Prior Years’ Turnover and Assessable Profits:

Year Ended December 31 Turnover (N’000) Assessable Profit (N’000)

2018 154,400 78,750

2019 198,600 95,120

2020 310,300 142,800

2021 314,900 166,900

Description	N’000
Dividend received (net)	2,700
Profit from disposal of non-current asset	600
Total	3,300

Description	N’000
Repairs of plantation equipment	1,200
Repairs to premises (non-industrial building)	900
Expansion to warehouse (industrial building)	3,700
Total	5,800

Description	N’000
Cost of income tax appeal	850
Cost of debt collection	1,300
Cost of acquiring new lease	1,700
Renewal of old lease	1,150
Total	5,000

Description	N’000
Specific provisions	5,230
General provisions	7,870
Bad debts recovered	(2,600)
Total	10,500

Recipient	N’000
Palm Oil Research Institute	1,400
National Library	600
Cocoa Research Institute of Nigeria	1,000
Women Society of the host community	1,000
Total	4,000

Description	N’000
Wedding gift to staff	350
Fine imposed on company driver for traffic offense	150
Haulage expenses	3,200
Transport and travelling	2,200
Total	5,900

Year Ended December 31	Turnover (N’000)	Assessable Profit (N’000)
2018	154,400	78,750
2019	198,600	95,120
2020	310,300	142,800
2021	314,900	166,900

Schedule of Qualifying Capital Expenditure Incurred:

Date of Acquisition	Asset Type	Amount (N’000)
August 31, 2017	Plantation equipment	4,600
August 31, 2017	Industrial building	12,000
August 31, 2017	Non-industrial building	9,000
January 1, 2018	Motor vehicles (3)	8,400
January 1, 2018	Furniture and fittings (10)	1,500
February 14, 2021	Motor vehicles (2)	5,600
June 12, 2022	Furniture and fittings (10)	2,000
July 8, 2022	Research and development	7,000

Required:

As the Tax Consultant to the company, draft a report to the Managing Director of Soft Farm and Agro-Allied Limited, in line with the provisions of the Companies Income Tax Act Cap C21 LFN 2004 (as amended). The report should provide professional advice on the following:

Treatment of Excess Amount of Deductible Interest Paid (6 Marks)
Adjusted Profit of the Company for the Year Ended December 31, 2022 (7 Marks)
Tax Liabilities for All Relevant Assessment Years (17 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Tax, Donations, Excess Interest Deduction, Export Sales, Legal Cost, Profit Adjustment, Qualifying Capital Expenditure
Level: Level 3

Topic: Tax Administration and Dispute Resolution
Series: MAY 2018

PT – Nov 2024 – L2 – Q4a – Chargeable Income Computation

Compute the chargeable income and tax payable for Amasa Architecture and Building LTD for the 2022 and 2023 years of assessment.

Question

Amasa Architecture and Building LTD has been in business for the past seven years. The following information relates to the company’s operations for the years ending 31 December 2022 and 2023.

DETAILS	2022 (GH¢)	2023 (GH¢)
Profit before tax	795,000	2,110,000
Provision for Depreciation	230,000	115,000
Donation to Manhyia Children Home (Approved by Social Welfare Department)	350,000	210,000
Donation towards 2023 Adae Kese Festival	105,000	150,000
Capital allowance agreed with the Ghana Revenue Authority	1,500,000	1,700,000
Withholding tax paid as contained in certificates received	10,000	25,000

Required:
Using the information provided above, compute the chargeable income and tax payable by Amasa Architecture and Building LTD for the years of assessment 2022 and 2023.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Allowance, chargeable income, Corporate Tax, Financial Statements, Tax adjustments, Tax computation
Level: Level 2

Topic: Corporate Tax Liabilities
Series: Nov 2024

FM – Nov 2024 – L2 – Q2 – Investment Appraisal

Calculate the NPV of launching two new products, Agbui and Loloi, and advise on the investment decision.

