Question Tag: Nigerian Tax System

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  • 15 Marks

ATAX – Nov 2021 – L3 – Q7 – Tax Administration and Dispute Resolution

Discusses constraints and strategies for improving tax collection from self-employed individuals in Nigeria.

The inability of the Federal government revenue-generating agencies to meet set revenue targets was the subject of a discussion between the Minister of Finance and Chief Executives of these agencies in October 2021.

The Minister emphasized that the Federal government has provided ample incentives and support to these agencies, yet performance has been below expectations. Consequently, the government has decided to take strict measures against any chief executive who fails to meet revenue targets for the financial year ending December 31, 2021.

The Federal government’s decision inspired the state government. As a result, the chairman of “MATS” State Board of Internal Revenue announced incentives for staff members who meet revenue targets set for tax collection, particularly from the self-employed category.

You have been engaged as the tax consultant to the chairman of “MATS” State Board of Internal Revenue.

Required:

Advise the chairman of “MATS” State Board of Internal Revenue on:

a. Identifying constraints facing tax authorities in assessing and collecting taxes from self-employed taxpayers. (8 Marks)
b. Developing strategies to expand the Nigerian tax net to improve tax collection from the self-employed category. (7 Marks)

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  • 20 Marks

ATAX – Nov 2020 – Q6 – Tax Administration and Dispute Resolution

Discuss the tax administration structure in Nigeria and address concerns regarding multiple taxation.

a. Ms. Lilian Abu is a Nigerian born with a British mother. She grew up and schooled in the UK after which she took up a job with Her Majesty Revenue and Customs (HMRC) as a revenue officer. She has been selected to join a team of international reviewers visiting Nigeria in the coming months under a project funded by the World Bank.

Lilian has contacted you as part of her initial research to understand the tax system in Nigeria ahead of her visit.

Required:
i. Discuss the structure of the tax administration system in Nigeria. (4 Marks)
ii. Discuss the functions of any TWO organs of tax administration in Nigeria. (8 Marks)

b. Lilian informed you that based on her Google searches, she had seen a lot of concerns being expressed by Nigerian taxpayers over multiple taxation.

Required:
Explain the concerns by Nigerian taxpayers over multiple taxation and outline the causes and possible solutions of multiple taxation in Nigeria. (8 Marks)

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  • 15 Marks

AT – Nov 2023 – L3 – SC – Q7 – Taxation of Specialized Businesses

Calculation of tax liabilities under the Mining Act and an explanation of tax neutralities with applications to policy issues.

Udi Nigeria Limited is a mining company which was established ten years ago. The company makes up its accounts to December 31 of every year. The Managing Director, who is an engineer, while having a chat with his former colleagues in the university during the week, heard for the first time, the concept of tax neutralities. He wondered how tax could be neutral.

On getting to the office the following week, he requested further information on tax neutralities from the accountant, but based on his personal opinion, the accountant’s response was not convincing enough.

The company is in the process of filing its annual returns for the year ended December 31, 2021, to the tax authorities. The Managing Director has directed the Financial Accountant to forward the following reports to you (being the company’s Tax Consultant) in respect of the company’s operational activities for the year:

Operational Results:

Description N’000
Gross Turnover 125,490
Salaries and Wages 25,900
Depreciation of Mining Equipment 15,400
Transport and Traveling 2,100
Repairs and Maintenance 3,700
Allowance for Bad Debts 6,200
Electricity and Other Utilities 4,660
Legal and Professional Fees 4,850
Certified Exploration Expenditure 4,500
Administrative Expenses 1,450
Development and Processing Expenditure 2,500
Miscellaneous Expenses 3,420
Total Deductibles 74,680
Net Profit 50,810

Additional Information:

  1. Repairs and maintenance included an amount of N1,500,000, being cost of fittings incurred at the operational site.
  2. Capital allowances computed:
    • Brought forward: N750,000
    • Current year (excluding current year capital expenditure): N12,200,000
    • Total: N12,950,000

