Question Tag: Permanent Establishment

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  • 15 Marks

AT – Nov 2014 – L3 – SC – Q5 – Transfer Pricing

Explain transfer pricing objectives, treatment of permanent establishments, and disclosure requirements under FIRS.

You are the Tax Manager of Forum Tax Associates and recently represented your firm at a Workshop organised by the Federal Inland Revenue Service (FIRS), Western Zone, on Transfer Pricing Regulations in Nigeria.

The Workshop was to create awareness on the filing requirements and compliance with the provisions of “The Income Tax (Transfer Pricing) Regulations 2012.”

The Workshop, which was held on the 20th Floor of the Nigeria Stock Exchange building, was fully attended by Company Auditors, Tax Practitioners, Stock Brokers, Bankers, and other Stakeholders.

From the notes you took at the Workshop, you presented a report to the Managing Partner, Forum Tax Associates, on Wednesday, 3 September 2014. The Managing Partner thanked you for a good job and highlighted some key areas of the regulations that will serve as a guide to the staff of the firm.

Required:
Prepare a technical briefing for the staff explaining the following key areas noted by the Managing Partner:
a) Objectives of the application of Transfer Pricing Regulations. (6 Marks)
b) Treatment of Permanent Establishment. (2 Marks)
c) Contents of a Transfer Pricing Disclosure to be submitted by Companies to the FIRS. (7 Marks)

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  • 5 Marks

ATAX – Nov 2018 – L3 – Q3b – International Taxation

Permanent Establishment (PE) under the Nigeria-UK Double Taxation Agreement

b) Double taxation agreements exist among Nigeria and some foreign countries.

Required:
Explain the term “Permanent Establishment” as contained in the double taxation agreement between Nigeria and the United Kingdom.
(5 Marks)

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  • 15 Marks

ATAX – Nov 2018 – L3 – Q3a – International Taxation

Tax implications for Sadiq Corporation's contracts executed by its Nigerian subsidiary, including PE under Nigeria-UK tax agreement.

(a) Sadiq Corporation was incorporated in Sweden as a limited liability company and has a subsidiary, Omologede Ventures Nigeria Limited located in Akure, Nigeria. Peniel Nigeria Plc awarded a contract to Sadiq Corporation to renovate a rice milling factory in Gboko, Benue State, and another in Abakaliki, Ebonyi State. The contract value for the Gboko factory is $11,064,150, and $7,337,616 for the Abakaliki factory. Sadiq Corporation later sub-contracted the two jobs to its subsidiary in Nigeria. The renovation is expected to be completed within six months.

The following information was submitted to the Federal Inland Revenue Service by Omologede Ventures Nigeria Limited for the year ended December 31, 2017:

Description Amount (N)
Direct materials 962,100,000
Scaffolding 183,538,320
Administrative expenses on hired professionals 33,352,800
Rentals on equipment 18,708,248
Maintenance of equipment 7,431,688
Personnel card (domestic) 28,803,029
Personnel cost (foreign) 14,738,250
Fees to engineers 11,298,689
Other operational costs 6,512,070

Additional Information:

  1. Capital allowance agreed by Omologede Ventures Nigeria Limited with the Federal Inland Revenue Service for the year was N104,418,744.
  2. 60% of the total contract sum was made available to Omologede Ventures Nigeria Limited.
  3. Depreciation is N69,902,092.
  4. 70% of the total contract sum was paid at the beginning of the job, while the balance was paid in September of the same year.
  5. The exchange rate at the time of signing the contract was N180 to $1. The rate changed in August of the same year to N195 to $1.

Withholding tax provisions were fully complied with by the two companies, and the tax remitted to the relevant tax authority as and when due.

Required:
As the local consultancy firm in Nigeria, provide advice to the management of the two companies on the tax implications of the contracts for the relevant year of assessment, clearly showing their tax liabilities (if any).
(15 Marks)

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  • 15 Marks

AT – Nov 2022 – L3 – Q6 – Double Taxation Reliefs and Credits

Evaluate whether Singapura PTC Limited, a Singaporean company, qualifies for tax exemption in Nigeria due to the Nigeria-Singapore double taxation agreement (DTA). Outline the benefits available under the DTA to Singaporean residents and identify scenarios where the company would still be liable for tax in Nigeria.