Question

Expected sales volumes (units) for Agbui:

Year	1	2	3	4
Volume	30,000	55,000	50,000	15,000

The first year’s selling price and direct material costs for each Agbui unit will be GH¢31 and GH¢12, respectively. On the other hand, the company expects to sell 25% more Loloi units than Agbui. Both selling price and direct material cost of Loloi are expected to be 25% less than Agbui’s.
Incremental fixed production costs are expected to be GH¢500,000 in the first year of operation, apportioned based on revenue. Advertising costs will be GH¢250,000 in the first year of operation and then GH¢125,000 per year for the following two years.
To produce the two products, an investment of GH¢1 million in machinery and GH¢500,000 in working capital will be needed, payable at the start of the period. Santrofi PLC expects to recover GH¢600,000 from the sale of machinery at the end of the project life. Investment in machinery attracts a 100% first-year tax-allowable depreciation. The company has sufficient profit to take full advantage of the allowance in Year 1. For the purpose of reporting accounting profit, the company depreciates machinery on a four-year straight-line basis.
Revenue and costs are expected to be affected by inflation after the first year as follows:
- Selling price: 3% a year
- Direct material cost: 3% a year
- Fixed production cost: 5% a year
The company’s real discount rate is 10% for investment appraisal. Average inflation is deemed to be 3%. The applicable corporate tax rate is 25%.

Required:
Calculate the Net Present Value (NPV) of the proposed investment in the two products and advise the company on its investment appraisal.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Tax, Discounted Cash Flow, Inflation, Investment Appraisal, Machinery Investment, Net Present Value
Level: Level 2

Topic: Introduction to Investment Appraisal
Series: Nov 2024

ATAX – May 2019 – L3 – Q7b – Corporate Tax Compliance and Reporting

Compute the total tax liabilities for Alaba Trading Limited for the 2018 assessment year, considering its assessable profit, capital allowances, and dividend payable.

Question

For the assessment year 2018, below are the extracts from the tax computations of Alaba Trading Limited:

Item	Amount (₦)
Assessable profit	8,200,000
Capital allowances	5,400,000
Dividend payable	6,000,000

Required:
Determine the total tax liabilities of Alaba Trading Limited for the assessment year.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital allowances, Corporate Tax, Dividend tax, Tax computation, Tax liabilities
Level: Level 3

Topic: Corporate Tax Compliance and Reporting

ATAX – May 2019 – L3 – Q5c – Double Taxation Reliefs and Credits

Advise on double taxation relief for SOKGlobal Limited and compute the applicable relief.

Question

Profit attributable to South Africa business: ₦8,740
Capital allowances agreed with tax officials for Nigeria and South Africa businesses were ₦5,500,000 and ₦2,210,000, respectively.

Required:
Advise the company on the double taxation relief applicable to the company, showing the necessary computations.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Tax, Double Taxation, Foreign Tax Credit, International Taxation, Tax Relief
Level: Level 3

Topic: Double Taxation Reliefs and Credits, Taxation of Companies

ATAX – May 2019 – L3 – Q3 – Taxation of Companies

Prepare capital allowance computations and tax liabilities for Pardo Nigeria Limited based on its financial data and asset acquisitions.

Question

Period Ended	Adjusted Profit (₦’000)
December 31, 2013	7,200
December 31, 2014	10,700
December 31, 2015	12,650
December 31, 2016	15,220
December 31, 2017	19,850

The company acquired the following assets:

Date	Asset Type	Amount (₦’000)
April 5, 2013	Factory building	5,400
January 17, 2014	Office furniture	2,750
December 1, 2014	Motor vehicle	4,500
January 3, 2015	Production plant	1,820

The company sold some of its assets on December 31, 2017 as follows:

Asset Type	Cost (₦’000)	Proceeds (₦’000)
Office furniture	250,000	35
Production plant	650,000	60

Required:
Prepare a report addressed to the managing director of the company showing, for all the relevant years:

a. Capital allowance computations (9 Marks)
b. Tax liabilities payable (11 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Asset Disposal, Capital Allowance, Corporate Tax, Tax Compliance, Tax liabilities
Level: Level 3

Topic: Taxation of Companies

ATAX – Nov 2016 – L3 – Q4b – Corporate Tax Compliance and Reporting

Compute the relevant tax liabilities for Gringrin Nigeria Ltd. in scenarios with different accounting dates

Question

Gringrin Nigeria Limited is proposing to embark on two courses of action:

i) Change its accounting date from March 31 to June 30; or
ii) Change its accounting date from March 31 to December 31.

