Question Tag: Employment Income

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  • 20 Marks

TAX – May 2015 – L2 – SA – Q2 – Personal Income Tax (PIT)

Tax compliance requirements and tax liability calculation for Mr. Sola Abijah based on employment and part-time income.

You have been approached by Mr. Sola Abijah, a political science graduate who did his compulsory National Youth Service in a media organization in 2009. On completion of National Youth Service in January 2010, he was offered a part-time job as a freelance writer in two international newspapers. He receives an income (net of Withholding tax) based on the articles he writes that are published by the newspapers. In March 2010, he joined a popular political party and served as the party’s temporary Public Relations Officer, also on a part-time income basis.

On 2 January 2012, he secured employment on full-time basis as Senior Manager, Corporate Affairs, in Jola Investment Enterprises on a salary of ₦12,000,000 per annum.

He was ignorant of the requirements for filing Tax Returns and paying tax to Government. He has been served a warning by the State Board of Internal Revenue (SBIR) to desist from non-disclosure of his other incomes, failing which, a Best of Judgement assessment may be raised on him by the tax inspector.

Mr. Abijah has approached you to provide tax advisory services in respect of his income tax compliance requirements and the likely tax liability that may be imposed on him by the SBIR.

The following additional information has been presented to you:

Requirements:

(a) State the difference between employment income and part-time income. (3 Marks)
(b) Explain why, when and to whom taxpayers are expected to file income tax returns. (5 Marks)
(c) Explain the circumstances that may arise to cause a tax authority to raise a Best of Judgement Assessment. (4 Marks)
(d) Compute the tax liability on Mr. Abijah’s Total Income. (8 Marks)

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  • 30 Marks

TAX – May 2024 – L2 – SA – Q1 – Personal Income Tax (PIT)

Determine Mr. Ola Alao’s chargeable income and tax payable with respect to benefits and allowances.

Mr. Ola Alao works as the manager of XYZ Limited located at Ikeja, Lagos. He provided the following income details for the 2021 assessment year:

  1. Gross monthly income: N204,000
  2. Bonuses:
    • May 29, 2021: N92,000
    • September 24, 2021: N162,000
  3. Workshop allowance (10 days at N45,000 per day)
  4. Luncheon vouchers: N120,000 (non-assignable)
  5. Official vehicle (N8,000,000, exclusive use)
  6. Night guard: N480,000, and domestic staff: N360,000 (both fully paid by the company)
  7. Transfer allowance: N2,000,000 (for relocation to Port-Harcourt office on November 1, 2021)
  8. Rented apartment paid by the company: N600,000 per annum
  9. Pension contribution: 8% of salary, life insurance premium: N20,000/month
  10. National health insurance and housing fund contributions: N35,000 and N40,000 monthly

Required:
a. For the 2021 assessment year,
i. Identify the relevant tax authority of Mr. Ola Alao. (2 Marks)
ii. Compute the chargeable income of Mr. Alao. (19 Marks)
iii. Compute the income tax payable by Mr. Alao. (5 Marks)
b. Differentiate between a contract of employment and contract for employment. (4 Marks)

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  • 5 Marks

TAX – Nov 2015 – L2 – Q4a – International Taxation

This question explains the tax treatment of income earned by a non-resident individual who has spent time in Nigeria.

Mr. Alexis Sanchez was employed by Zenon Ltd as Director Commercial, West and Central Africa with effect from 1 March 2011. He entered Nigeria on the date his employment became effective and remained in Nigeria till 25 August 2011. He returned to Nigeria on 15 January 2012, and remained in Nigeria till 31 July 2012.

Required:
Explain the basis for the taxation of income earned by Mr. Alexis Sanchez in Nigeria for the relevant tax years.

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  • 25 Marks

TAX – Nov 2016 – L2 – Q1a – Personal Income Tax (PIT)

Compute tax payable by Mr. Adeola based on trading and employment income, deductions, and allowances.