Singapura PTC Limited, a company registered in Singapore, derived various income streams from Nigeria in 2021. Following this, the Nigerian tax office issued an assessment based on the Companies Income Tax Act, prompting Singapura PTC Limited to request an objection. The company claims that, as a Singapore resident, it should not be liable for Nigerian taxes due to the double taxation agreement between Nigeria and Singapore.

Required:

  1. Do you agree with the company, that its residence in Singapore qualifies it for tax exemption in Nigeria?
    (5 Marks)
  2. What are the benefits that may be available to a resident of Singapore under the double taxation agreement between Nigeria and Singapore?
    (5 Marks)
  3. State FIVE circumstances under which a company registered in Singapore will be liable to tax in Nigeria.
    (5 Marks)

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  • 8 Marks

PT – July 2023 – L2 – Q4b – Corporate Tax Liabilities

Advice on the tax implications of setting up as a subsidiary vs permanent establishment, finance leasing, and paying employees.

The management of Chika Plc, a United Kingdom (UK) based Company, is considering the possibility of launching its presence into Ghana and it is not too sure of the tax implications of the following in light of the tax laws of Ghana:

i) It is considering making its presence through incorporation in Ghana or creating an external company that is a Permanent Establishment (Branch) instead.
ii) It intends to acquire all its non-current assets through finance lease as against buying the assets outright when it makes its presence in Ghana.
iii) It intends to bring some staff from the UK to work in Ghana who will be paid half salary in Ghana and the other half paid directly to their accounts in the UK.

Required:
Advise on the tax implications of each one of them to enable management of Chika Plc to take a decision. (8 marks)

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  • 10 Marks

AT – Nov 2018 – L3 – Q3a – Permanent establishment, International taxation

Tax policy implications on the establishment of a permanent entity, finance lease acquisitions, and dividend policies by a foreign company.

The management of Smith Plc, a UK-based company, is considering the possibility of launching its presence in Ghana and it is not sure of the tax implication of the following under the tax laws of Ghana:

i) It is considering making its presence through incorporation in Ghana or creating an external company that is a Permanent Establishment (Branch) instead.
ii) It intends to acquire all its non-current assets through finance lease as against buying the assets outright when it makes its presence in Ghana.
iii) It intends to bring some staff from the United Kingdom to work in Ghana who will be paid half salary in Ghana and the other half paid directly to their accounts in the United Kingdom as against paying their full salary in Ghana.
iv) Management intends to acquire shares in many companies in Ghana as part of efforts to create value for shareholders through dividend receipts as against granting loans to interested companies in Ghana if it is unable to make its presence in Ghana.

Required:
Evaluate the above policy interventions and advise on the tax implication of each to enable the management of Smith Plc to make a decision.

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  • 4 Marks

TF – May 2018 – L3 – Q4a – Permanent establishment

Discuss how a non-resident person is taxed in Ghana with and without a permanent establishment.

Tax administration allows for cross-border transactions. To this end, entities conduct businesses across countries as a way of increasing their competitiveness and international appeal and consequently their profits.

Required:
Discuss how a non-resident person would be taxed in Ghana if they:
i) Have a permanent establishment.
ii) Do not have a permanent establishment.
(4 marks)

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  • 4 Marks

AT – Aug 2022 – L3 – Q1a – International taxation

Tax treatment for a non-resident company using a subsidiary to execute a project.

Jantua Ltd (Jantua) is a company incorporated in the Republic of Israel with subsidiaries across other countries, including Frankaa Company Ltd (Frankaa) in Ghana. All subsidiaries were incorporated in their respective countries by Jantua.

Jantua won a contract with the Ministry of Roads and Highways to construct a road in Ghana. Jantua used its subsidiary, Frankaa, to carry out the project. Jantua billed the Ministry of Roads and Highways for the work done. Likewise, Frankaa billed Jantua for management and technical services on the road project.