The adjusted profits in each scenario are as follows:

Change to June 30:

Period	Adjusted Profits (N’000)
Year ended March 31, 2011	30,000
Year ended March 31, 2012	33,000
Period ended June 30, 2013 (15 months)	78,000
Year ended June 30, 2014	34,000

Change to December 31:

Period	Adjusted Profits (N’000)
Year ended March 31, 2011	50,000
Year ended March 31, 2012	60,000
Period ended December 31, 2013 (21 months)	180,000
Year ended December 31, 2014	70,000

As the Tax Consultant, you are required to:

Compute the relevant tax liabilities. (15 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Date Change, Adjusted Profit, Basis Period, Corporate Tax, Tax implications
Level: Level 3

Topic: Corporate Tax Compliance and Reporting

FM – Nov 2021 – L3 – Q7 – Financing Decisions and Capital Markets

Analyze the effects of a 1-for-5 rights issue for James Obasi plc, calculate theoretical ex-rights price, and assess investor options and impacts.

Question

Financial Information:

Statement of Financial Position (N’000):

Required:

a. Ignoring issue costs and any use of the funds raised by the rights issue, calculate: i. The theoretical ex-rights price per share. ii. The value of rights per existing share. (4 Marks)

c. Calculate the current earnings per share and the revised earnings per share if the rights issue funds are used to redeem some of the existing bonds.
(5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Tax, Debt Redemption, Debt-equity ratio, Ex-Rights Price, Financial Position, Interest Cover, Investor Options, Rights Issue, Shareholder Wealth
Level: Level 3

Topic: Financing Decisions and Capital Markets

ATAX – Nov 2021 – L3 – Q1 – Corporate Tax Compliance and Reporting

Calculation of tax liabilities, corporate tax compliance, and adjustments in financial reporting.

Question

The statement of profit or loss for the year ended December 31, 2020, is as follows:

Additional Information:

Other income included ₦320,000 realized from the disposal of an old plant.
Administrative expenses included ₦250,000 paid to a legal practitioner for the defense and release of the company’s driver caught by traffic officers.
30% of motor running expenses was expended on the personal expenses of the Managing Director.
20% of the donation was paid to a State Government fund assisting insurgent victims.
Repairs and maintenance included ₦215,000 for erecting a gate destroyed during a youth protest.
Allowance for doubtful debts comprised ₦600,000 in general provision and ₦400,000 in specific provision.
Miscellaneous expenses included ₦450,000 for hamper gifts to customers during Sallah and Christmas.
A review revealed the gross turnover was understated by ₦750,000.

The following is the schedule of qualifying capital expenditure on property, plant, and equipment:

Nature	Date of Acquisition	Amount (₦’000)
Factory building	September 8, 2016	3,800
Furniture & fittings	October 12, 2016	1,600
Motor van	June 19, 2018	4,200
Factory building	March 8, 2020	6,500
Furniture & fittings	April 15, 2020	2,000
Industrial plant	July 1, 2020	5,700
Motor van	December 20, 2020	4,240

Unutilized capital allowances brought forward was ₦1,500,000, with a balancing charge of ₦155,000 on disposal of the old plant.

Required:
As the company’s tax consultant, prepare a report to the Group Managing Director covering the following:

a. Provisions of the Companies Income Tax Act CAP C21 LFN 2004 (as amended) and Finance Act 2020 regarding maintenance of books or records of accounts (4 Marks)

b. Back duty audit and its implications (4 Marks)

c. Computation of the company’s tax liabilities (with supporting schedules) for the relevant tax year (22 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjusted Profit, Capital Allowance, Corporate Tax, Financial Statements, Reporting, Tax Compliance, Tax liabilities
Level: Level 3

Topic: Corporate Tax Compliance and Reporting

ATAX – Nov 2020 – Q1 – Taxation of Companies

Analyze tax implications for Sunchi Limited's operations in Nigeria and corporate tax obligations for resident and non-resident companies.

