- 20 Marks
AT – Nov 2017 – L3 – Q3 – Double Taxation Reliefs and Credits
Outline objectives of the MOU with oil companies and compute double tax credit for Salim Consultants.
Question
a. Outline FIVE objectives of the Memorandum of Understanding which the Federal Government of Nigeria entered into with the Oil Producing Companies on January 1, 1986.
b. SALIM CONSULTANTS LIMITED, incorporated in 2012, is a corporate advisory firm in Nigeria. In 2015, it expanded to Burundi to explore business opportunities there. The directors are interested in the Double Taxation Agreement but have not benefited from it before.
Below is a summary of the Income Statements for the year ended December 31, 2016:
| Description | Nigeria (N) | Burundi (N) | Total (N) |
|---|---|---|---|
| Gross Advisory fees | 57,000,000 | 21,750,000 | 78,750,000 |
| Other Income | 960,000 | 1,800,000 | 2,760,000 |
| Total | 57,960,000 | 23,550,000 | 81,510,000 |
| Deduct Expenses: | |||
| Deal Execution Expenses | (30,225,000) | (9,750,000) | (39,975,000) |
| Office Rent | (1,800,000) | (675,000) | (2,475,000) |
| Depreciation | (5,100,000) | (2,700,000) | (7,800,000) |
| Loss on sale of Non-Current Assets | – | (525,000) | (525,000) |
| Foreign Exchange Loss Provision | (960,000) | – | (960,000) |
| Other Operating Expenses | (3,240,000) | (1,380,000) | (4,620,000) |
| Net Operating Profit | 16,635,000 | 8,520,000 | 25,155,000 |
Additional information:
(i) N2,130,000 was paid to the Burundi Tax Authority after claiming N4,800,000 Capital Allowance. Capital Allowance claimable in Nigeria was N7,800,000.
(ii) Other income of N960,000 is profit from the sale of Non-Current Assets, while N1,800,000 is gains from the disposal of securities.
Required:
a. Explain briefly what is meant by Double Taxation Relief.
b. Compute the Double Tax Credit claimable by the Company assuming there is a Double Taxation Agreement with Burundi.
Find Related Questions by Tags, levels, etc.
- Tags: Double Taxation, Memorandum of Understanding, Tax computation, Tax Credit
- Level: Level 3
- Topic: Double Taxation Reliefs and Credits
- Series: NOV 2017