Required:
What is the tax treatment of this arrangement?
(4 marks)

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  • 10 Marks

AT – May 2020 – L3 – Q2b – International taxation

Analyze tax implications for an Italian company constructing a fuel depot in Ghana, distinguishing between trading in Ghana and trading with Ghana

XYZ Parks Ltd, an Italian Company, had a contract for the construction of a fuel depot in Ghana. It was clear from the contract agreement that the production and fabrication costing $500,000 would be carried out outside Ghana. The installation works in Ghana and related services would cost $200,000 and GH¢2,400,000 respectively.

XYZ Parks Ltd has asked of your professional advice on the above transaction.

Required:
i) What is the tax implication of trading in Ghana and trading with Ghana? (4 marks)
ii) What will be your professional advice to XYZ Parks Ltd on the tax implication of other contract? (6 marks)

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  • 20 Marks

AT – May 2020 – L3 – Q1 – International taxation

Explanation of the concept of permanent establishment in Ghana and the differences between economic and juridical double taxation.

The spectrum of investment opportunities in Ghana has heightened and this has attracted some investors who intend to visit next month to assess the potential for investment. The Ministry of Finance has written to your Tax Consulting Firm to make a presentation on behalf of the Ministry to these Investors. The letter from the Ministry contains in part the following:

“International trade has given persons the ability to carry out separate aspects of their business operations in different countries. Even though it will be inconceivable to compel a person to pay taxes in every country where that person carries out business operations, the level of business activity carried on by a person in a particular country may expose that person to tax liabilities under the laws of that country. In Ghana, assessable income of a non-resident person includes income effectively connected with a Ghanaian permanent establishment of the person irrespective of the source of the income…”

Required: Prepare a report highlighting the following:

a) What constitutes a Ghanaian permanent establishment with reference to the Income Tax Act, 2015 (Act 896)?
(4 marks)

b) Explain the taxation rules on Ghanaian permanent establishment as enshrined in the Income Tax Act, 2015 (Act 896).
(10 marks)

c) There are economic double taxation and juridical double taxation. Explain these TWO (2) concepts of double taxation.
(6 marks)

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  • 15 Marks

AT – Nov 2014 – L3 – SC – Q5 – Transfer Pricing

Explain transfer pricing objectives, treatment of permanent establishments, and disclosure requirements under FIRS.

You are the Tax Manager of Forum Tax Associates and recently represented your firm at a Workshop organised by the Federal Inland Revenue Service (FIRS), Western Zone, on Transfer Pricing Regulations in Nigeria.

The Workshop was to create awareness on the filing requirements and compliance with the provisions of “The Income Tax (Transfer Pricing) Regulations 2012.”

The Workshop, which was held on the 20th Floor of the Nigeria Stock Exchange building, was fully attended by Company Auditors, Tax Practitioners, Stock Brokers, Bankers, and other Stakeholders.

From the notes you took at the Workshop, you presented a report to the Managing Partner, Forum Tax Associates, on Wednesday, 3 September 2014. The Managing Partner thanked you for a good job and highlighted some key areas of the regulations that will serve as a guide to the staff of the firm.

Required:
Prepare a technical briefing for the staff explaining the following key areas noted by the Managing Partner:
a) Objectives of the application of Transfer Pricing Regulations. (6 Marks)
b) Treatment of Permanent Establishment. (2 Marks)
c) Contents of a Transfer Pricing Disclosure to be submitted by Companies to the FIRS. (7 Marks)

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  • 5 Marks

ATAX – Nov 2018 – L3 – Q3b – International Taxation

Permanent Establishment (PE) under the Nigeria-UK Double Taxation Agreement

b) Double taxation agreements exist among Nigeria and some foreign countries.

Required:
Explain the term “Permanent Establishment” as contained in the double taxation agreement between Nigeria and the United Kingdom.
(5 Marks)

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  • 15 Marks

ATAX – Nov 2018 – L3 – Q3a – International Taxation

Tax implications for Sadiq Corporation's contracts executed by its Nigerian subsidiary, including PE under Nigeria-UK tax agreement.