Question

The first set of consolidated accounts was audited by a reputable audit firm based in China. Taxes for both business operations were also paid in China.

(i) Miscellaneous income:
This consists of income realised from the sale of component parts to the head office. The transaction was made at open market price.

(ii) Legal expenses comprise:

Description	Amount (N’000)
Debt collection	800
Preliminary expenses	2,100
Land acquisition	550
Retainership fee	750
Total	4,200

Nigeria branch and the parent company (3 Marks)
Nigeria subsidiary and the parent company (3 Marks)
d. Overseas branch of a Nigerian company (3 Marks)
e. Overseas subsidiary of a Nigerian company (3 Marks)
f. Advise on, if any, the companies income tax payable by the two business operations in Nigeria. (14 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Tax, Income Tax, Non-Resident Companies, Tax Compliance
Level: Level 3

Topic: Taxation of Companies

AT – May 2024 – L3 – SA – Q1 – Tax Administration and Dispute Resolution

Provide professional tax advice for the management of Soft Farm and Agro-Allied Ltd, focusing on deductible interest, adjusted profit, and tax liabilities.

Question

In January 2022, the parent company granted a loan of N100 million to Soft Farm and Agro-Allied Limited for business expansion.

Extract from Financial Statements for the Year Ended December 31, 2022

Item	N’000
Gross turnover:
– Domestic sales	147,500
– Export sales	200,100
– Other operating income	3,300
Total Gross Turnover	350,900
Deduct:
– Staff salary	122,600
– Ground rent paid to State government	3,200
– Motor running expenses	1,750
– Audit and accountancy fees	1,000
– Repairs and maintenance	5,800
– Depreciation of assets	38,240
– Rent paid	1,850
– Power and lighting	5,400
– Legal cost	5,000
– Rates (water)	2,100
– Allowance for doubtful debts	10,500
– Donations	4,000
– Interest and other finance costs paid	15,600
– Income tax provision	23,400
– General expenses	5,900
Total Deductions	246,340
Net Profit	104,560

Additional Information:

Export Sales:
20% of export sales were made to the parent company at the prevailing international market price.
Other Operating Income:

Description N’000

Dividend received (net) 2,700

Profit from disposal of non-current asset 600

Total 3,300
Repairs and Maintenance:

Description N’000

Repairs of plantation equipment 1,200

Repairs to premises (non-industrial building) 900

Expansion to warehouse (industrial building) 3,700

Total 5,800
Rent Paid:
This amount is for accommodation for the newly employed General Manager, whose basic salary is N4,800,000.
Legal Cost:

Description N’000

Cost of income tax appeal 850

Cost of debt collection 1,300

Cost of acquiring new lease 1,700

Renewal of old lease 1,150

Total 5,000
Allowance for Doubtful Debts:

Description N’000

Specific provisions 5,230

General provisions 7,870

Bad debts recovered (2,600)

Total 10,500
Donations:

Recipient N’000

Palm Oil Research Institute 1,400

National Library 600

Cocoa Research Institute of Nigeria 1,000

Women Society of the host community 1,000

Total 4,000
Interest and Other Finance Costs Paid:
In January 2022, the company obtained a loan facility of N100 million from the parent company for business expansion at a competitive interest rate of 12% per annum. The loan duration is 10 years, with interest payable for the first three years, and principal and interest repayments due from the fourth year onward. The balance in the financial statements includes other finance costs and bank charges paid to domestic banks on various accounts.
General Expenses:

Description N’000

Wedding gift to staff 350

Fine imposed on company driver for traffic offense 150

Haulage expenses 3,200

Transport and travelling 2,200

Total 5,900
Schedule of Prior Years’ Turnover and Assessable Profits:

Year Ended December 31 Turnover (N’000) Assessable Profit (N’000)

2018 154,400 78,750

2019 198,600 95,120

2020 310,300 142,800

2021 314,900 166,900

Description	N’000
Dividend received (net)	2,700
Profit from disposal of non-current asset	600
Total	3,300

Description	N’000
Repairs of plantation equipment	1,200
Repairs to premises (non-industrial building)	900
Expansion to warehouse (industrial building)	3,700
Total	5,800

