Question Tag: Minimum Tax

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  • 30 Marks

AT – Nov 2014 – L3 – SA – Q1 – Tax Administration and Dispute Resolution

Explain penalties for non-compliance, compute profit and tax liabilities, and detail exemptions from minimum tax liability.

The Tax Consultants, ABFR Consult, received an e-mail from Mrs. Deboh Komo, Managing Director of Deboko Nigeria Limited. Extracts of her e-mail are as follows:

  1. The company was incorporated on 1 February 2007.
  2. It commenced business as importers of new engines for tricycles on 1 May 2009.
  3. The Directors chose 30 June as the year-end and made the first financial statements up to 30 June 2010.
  4. The company did not file any tax returns to date due to a general lull in business activities.
  5. The tax monitoring section of the Federal Inland Revenue Service (FIRS) visited the company on 2 September 2014, uncovering non-compliance.
  6. No tax registration was done, and no returns were filed.
  7. The Accounts Officer advised the company to register for all statutory payments, including Value Added Tax (VAT) and Companies Income Tax, but the management delayed.
  8. The company pleaded for leniency, but the FIRS insisted on full compliance with tax laws.

Additional Information:

  1. Statement of Profit or Loss and Other Comprehensive Income:
Period Ended 30/06/13 (₦’000) 30/06/12 (₦’000) 30/06/11 (₦’000) 30/06/10 (₦’000)
Operating Profit/(Loss) 1,060 960 720 (504)
Depreciation 380 120 120 153
Staff Loans Written Off – – – 40
Stamp Duties on Incorporation – – – 16
Sales Tax 120 80 44 40
Donations to Christian Association 60 – – 10
Specific Bad Debts Written Off 28 – – 14
  1. Statement of Financial Position:
Item 30/06/13 (₦’000) 30/06/12 (₦’000) 30/06/11 (₦’000) 30/06/10 (₦’000)
Paid-Up Capital 30,000 15,000 15,000 15,000
Deposit for Shares 25,000 10,000 5,000 –
Net Assets 101,500 84,110 76,700 66,000
Revenue 210,500 180,400 162,000 104,000
Gross Profit 16,400 14,200 12,800 10,200
  1. Capital Allowances Agreed:
Year of Assessment 2014 2013 2012 2011 2010 2009
Capital Allowances 140 150 150 250 200 300

Requirement:

(a) Explain the penalties for late submission of annual returns to the FIRS. (4 Marks)

(b) Compute the Total Profit and Tax Liabilities of the company for the relevant years of assessment. (24 Marks)

(c) Explain the conditions for exemption from minimum tax liability under the Companies Income Tax Act CAP C21 LFN 2004 (as amended). (2 Marks)

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  • 15 Marks

TAX – May 2022 – L2 – SA – Q6 – Tax Administration and Enforcement

Identify the badges of trade and compute the minimum tax payable for a given year of assessment.

a. The difficulty in determining what constitutes a trade has led to many litigations and the huge number of tax cases that exist on the issue. The problem from the decided cases is that of finding an absolute test for identifying a trade.

The conclusion had always been that there are no fixed rules but that each case could be examined on its own facts.
Required:
State FOUR considerations that influence the identification of badges of trade. (8 Marks)

b. Ndakogi Nigeria Limited commenced business in 2007. The extract of the statement of profit or loss of the company for the year ended December 31, 2021, has revealed the following:

Required:
Compute the minimum tax payable

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  • 1 Marks

TAX – May 2021 – L1 – SA – Q20 – Tax Administration and Enforcement

Objective question on the minimum tax payable by air or sea transport businesses in Nigeria.

The minimum tax payable by a company engaged in air or sea transport business shall not be less than……………… of the full sum receivable in respect of carriage of passengers, mails, livestock, or goods shipped or loaded into an aircraft in Nigeria.
A. 20%
B. 10%
C. 5%
D. 2%
E. 1%

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  • 4 Marks

TAX – Nov 2018 – L2 – SC – Q5b – Companies Income Tax (CIT)

State the categories of companies exempted from minimum tax liability.

State the categories of companies that are exempted from minimum tax liability.

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  • 16 Marks

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.

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.