Mr. Adeola has been in the employment of Hope Nigeria Limited for a long time, rising to Senior Manager, while also running a trading business. He ceased trading on December 31, 2014, to focus on his employment fully. The following information pertains to his income:

Trading: (i) Trading results for the periods:
Year ended August 31, 2012: N2,400,000
Year ended August 31, 2013: N1,800,000
Year ended August 31, 2014: N2,625,000
Period ended December 31, 2014: N360,000

(ii) Capital Allowances for the Years of Assessment:
2012 Assessment Year: N240,000
2013 Assessment Year: N180,000
2014 Assessment Year: N120,000

(iii) On January 1, 2015, N360,000 was received from a debtor whose debt had been written off.

Employment:
(i) Annual salary: N3,600,000.
(ii) Transfer cost spent by the company: N52,000.
(iii) A motor car provided for his exclusive use, costing N7,200,000.
(iv) Domestic staff with a salary of N600,000 per annum provided by the company.
(v) He receives assignable luncheon vouchers worth N360,000 annually.

Other Information:
(i) He derives a gross rent of N1,200,000 annually, with 10% withholding tax deducted.
(ii) Receives annual interest of N80,000 on fixed deposits.
(iii) Pays N240,000 annually as life assurance premium.
(iv) Contributes N180,000 to the National Housing Fund and N150,000 to the National Health Insurance Scheme.
(v) Pays N596,250 annually for Pension Fund Contribution.

Required:
Compute the tax payable by Mr. Adeola in respect of 2014 Year of Assessment. (Ignore the penultimate year)

 

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  • 30 Marks

AX – Nov 2021 – L2 – Q1 – Personal Income Tax (PIT)

Calculation of personal income tax liability for two job offers and providing advice on the offer that yields a higher income after tax.

Miss Opeyemi Olunba is a young engineer who has been working in an oil sector for
over 5 years. She currently earns a gross salary of N10,000,000 per annum. She
recently attended two interviews for a new job at Joke Oil & Gas in Rivers State and
Dabiri Hotels & Suite in Lagos State.
She has been called by the two companies to assume office on April 1, 2021. The
following salaries and allowances were offered by the two companies:

Additional information:

  1. If Miss Opeyemi accepts the offer from Joke Oil & Gas, she will rent out her Lagos apartment for N20,000,000 per annum but will need a loan of N12,000,000 at 20% interest to modify the apartment.
  2. She will pay rent of N5,000,000 in Port Harcourt if she relocates.
  3. She maintains her child, a student at St. John University,
  4. She also supports her parents.
  5. She pays a life assurance premium of N5,000,000 annually.
  6. Her employers will deduct contributions for the National Housing Fund (N5,000,000) and Pension Fund (N3,000,000).
  7. She also pays National Health Insurance Premium (N1,000,000).

Required:

a. Compute Miss Opeyemi’s personal income tax liability for the relevant year of assessment for both offers.
b. Advise her on which employment will give her a higher income after tax.

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  • 5 Marks

PT – April 2022 – L2 – Q3b(i & ii) – Income Tax Liabilities

Compute the tax liability on overtime allowances for Maame Agyeiwaa for January and February 2021.

b) Maame Agyeiwaa is a junior staff member of KayDee Ltd. Her monthly basic salary is GH¢800. She was paid an overtime allowance totalling GH¢100 during the month of January 2021. In February 2021, Maame Agyeiwaa was paid overtime allowance totalling GH¢500.

Required:
i) Compute her tax liability on the overtime allowance for the month of January 2021.
(2 marks)

ii) Compute her tax liability on the overtime allowance payments for the month of February 2021.
(3 marks)

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  • 3 Marks

PT – April 2022 – L2 – Q3e – Income Tax Liabilities

Calculate the tax liability on Bisa's bonus income for 2021

Bisa works with Kaydei Ltd and earns an annual basic salary of GH¢140,000. He was paid a bonus of GH¢45,000 in 2021.

Required:
Determine the tax liability on the bonus.
(3 marks)

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  • 5 Marks

PT – April 2022 – L2 – Q5c – Income Tax Liabilities

Explain how gifts received by individuals in relation to employment, business, or investment are taxed.