Required:

As the company’s Tax Consultant, you are to prepare a report to the Managing Director of Udi Nigeria Limited, which will:

a. Show the tax liabilities payable by the company for the relevant assessment year in line with the provisions of Nigerian Minerals and Mining Act 2007 (as amended). (9 Marks)

b. Explain the concept of tax neutralities and its applications to specific policy issues. (6 Marks)

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  • 15 Marks

AT – Nov 2023 – L3 – SC – Q6 – Tax Administration and Dispute Resolution

Outline of the fundamental features of NTP 2017 and principles from the IESBA codes for professional accountants.

The National tax policy (NTP) 2017, provides fundamental guidelines for the orderly development of the Nigerian tax system. Professional accountants are one of the major stakeholders that are expected to drive the tenets of the tax policy for economic development of the country. In guiding professional accountants to behave in a responsible ethical manner, the International Ethics Standards Board for Accountants (IESBA) develops and issues in the public interest, high-quality ethical standards and other pronouncements for use by professional accountants around the world.

Required:

a. Explain FIVE fundamental features as provided for in the NTP 2017, which the existing and future taxes are expected to align with. (5 Marks)

b. Identify and explain FOUR principles and guidance for accountants as specified in the IESBA codes. (10 Marks)

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  • 15 Marks

AT – Nov 2023 – L3 – SC – Q5 – Tax Administration and Dispute Resolution

Steps and objectives in handling a tax audit with FIRS and the required documentation.

Zola Nigeria Limited has been in business for several years, preparing its accounts to December 31 of every year. Prior to the last two years, the company had a very good relationship with the Federal Inland Revenue Service (FIRS) as far as prompt filing of annual tax returns and payment of tax liabilities are concerned. The company was, however, fined for late filing of returns in the last financial year ended December 31, 2020.

In compliance with the provisions of the Companies Income Tax Act Cap C21 LFN 2004 (as amended), the company filed its annual returns for the 2022 assessment year (year ended December 31, 2021) within the statutory period. Payment of tax due was also made.

The review done by the tax officials at the FIRS on the tax returns filed by the company necessitated the request for additional relevant documents to authenticate some items of expenditure and capital allowances claimed. The FIRS subsequently wrote a letter to the company for the submission of the documents within two weeks of the receipt of the letter. The receipt of the letter was acknowledged by the company, but it, however, failed to forward the required documents to the tax authorities. A reminder was sent to the company four weeks after the first letter was written, yet it failed to respond to the request made.

The Managing Director of the company has just received a letter from the tax office that a team of tax inspectors will be visiting the company in a fortnight to conduct a tax audit.

The company has approached your firm of chartered accountants to assist with advice on how the company should handle the forthcoming tax audit.

Required:

Your Principal Partner has directed you, as a newly employed Audit Senior, to handle the engagement and expects you to prepare a report for his review before sending the same to the client. The report should address the following:

a. Objectives of tax audits (5 Marks)

b. Stages in a typical tax audit process (4 Marks)

c. Schedule of requirements for FIRS tax audit (6 Marks)

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  • 20 Marks

TAX – Nov 2020 – L1 – SA – Q6 – Tax Administration and Enforcement

: State the contents of a tax return, conditions for TCC issuance, and transactions requiring TCC.

All limited liability companies in Nigeria shall at least once in a year without notice or demand from the Federal Inland Revenue Service (FIRS), file a return with the FIRS in a prescribed form which contains the relevant information and documents.

In Nigeria, a tax clearance certificate (TCC) is issued only upon the application by the taxpayer. Therefore, in issuing the certificate, the relevant tax authority would have satisfied itself that the tax assessed on the income of the applicant for the three years immediately preceding the current year of assessment has been fully paid, or that no tax is due on such income, or that the applicant is not liable to tax for any of the three years.