Description	N’000
Cost of income tax appeal	850
Cost of debt collection	1,300
Cost of acquiring new lease	1,700
Renewal of old lease	1,150
Total	5,000

Description	N’000
Specific provisions	5,230
General provisions	7,870
Bad debts recovered	(2,600)
Total	10,500

Recipient	N’000
Palm Oil Research Institute	1,400
National Library	600
Cocoa Research Institute of Nigeria	1,000
Women Society of the host community	1,000
Total	4,000

Description	N’000
Wedding gift to staff	350
Fine imposed on company driver for traffic offense	150
Haulage expenses	3,200
Transport and travelling	2,200
Total	5,900

Year Ended December 31	Turnover (N’000)	Assessable Profit (N’000)
2018	154,400	78,750
2019	198,600	95,120
2020	310,300	142,800
2021	314,900	166,900

Schedule of Qualifying Capital Expenditure Incurred:

Date of Acquisition	Asset Type	Amount (N’000)
August 31, 2017	Plantation equipment	4,600
August 31, 2017	Industrial building	12,000
August 31, 2017	Non-industrial building	9,000
January 1, 2018	Motor vehicles (3)	8,400
January 1, 2018	Furniture and fittings (10)	1,500
February 14, 2021	Motor vehicles (2)	5,600
June 12, 2022	Furniture and fittings (10)	2,000
July 8, 2022	Research and development	7,000

Required:

Treatment of Excess Amount of Deductible Interest Paid (6 Marks)
Adjusted Profit of the Company for the Year Ended December 31, 2022 (7 Marks)
Tax Liabilities for All Relevant Assessment Years (17 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Tax, Donations, Excess Interest Deduction, Export Sales, Legal Cost, Profit Adjustment, Qualifying Capital Expenditure
Level: Level 3

Topic: Tax Administration and Dispute Resolution
Series: MAY 2018

Question Tag: Corporate Tax

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

PT – Nov 2024 – L2 – Q4a – Chargeable Income Computation

Compute the chargeable income and tax payable for Amasa Architecture and Building LTD for the 2022 and 2023 years of assessment.

You're reporting an error for "PT – Nov 2024 – L2 – Q4a – Chargeable Income Computation"

FM – Nov 2024 – L2 – Q2 – Investment Appraisal

Calculate the NPV of launching two new products, Agbui and Loloi, and advise on the investment decision.

You're reporting an error for "FM – Nov 2024 – L2 – Q2 – Investment Appraisal"

ATAX – May 2019 – L3 – Q7b – Corporate Tax Compliance and Reporting

Compute the total tax liabilities for Alaba Trading Limited for the 2018 assessment year, considering its assessable profit, capital allowances, and dividend payable.

You're reporting an error for "ATAX – May 2019 – L3 – Q7b – Corporate Tax Compliance and Reporting"

ATAX – May 2019 – L3 – Q5c – Double Taxation Reliefs and Credits

Advise on double taxation relief for SOKGlobal Limited and compute the applicable relief.

You're reporting an error for "ATAX – May 2019 – L3 – Q5c – Double Taxation Reliefs and Credits"

ATAX – May 2019 – L3 – Q3 – Taxation of Companies

Prepare capital allowance computations and tax liabilities for Pardo Nigeria Limited based on its financial data and asset acquisitions.

You're reporting an error for "ATAX – May 2019 – L3 – Q3 – Taxation of Companies"

ATAX – Nov 2016 – L3 – Q4b – Corporate Tax Compliance and Reporting

Compute the relevant tax liabilities for Gringrin Nigeria Ltd. in scenarios with different accounting dates

You're reporting an error for "ATAX – Nov 2016 – L3 – Q4b – Corporate Tax Compliance and Reporting"

FM – Nov 2021 – L3 – Q7 – Financing Decisions and Capital Markets

Analyze the effects of a 1-for-5 rights issue for James Obasi plc, calculate theoretical ex-rights price, and assess investor options and impacts.

Financial Information:

Required:

You're reporting an error for "FM – Nov 2021 – L3 – Q7 – Financing Decisions and Capital Markets"

ATAX – Nov 2021 – L3 – Q1 – Corporate Tax Compliance and Reporting

Calculation of tax liabilities, corporate tax compliance, and adjustments in financial reporting.