Gift means a receipt without consideration or for inadequate consideration.

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  • 20 Marks

PT – Nov 2023 – L2 – Q3a – Income Tax Liabilities

Computation of chargeable income for a physically challenged employee with various benefits and allowances.

Mr. Antitom (physically challenged) was employed as a Chief Accountant of Nangode Ltd on 1 April 2020 on an annual basic salary of GH¢60,000 x 10,000 – GH¢100,000. He was entitled to the following monthly allowances and benefits:

Allowances & Benefits Monthly Amount (GH¢)
Responsibility Allowance 4,400
Professional Allowance 6,600
House Help Allowance 8,200
Utilities 4,200
Overtime Allowance 6,000
Provision of furnished accommodation by the employer for which he paid 5% of his basic salary.
Provision of vehicle and fuel by the employer for both official and private use.
Bonus payment amounting to 25% of his basic salary.
He contributed 5.5% of his basic salary to the Mandatory Pension Scheme and an additional 10% to a Voluntary Pension Scheme approved by the National Pension Regulatory Authority.
Married with 3 children, 2 in approved Senior High Schools in Ghana, 1 at the University of South Africa.
Earned interest of GH¢4,000 on a savings account with Kilma Bank.
Received a net dividend of GH¢20,480 from an investment with Enoga Securities.
Required:
Compute the chargeable income of Mr. Antitom for the 2022 year of assessment.
(20 marks)

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  • 7 Marks

PT – Nov 2019 – L2 – Q3a – Income Tax Liabilities

Computes King Peter’s tax liability on overtime for the months of January and February 2019.

a) King Peter is a Junior Staff member of Sir James Company Limited. His monthly basic salary is GH¢700.00. He was paid overtime totaling GH¢50.00 during the month of January 2019.

Required:
i) Compute his tax liability on overtime for the month of January 2019. (2 marks)

In the month of February 2019, King Peter was paid overtime totaling GH¢500.00.

ii) Compute his tax liability on the overtime payments for the month of February 2019. (3 marks)

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  • 20 Marks

TAX – May 2015 – L2 – SA – Q2 – Personal Income Tax (PIT)

Tax compliance requirements and tax liability calculation for Mr. Sola Abijah based on employment and part-time income.

You have been approached by Mr. Sola Abijah, a political science graduate who did his compulsory National Youth Service in a media organization in 2009. On completion of National Youth Service in January 2010, he was offered a part-time job as a freelance writer in two international newspapers. He receives an income (net of Withholding tax) based on the articles he writes that are published by the newspapers. In March 2010, he joined a popular political party and served as the party’s temporary Public Relations Officer, also on a part-time income basis.

On 2 January 2012, he secured employment on full-time basis as Senior Manager, Corporate Affairs, in Jola Investment Enterprises on a salary of ₦12,000,000 per annum.

He was ignorant of the requirements for filing Tax Returns and paying tax to Government. He has been served a warning by the State Board of Internal Revenue (SBIR) to desist from non-disclosure of his other incomes, failing which, a Best of Judgement assessment may be raised on him by the tax inspector.

Mr. Abijah has approached you to provide tax advisory services in respect of his income tax compliance requirements and the likely tax liability that may be imposed on him by the SBIR.

The following additional information has been presented to you:

Requirements:

(a) State the difference between employment income and part-time income. (3 Marks)
(b) Explain why, when and to whom taxpayers are expected to file income tax returns. (5 Marks)
(c) Explain the circumstances that may arise to cause a tax authority to raise a Best of Judgement Assessment. (4 Marks)
(d) Compute the tax liability on Mr. Abijah’s Total Income. (8 Marks)

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  • 30 Marks

TAX – May 2024 – L2 – SA – Q1 – Personal Income Tax (PIT)

Determine Mr. Ola Alao’s chargeable income and tax payable with respect to benefits and allowances.