Required:
a. State FOUR contents of a tax return. (8 Marks)
b. State THREE conditions precedent for the issuance of a TCC. (6 Marks)
c. State SIX transactions for which a TCC is required. (6 Marks)

Total: 20 Marks

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  • 15 Marks

TAX – Nov 2020 – L1 – SA – Q4b – Companies Income Tax (CIT)

Compute tax liabilities for Oxygen Nigeria Limited, considering capital allowances and available options.

(ii) Capital allowances as agreed with the Federal Inland Revenue are as follows:

Year of Assessment Amount (N)
2016 600,000
2017 490,000
2018 420,000
2019 385,000

Required:
Compute the tax liabilities of the company for the relevant years of assessment, taking into consideration the options available to the company.

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  • 1 Marks

TAX – Nov 2020 – L1 – SA – Q20 – Taxation of Non-Residents

Identify the minimum tax rate for foreign companies operating in air, sea, and telecommunication businesses in Nigeria.

Which of the following is the minimum tax rate applicable to foreign companies operating in air, sea, and telecommunication businesses in Nigeria?
A. 20%
B. 10%
C. 7½%
D. 5%
E. 2%

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  • 1 Marks

TAX – Nov 2020 – L1 – SA – Q17 – Personal Income Tax (PIT)

Identify which tax subject is not covered under the Personal Income Tax Act.

Which of the following does NOT relate to the provision of the Personal Income Tax Act Cap P8 LFN 2004 (as amended)?
A. Taxation of employees
B. Taxation of estates, trusts, and settlements
C. Taxation of partners
D. Taxation of sole traders
E. Taxation of limited liability companies

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  • 1 Marks

TAX – Nov 2020 – L1 – SA – Q14 – Stamp Duties

Identify which instrument is not assessed by fixed duties under the Stamp Duties Act.

Which of the following is NOT an instrument being assessed by fixed duties?
A. Payment receipts
B. Cheque leaves
C. Guarantor forms
D. Proxy forms
E. Bills of exchange

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  • 15 Marks

ATAX – Nov 2021 – L3 – Q7 – Tax Administration and Dispute Resolution

Discusses constraints and strategies for improving tax collection from self-employed individuals in Nigeria.

The inability of the Federal government revenue-generating agencies to meet set revenue targets was the subject of a discussion between the Minister of Finance and Chief Executives of these agencies in October 2021.

The Minister emphasized that the Federal government has provided ample incentives and support to these agencies, yet performance has been below expectations. Consequently, the government has decided to take strict measures against any chief executive who fails to meet revenue targets for the financial year ending December 31, 2021.

The Federal government’s decision inspired the state government. As a result, the chairman of “MATS” State Board of Internal Revenue announced incentives for staff members who meet revenue targets set for tax collection, particularly from the self-employed category.

You have been engaged as the tax consultant to the chairman of “MATS” State Board of Internal Revenue.

Required:

Advise the chairman of “MATS” State Board of Internal Revenue on:

a. Identifying constraints facing tax authorities in assessing and collecting taxes from self-employed taxpayers. (8 Marks)
b. Developing strategies to expand the Nigerian tax net to improve tax collection from the self-employed category. (7 Marks)

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  • 20 Marks

ATAX – Nov 2020 – Q6 – Tax Administration and Dispute Resolution

Discuss the tax administration structure in Nigeria and address concerns regarding multiple taxation.

a. Ms. Lilian Abu is a Nigerian born with a British mother. She grew up and schooled in the UK after which she took up a job with Her Majesty Revenue and Customs (HMRC) as a revenue officer. She has been selected to join a team of international reviewers visiting Nigeria in the coming months under a project funded by the World Bank.

Lilian has contacted you as part of her initial research to understand the tax system in Nigeria ahead of her visit.

Required:
i. Discuss the structure of the tax administration system in Nigeria. (4 Marks)
ii. Discuss the functions of any TWO organs of tax administration in Nigeria. (8 Marks)

b. Lilian informed you that based on her Google searches, she had seen a lot of concerns being expressed by Nigerian taxpayers over multiple taxation.