(a) Sadiq Corporation was incorporated in Sweden as a limited liability company and has a subsidiary, Omologede Ventures Nigeria Limited located in Akure, Nigeria. Peniel Nigeria Plc awarded a contract to Sadiq Corporation to renovate a rice milling factory in Gboko, Benue State, and another in Abakaliki, Ebonyi State. The contract value for the Gboko factory is $11,064,150, and $7,337,616 for the Abakaliki factory. Sadiq Corporation later sub-contracted the two jobs to its subsidiary in Nigeria. The renovation is expected to be completed within six months.

The following information was submitted to the Federal Inland Revenue Service by Omologede Ventures Nigeria Limited for the year ended December 31, 2017:

Description Amount (N)
Direct materials 962,100,000
Scaffolding 183,538,320
Administrative expenses on hired professionals 33,352,800
Rentals on equipment 18,708,248
Maintenance of equipment 7,431,688
Personnel card (domestic) 28,803,029
Personnel cost (foreign) 14,738,250
Fees to engineers 11,298,689
Other operational costs 6,512,070

Additional Information:

  1. Capital allowance agreed by Omologede Ventures Nigeria Limited with the Federal Inland Revenue Service for the year was N104,418,744.
  2. 60% of the total contract sum was made available to Omologede Ventures Nigeria Limited.
  3. Depreciation is N69,902,092.
  4. 70% of the total contract sum was paid at the beginning of the job, while the balance was paid in September of the same year.
  5. The exchange rate at the time of signing the contract was N180 to $1. The rate changed in August of the same year to N195 to $1.

Withholding tax provisions were fully complied with by the two companies, and the tax remitted to the relevant tax authority as and when due.

Required:
As the local consultancy firm in Nigeria, provide advice to the management of the two companies on the tax implications of the contracts for the relevant year of assessment, clearly showing their tax liabilities (if any).
(15 Marks)

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  • 15 Marks

AT – Nov 2022 – L3 – Q6 – Double Taxation Reliefs and Credits

Evaluate whether Singapura PTC Limited, a Singaporean company, qualifies for tax exemption in Nigeria due to the Nigeria-Singapore double taxation agreement (DTA). Outline the benefits available under the DTA to Singaporean residents and identify scenarios where the company would still be liable for tax in Nigeria.

Singapura PTC Limited, a company registered in Singapore, derived various income streams from Nigeria in 2021. Following this, the Nigerian tax office issued an assessment based on the Companies Income Tax Act, prompting Singapura PTC Limited to request an objection. The company claims that, as a Singapore resident, it should not be liable for Nigerian taxes due to the double taxation agreement between Nigeria and Singapore.

Required:

  1. Do you agree with the company, that its residence in Singapore qualifies it for tax exemption in Nigeria?
    (5 Marks)
  2. What are the benefits that may be available to a resident of Singapore under the double taxation agreement between Nigeria and Singapore?
    (5 Marks)
  3. State FIVE circumstances under which a company registered in Singapore will be liable to tax in Nigeria.
    (5 Marks)

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  • 8 Marks

PT – July 2023 – L2 – Q4b – Corporate Tax Liabilities

Advice on the tax implications of setting up as a subsidiary vs permanent establishment, finance leasing, and paying employees.

The management of Chika Plc, a United Kingdom (UK) based Company, is considering the possibility of launching its presence into Ghana and it is not too sure of the tax implications of the following in light of the tax laws of Ghana:

i) It is considering making its presence through incorporation in Ghana or creating an external company that is a Permanent Establishment (Branch) instead.
ii) It intends to acquire all its non-current assets through finance lease as against buying the assets outright when it makes its presence in Ghana.
iii) It intends to bring some staff from the UK to work in Ghana who will be paid half salary in Ghana and the other half paid directly to their accounts in the UK.

Required:
Advise on the tax implications of each one of them to enable management of Chika Plc to take a decision. (8 marks)

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  • 10 Marks

AT – Nov 2018 – L3 – Q3a – Permanent establishment, International taxation

Tax policy implications on the establishment of a permanent entity, finance lease acquisitions, and dividend policies by a foreign company.