Mr. Ola Alao works as the manager of XYZ Limited located at Ikeja, Lagos. He provided the following income details for the 2021 assessment year:

  1. Gross monthly income: N204,000
  2. Bonuses:
    • May 29, 2021: N92,000
    • September 24, 2021: N162,000
  3. Workshop allowance (10 days at N45,000 per day)
  4. Luncheon vouchers: N120,000 (non-assignable)
  5. Official vehicle (N8,000,000, exclusive use)
  6. Night guard: N480,000, and domestic staff: N360,000 (both fully paid by the company)
  7. Transfer allowance: N2,000,000 (for relocation to Port-Harcourt office on November 1, 2021)
  8. Rented apartment paid by the company: N600,000 per annum
  9. Pension contribution: 8% of salary, life insurance premium: N20,000/month
  10. National health insurance and housing fund contributions: N35,000 and N40,000 monthly

Required:
a. For the 2021 assessment year,
i. Identify the relevant tax authority of Mr. Ola Alao. (2 Marks)
ii. Compute the chargeable income of Mr. Alao. (19 Marks)
iii. Compute the income tax payable by Mr. Alao. (5 Marks)
b. Differentiate between a contract of employment and contract for employment. (4 Marks)

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  • 5 Marks

TAX – Nov 2015 – L2 – Q4a – International Taxation

This question explains the tax treatment of income earned by a non-resident individual who has spent time in Nigeria.

Mr. Alexis Sanchez was employed by Zenon Ltd as Director Commercial, West and Central Africa with effect from 1 March 2011. He entered Nigeria on the date his employment became effective and remained in Nigeria till 25 August 2011. He returned to Nigeria on 15 January 2012, and remained in Nigeria till 31 July 2012.

Required:
Explain the basis for the taxation of income earned by Mr. Alexis Sanchez in Nigeria for the relevant tax years.

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  • 25 Marks

TAX – Nov 2016 – L2 – Q1a – Personal Income Tax (PIT)

Compute tax payable by Mr. Adeola based on trading and employment income, deductions, and allowances.

Mr. Adeola has been in the employment of Hope Nigeria Limited for a long time, rising to Senior Manager, while also running a trading business. He ceased trading on December 31, 2014, to focus on his employment fully. The following information pertains to his income:

Trading: (i) Trading results for the periods:
Year ended August 31, 2012: N2,400,000
Year ended August 31, 2013: N1,800,000
Year ended August 31, 2014: N2,625,000
Period ended December 31, 2014: N360,000

(ii) Capital Allowances for the Years of Assessment:
2012 Assessment Year: N240,000
2013 Assessment Year: N180,000
2014 Assessment Year: N120,000

(iii) On January 1, 2015, N360,000 was received from a debtor whose debt had been written off.

Employment:
(i) Annual salary: N3,600,000.
(ii) Transfer cost spent by the company: N52,000.
(iii) A motor car provided for his exclusive use, costing N7,200,000.
(iv) Domestic staff with a salary of N600,000 per annum provided by the company.
(v) He receives assignable luncheon vouchers worth N360,000 annually.

Other Information:
(i) He derives a gross rent of N1,200,000 annually, with 10% withholding tax deducted.
(ii) Receives annual interest of N80,000 on fixed deposits.
(iii) Pays N240,000 annually as life assurance premium.
(iv) Contributes N180,000 to the National Housing Fund and N150,000 to the National Health Insurance Scheme.
(v) Pays N596,250 annually for Pension Fund Contribution.

Required:
Compute the tax payable by Mr. Adeola in respect of 2014 Year of Assessment. (Ignore the penultimate year)

 

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  • 30 Marks

AX – Nov 2021 – L2 – Q1 – Personal Income Tax (PIT)

Calculation of personal income tax liability for two job offers and providing advice on the offer that yields a higher income after tax.