Required:
Explain the concerns by Nigerian taxpayers over multiple taxation and outline the causes and possible solutions of multiple taxation in Nigeria. (8 Marks)

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  • 15 Marks

AT – Nov 2023 – L3 – SC – Q7 – Taxation of Specialized Businesses

Calculation of tax liabilities under the Mining Act and an explanation of tax neutralities with applications to policy issues.

Udi Nigeria Limited is a mining company which was established ten years ago. The company makes up its accounts to December 31 of every year. The Managing Director, who is an engineer, while having a chat with his former colleagues in the university during the week, heard for the first time, the concept of tax neutralities. He wondered how tax could be neutral.

On getting to the office the following week, he requested further information on tax neutralities from the accountant, but based on his personal opinion, the accountant’s response was not convincing enough.

The company is in the process of filing its annual returns for the year ended December 31, 2021, to the tax authorities. The Managing Director has directed the Financial Accountant to forward the following reports to you (being the company’s Tax Consultant) in respect of the company’s operational activities for the year:

Operational Results:

Description N’000
Gross Turnover 125,490
Salaries and Wages 25,900
Depreciation of Mining Equipment 15,400
Transport and Traveling 2,100
Repairs and Maintenance 3,700
Allowance for Bad Debts 6,200
Electricity and Other Utilities 4,660
Legal and Professional Fees 4,850
Certified Exploration Expenditure 4,500
Administrative Expenses 1,450
Development and Processing Expenditure 2,500
Miscellaneous Expenses 3,420
Total Deductibles 74,680
Net Profit 50,810

Additional Information:

  1. Repairs and maintenance included an amount of N1,500,000, being cost of fittings incurred at the operational site.
  2. Capital allowances computed:
    • Brought forward: N750,000
    • Current year (excluding current year capital expenditure): N12,200,000
    • Total: N12,950,000

Required:

As the company’s Tax Consultant, you are to prepare a report to the Managing Director of Udi Nigeria Limited, which will:

a. Show the tax liabilities payable by the company for the relevant assessment year in line with the provisions of Nigerian Minerals and Mining Act 2007 (as amended). (9 Marks)

b. Explain the concept of tax neutralities and its applications to specific policy issues. (6 Marks)

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  • 15 Marks

AT – Nov 2023 – L3 – SC – Q6 – Tax Administration and Dispute Resolution

Outline of the fundamental features of NTP 2017 and principles from the IESBA codes for professional accountants.

The National tax policy (NTP) 2017, provides fundamental guidelines for the orderly development of the Nigerian tax system. Professional accountants are one of the major stakeholders that are expected to drive the tenets of the tax policy for economic development of the country. In guiding professional accountants to behave in a responsible ethical manner, the International Ethics Standards Board for Accountants (IESBA) develops and issues in the public interest, high-quality ethical standards and other pronouncements for use by professional accountants around the world.

Required:

a. Explain FIVE fundamental features as provided for in the NTP 2017, which the existing and future taxes are expected to align with. (5 Marks)

b. Identify and explain FOUR principles and guidance for accountants as specified in the IESBA codes. (10 Marks)

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  • 15 Marks

AT – Nov 2023 – L3 – SC – Q5 – Tax Administration and Dispute Resolution

Steps and objectives in handling a tax audit with FIRS and the required documentation.

Zola Nigeria Limited has been in business for several years, preparing its accounts to December 31 of every year. Prior to the last two years, the company had a very good relationship with the Federal Inland Revenue Service (FIRS) as far as prompt filing of annual tax returns and payment of tax liabilities are concerned. The company was, however, fined for late filing of returns in the last financial year ended December 31, 2020.