The management of Smith Plc, a UK-based company, is considering the possibility of launching its presence in Ghana and it is not sure of the tax implication of the following under the tax laws of Ghana:

i) It is considering making its presence through incorporation in Ghana or creating an external company that is a Permanent Establishment (Branch) instead.
ii) It intends to acquire all its non-current assets through finance lease as against buying the assets outright when it makes its presence in Ghana.
iii) It intends to bring some staff from the United Kingdom to work in Ghana who will be paid half salary in Ghana and the other half paid directly to their accounts in the United Kingdom as against paying their full salary in Ghana.
iv) Management intends to acquire shares in many companies in Ghana as part of efforts to create value for shareholders through dividend receipts as against granting loans to interested companies in Ghana if it is unable to make its presence in Ghana.

Required:
Evaluate the above policy interventions and advise on the tax implication of each to enable the management of Smith Plc to make a decision.

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  • 4 Marks

TF – May 2018 – L3 – Q4a – Permanent establishment

Discuss how a non-resident person is taxed in Ghana with and without a permanent establishment.

Tax administration allows for cross-border transactions. To this end, entities conduct businesses across countries as a way of increasing their competitiveness and international appeal and consequently their profits.

Required:
Discuss how a non-resident person would be taxed in Ghana if they:
i) Have a permanent establishment.
ii) Do not have a permanent establishment.
(4 marks)

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  • 4 Marks

AT – Aug 2022 – L3 – Q1a – International taxation

Tax treatment for a non-resident company using a subsidiary to execute a project.

Jantua Ltd (Jantua) is a company incorporated in the Republic of Israel with subsidiaries across other countries, including Frankaa Company Ltd (Frankaa) in Ghana. All subsidiaries were incorporated in their respective countries by Jantua.

Jantua won a contract with the Ministry of Roads and Highways to construct a road in Ghana. Jantua used its subsidiary, Frankaa, to carry out the project. Jantua billed the Ministry of Roads and Highways for the work done. Likewise, Frankaa billed Jantua for management and technical services on the road project.

Required:
What is the tax treatment of this arrangement?
(4 marks)

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  • 10 Marks

AT – May 2020 – L3 – Q2b – International taxation

Analyze tax implications for an Italian company constructing a fuel depot in Ghana, distinguishing between trading in Ghana and trading with Ghana

XYZ Parks Ltd, an Italian Company, had a contract for the construction of a fuel depot in Ghana. It was clear from the contract agreement that the production and fabrication costing $500,000 would be carried out outside Ghana. The installation works in Ghana and related services would cost $200,000 and GH¢2,400,000 respectively.

XYZ Parks Ltd has asked of your professional advice on the above transaction.

Required:
i) What is the tax implication of trading in Ghana and trading with Ghana? (4 marks)
ii) What will be your professional advice to XYZ Parks Ltd on the tax implication of other contract? (6 marks)

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  • 20 Marks

AT – May 2020 – L3 – Q1 – International taxation

Explanation of the concept of permanent establishment in Ghana and the differences between economic and juridical double taxation.

The spectrum of investment opportunities in Ghana has heightened and this has attracted some investors who intend to visit next month to assess the potential for investment. The Ministry of Finance has written to your Tax Consulting Firm to make a presentation on behalf of the Ministry to these Investors. The letter from the Ministry contains in part the following:

“International trade has given persons the ability to carry out separate aspects of their business operations in different countries. Even though it will be inconceivable to compel a person to pay taxes in every country where that person carries out business operations, the level of business activity carried on by a person in a particular country may expose that person to tax liabilities under the laws of that country. In Ghana, assessable income of a non-resident person includes income effectively connected with a Ghanaian permanent establishment of the person irrespective of the source of the income…”

Required: Prepare a report highlighting the following:

a) What constitutes a Ghanaian permanent establishment with reference to the Income Tax Act, 2015 (Act 896)?
(4 marks)

b) Explain the taxation rules on Ghanaian permanent establishment as enshrined in the Income Tax Act, 2015 (Act 896).
(10 marks)

c) There are economic double taxation and juridical double taxation. Explain these TWO (2) concepts of double taxation.
(6 marks)

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