Miss Opeyemi Olunba is a young engineer who has been working in an oil sector for
over 5 years. She currently earns a gross salary of N10,000,000 per annum. She
recently attended two interviews for a new job at Joke Oil & Gas in Rivers State and
Dabiri Hotels & Suite in Lagos State.
She has been called by the two companies to assume office on April 1, 2021. The
following salaries and allowances were offered by the two companies:

Additional information:

  1. If Miss Opeyemi accepts the offer from Joke Oil & Gas, she will rent out her Lagos apartment for N20,000,000 per annum but will need a loan of N12,000,000 at 20% interest to modify the apartment.
  2. She will pay rent of N5,000,000 in Port Harcourt if she relocates.
  3. She maintains her child, a student at St. John University,
  4. She also supports her parents.
  5. She pays a life assurance premium of N5,000,000 annually.
  6. Her employers will deduct contributions for the National Housing Fund (N5,000,000) and Pension Fund (N3,000,000).
  7. She also pays National Health Insurance Premium (N1,000,000).

Required:

a. Compute Miss Opeyemi’s personal income tax liability for the relevant year of assessment for both offers.
b. Advise her on which employment will give her a higher income after tax.

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  • 5 Marks

PT – April 2022 – L2 – Q3b(i & ii) – Income Tax Liabilities

Compute the tax liability on overtime allowances for Maame Agyeiwaa for January and February 2021.

b) Maame Agyeiwaa is a junior staff member of KayDee Ltd. Her monthly basic salary is GH¢800. She was paid an overtime allowance totalling GH¢100 during the month of January 2021. In February 2021, Maame Agyeiwaa was paid overtime allowance totalling GH¢500.

Required:
i) Compute her tax liability on the overtime allowance for the month of January 2021.
(2 marks)

ii) Compute her tax liability on the overtime allowance payments for the month of February 2021.
(3 marks)

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  • 3 Marks

PT – April 2022 – L2 – Q3e – Income Tax Liabilities

Calculate the tax liability on Bisa's bonus income for 2021

Bisa works with Kaydei Ltd and earns an annual basic salary of GH¢140,000. He was paid a bonus of GH¢45,000 in 2021.

Required:
Determine the tax liability on the bonus.
(3 marks)

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  • 5 Marks

PT – April 2022 – L2 – Q5c – Income Tax Liabilities

Explain how gifts received by individuals in relation to employment, business, or investment are taxed.

Gift means a receipt without consideration or for inadequate consideration.

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  • 20 Marks

PT – Nov 2023 – L2 – Q3a – Income Tax Liabilities

Computation of chargeable income for a physically challenged employee with various benefits and allowances.

Mr. Antitom (physically challenged) was employed as a Chief Accountant of Nangode Ltd on 1 April 2020 on an annual basic salary of GH¢60,000 x 10,000 – GH¢100,000. He was entitled to the following monthly allowances and benefits:

Allowances & Benefits Monthly Amount (GH¢)
Responsibility Allowance 4,400
Professional Allowance 6,600
House Help Allowance 8,200
Utilities 4,200
Overtime Allowance 6,000
Provision of furnished accommodation by the employer for which he paid 5% of his basic salary.
Provision of vehicle and fuel by the employer for both official and private use.
Bonus payment amounting to 25% of his basic salary.
He contributed 5.5% of his basic salary to the Mandatory Pension Scheme and an additional 10% to a Voluntary Pension Scheme approved by the National Pension Regulatory Authority.
Married with 3 children, 2 in approved Senior High Schools in Ghana, 1 at the University of South Africa.
Earned interest of GH¢4,000 on a savings account with Kilma Bank.
Received a net dividend of GH¢20,480 from an investment with Enoga Securities.
Required:
Compute the chargeable income of Mr. Antitom for the 2022 year of assessment.
(20 marks)

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  • 7 Marks

PT – Nov 2019 – L2 – Q3a – Income Tax Liabilities

Computes King Peter’s tax liability on overtime for the months of January and February 2019.

a) King Peter is a Junior Staff member of Sir James Company Limited. His monthly basic salary is GH¢700.00. He was paid overtime totaling GH¢50.00 during the month of January 2019.

Required:
i) Compute his tax liability on overtime for the month of January 2019. (2 marks)

In the month of February 2019, King Peter was paid overtime totaling GH¢500.00.

ii) Compute his tax liability on the overtime payments for the month of February 2019. (3 marks)

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