In compliance with the provisions of the Companies Income Tax Act Cap C21 LFN 2004 (as amended), the company filed its annual returns for the 2022 assessment year (year ended December 31, 2021) within the statutory period. Payment of tax due was also made.

The review done by the tax officials at the FIRS on the tax returns filed by the company necessitated the request for additional relevant documents to authenticate some items of expenditure and capital allowances claimed. The FIRS subsequently wrote a letter to the company for the submission of the documents within two weeks of the receipt of the letter. The receipt of the letter was acknowledged by the company, but it, however, failed to forward the required documents to the tax authorities. A reminder was sent to the company four weeks after the first letter was written, yet it failed to respond to the request made.

The Managing Director of the company has just received a letter from the tax office that a team of tax inspectors will be visiting the company in a fortnight to conduct a tax audit.

The company has approached your firm of chartered accountants to assist with advice on how the company should handle the forthcoming tax audit.

Required:

Your Principal Partner has directed you, as a newly employed Audit Senior, to handle the engagement and expects you to prepare a report for his review before sending the same to the client. The report should address the following:

a. Objectives of tax audits (5 Marks)

b. Stages in a typical tax audit process (4 Marks)

c. Schedule of requirements for FIRS tax audit (6 Marks)

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  • 20 Marks

TAX – Nov 2020 – L1 – SA – Q6 – Tax Administration and Enforcement

: State the contents of a tax return, conditions for TCC issuance, and transactions requiring TCC.

All limited liability companies in Nigeria shall at least once in a year without notice or demand from the Federal Inland Revenue Service (FIRS), file a return with the FIRS in a prescribed form which contains the relevant information and documents.

In Nigeria, a tax clearance certificate (TCC) is issued only upon the application by the taxpayer. Therefore, in issuing the certificate, the relevant tax authority would have satisfied itself that the tax assessed on the income of the applicant for the three years immediately preceding the current year of assessment has been fully paid, or that no tax is due on such income, or that the applicant is not liable to tax for any of the three years.

Required:
a. State FOUR contents of a tax return. (8 Marks)
b. State THREE conditions precedent for the issuance of a TCC. (6 Marks)
c. State SIX transactions for which a TCC is required. (6 Marks)

Total: 20 Marks

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  • 15 Marks

TAX – Nov 2020 – L1 – SA – Q4b – Companies Income Tax (CIT)

Compute tax liabilities for Oxygen Nigeria Limited, considering capital allowances and available options.

(ii) Capital allowances as agreed with the Federal Inland Revenue are as follows:

Year of Assessment Amount (N)
2016 600,000
2017 490,000
2018 420,000
2019 385,000

Required:
Compute the tax liabilities of the company for the relevant years of assessment, taking into consideration the options available to the company.

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  • 1 Marks

TAX – Nov 2020 – L1 – SA – Q20 – Taxation of Non-Residents

Identify the minimum tax rate for foreign companies operating in air, sea, and telecommunication businesses in Nigeria.

Which of the following is the minimum tax rate applicable to foreign companies operating in air, sea, and telecommunication businesses in Nigeria?
A. 20%
B. 10%
C. 7½%
D. 5%
E. 2%

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  • 1 Marks

TAX – Nov 2020 – L1 – SA – Q17 – Personal Income Tax (PIT)

Identify which tax subject is not covered under the Personal Income Tax Act.

Which of the following does NOT relate to the provision of the Personal Income Tax Act Cap P8 LFN 2004 (as amended)?
A. Taxation of employees
B. Taxation of estates, trusts, and settlements
C. Taxation of partners
D. Taxation of sole traders
E. Taxation of limited liability companies

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  • 1 Marks

TAX – Nov 2020 – L1 – SA – Q14 – Stamp Duties

Identify which instrument is not assessed by fixed duties under the Stamp Duties Act.

Which of the following is NOT an instrument being assessed by fixed duties?
A. Payment receipts
B. Cheque leaves
C. Guarantor forms
D. Proxy forms
E. Bills of exchange

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