You're reporting an error for "ATAX – Nov 2021 – L3 – Q1 – Corporate Tax Compliance and Reporting"

ATAX – Nov 2020 – Q1 – Taxation of Companies

Analyze tax implications for Sunchi Limited's operations in Nigeria and corporate tax obligations for resident and non-resident companies.

You're reporting an error for "ATAX – Nov 2020 – Q1 – Taxation of Companies"

AT – May 2024 – L3 – SA – Q1 – Tax Administration and Dispute Resolution

Provide professional tax advice for the management of Soft Farm and Agro-Allied Ltd, focusing on deductible interest, adjusted profit, and tax liabilities.

You're reporting an error for "AT – May 2024 – L3 – SA – Q1 – Tax Administration and Dispute Resolution"

PT – Nov 2024 – L2 – Q4a – Chargeable Income Computation

Compute the chargeable income and tax payable for Amasa Architecture and Building LTD for the 2022 and 2023 years of assessment.

You're reporting an error for "PT – Nov 2024 – L2 – Q4a – Chargeable Income Computation"

FM – Nov 2024 – L2 – Q2 – Investment Appraisal

Calculate the NPV of launching two new products, Agbui and Loloi, and advise on the investment decision.

You're reporting an error for "FM – Nov 2024 – L2 – Q2 – Investment Appraisal"

ATAX – May 2019 – L3 – Q7b – Corporate Tax Compliance and Reporting

Compute the total tax liabilities for Alaba Trading Limited for the 2018 assessment year, considering its assessable profit, capital allowances, and dividend payable.

You're reporting an error for "ATAX – May 2019 – L3 – Q7b – Corporate Tax Compliance and Reporting"

ATAX – May 2019 – L3 – Q5c – Double Taxation Reliefs and Credits

Advise on double taxation relief for SOKGlobal Limited and compute the applicable relief.

You're reporting an error for "ATAX – May 2019 – L3 – Q5c – Double Taxation Reliefs and Credits"

ATAX – May 2019 – L3 – Q3 – Taxation of Companies

Prepare capital allowance computations and tax liabilities for Pardo Nigeria Limited based on its financial data and asset acquisitions.

You're reporting an error for "ATAX – May 2019 – L3 – Q3 – Taxation of Companies"

ATAX – Nov 2016 – L3 – Q4b – Corporate Tax Compliance and Reporting

Compute the relevant tax liabilities for Gringrin Nigeria Ltd. in scenarios with different accounting dates

You're reporting an error for "ATAX – Nov 2016 – L3 – Q4b – Corporate Tax Compliance and Reporting"

FM – Nov 2021 – L3 – Q7 – Financing Decisions and Capital Markets

Analyze the effects of a 1-for-5 rights issue for James Obasi plc, calculate theoretical ex-rights price, and assess investor options and impacts.

Financial Information:

Required:

You're reporting an error for "FM – Nov 2021 – L3 – Q7 – Financing Decisions and Capital Markets"

ATAX – Nov 2021 – L3 – Q1 – Corporate Tax Compliance and Reporting

Calculation of tax liabilities, corporate tax compliance, and adjustments in financial reporting.

You're reporting an error for "ATAX – Nov 2021 – L3 – Q1 – Corporate Tax Compliance and Reporting"

ATAX – Nov 2020 – Q1 – Taxation of Companies

Analyze tax implications for Sunchi Limited's operations in Nigeria and corporate tax obligations for resident and non-resident companies.

You're reporting an error for "ATAX – Nov 2020 – Q1 – Taxation of Companies"

AT – May 2024 – L3 – SA – Q1 – Tax Administration and Dispute Resolution

Provide professional tax advice for the management of Soft Farm and Agro-Allied Ltd, focusing on deductible interest, adjusted profit, and tax liabilities.

You're reporting an error for "AT – May 2024 – L3 – SA – Q1 – Tax Administration and Dispute Resolution"

Our offerings

Contact Info

Customer

Get In Touch

NBC Institute

admin