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  • 30 Marks

AT – Nov 2014 – L3 – SA – Q1 – Tax Administration and Dispute Resolution

Explain penalties for non-compliance, compute profit and tax liabilities, and detail exemptions from minimum tax liability.

The Tax Consultants, ABFR Consult, received an e-mail from Mrs. Deboh Komo, Managing Director of Deboko Nigeria Limited. Extracts of her e-mail are as follows:

  1. The company was incorporated on 1 February 2007.
  2. It commenced business as importers of new engines for tricycles on 1 May 2009.
  3. The Directors chose 30 June as the year-end and made the first financial statements up to 30 June 2010.
  4. The company did not file any tax returns to date due to a general lull in business activities.
  5. The tax monitoring section of the Federal Inland Revenue Service (FIRS) visited the company on 2 September 2014, uncovering non-compliance.
  6. No tax registration was done, and no returns were filed.
  7. The Accounts Officer advised the company to register for all statutory payments, including Value Added Tax (VAT) and Companies Income Tax, but the management delayed.
  8. The company pleaded for leniency, but the FIRS insisted on full compliance with tax laws.

Additional Information:

  1. Statement of Profit or Loss and Other Comprehensive Income:
Period Ended 30/06/13 (₦’000) 30/06/12 (₦’000) 30/06/11 (₦’000) 30/06/10 (₦’000)
Operating Profit/(Loss) 1,060 960 720 (504)
Depreciation 380 120 120 153
Staff Loans Written Off – – – 40
Stamp Duties on Incorporation – – – 16
Sales Tax 120 80 44 40
Donations to Christian Association 60 – – 10
Specific Bad Debts Written Off 28 – – 14
  1. Statement of Financial Position:
Item 30/06/13 (₦’000) 30/06/12 (₦’000) 30/06/11 (₦’000) 30/06/10 (₦’000)
Paid-Up Capital 30,000 15,000 15,000 15,000
Deposit for Shares 25,000 10,000 5,000 –
Net Assets 101,500 84,110 76,700 66,000
Revenue 210,500 180,400 162,000 104,000
Gross Profit 16,400 14,200 12,800 10,200
  1. Capital Allowances Agreed:
Year of Assessment 2014 2013 2012 2011 2010 2009
Capital Allowances 140 150 150 250 200 300

Requirement:

(a) Explain the penalties for late submission of annual returns to the FIRS. (4 Marks)

(b) Compute the Total Profit and Tax Liabilities of the company for the relevant years of assessment. (24 Marks)

(c) Explain the conditions for exemption from minimum tax liability under the Companies Income Tax Act CAP C21 LFN 2004 (as amended). (2 Marks)

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  • 15 Marks

TAX – May 2022 – L2 – SA – Q6 – Tax Administration and Enforcement

Identify the badges of trade and compute the minimum tax payable for a given year of assessment.

a. The difficulty in determining what constitutes a trade has led to many litigations and the huge number of tax cases that exist on the issue. The problem from the decided cases is that of finding an absolute test for identifying a trade.

The conclusion had always been that there are no fixed rules but that each case could be examined on its own facts.
Required:
State FOUR considerations that influence the identification of badges of trade. (8 Marks)

b. Ndakogi Nigeria Limited commenced business in 2007. The extract of the statement of profit or loss of the company for the year ended December 31, 2021, has revealed the following:

Required:
Compute the minimum tax payable

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  • 1 Marks

TAX – May 2021 – L1 – SA – Q20 – Tax Administration and Enforcement

Objective question on the minimum tax payable by air or sea transport businesses in Nigeria.

The minimum tax payable by a company engaged in air or sea transport business shall not be less than……………… of the full sum receivable in respect of carriage of passengers, mails, livestock, or goods shipped or loaded into an aircraft in Nigeria.
A. 20%
B. 10%
C. 5%
D. 2%
E. 1%

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You're reporting an error for "TAX – May 2021 – L1 – SA – Q20 – Tax Administration and Enforcement"

  • 4 Marks

TAX – Nov 2018 – L2 – SC – Q5b – Companies Income Tax (CIT)

State the categories of companies exempted from minimum tax liability.

State the categories of companies that are exempted from minimum tax liability.

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  • 16 Marks

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.

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.

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