Question Tag: Pioneer Status

Search 500 + past questions and counting.

  • Filter by Professional Bodies

  • Filter by Subject

  • Filter by Series

  • Filter by Topics

  • Filter by Levels

  • 15 Marks

AT – Nov 2016 – L3 – SC – Q5 – Tax Incentives and Reliefs

Identify industries qualifying as Pioneer Industries and compute tax liabilities and withholding tax for Ajanaku Nigeria Limited.

a. **One of the incentives available to industries in Nigeria is contained in the Industrial Development (Income Tax Relief) Act 1971, which grants tax holidays to companies in the industries that meet the conditions for being designated “Pioneer Industries.”

Under the Industrial Development (Income Tax Relief) Act 1971, state any FOUR industries that qualify to be regarded as Pioneer Industries.** (4 Marks)

b. Ajanaku Nigeria Limited was incorporated as a pioneer company on March 15, 2011, with a focus on the manufacture of aluminum roofing sheets. It was granted a Pioneer Certificate with Production Day given as July 1, 2011. Extracts of Audited Financial Statements are as shown below:

Period 6 Months to 31/12/11 Year to 31/12/12 Year to 31/12/13 Six Months to 30/6/14
(Loss) / Profit (3,750) (4,800) 2,250 4,500
After Charging: Depreciation 2,800 2,500 1,700 1,000
Withholding Tax on Rent Included 500 250 – –
Donations to:
Epe Traditional Dance Troupe 10 – – –
Nigerian Red Cross – 100 – –
Borno State General Hospital – – 120 –

Additional Information:

  • Ajanaku Nigeria Limited declared gross dividends of ₦600,000 and ₦1,500,000 for 2013 and 2014, respectively.
  • Withholding tax rates on dividends for the relevant years are 10%.
  • Ignore minimum tax provisions.
  • The company’s initial tax relief period was not extended.

Required:
Compute the tax liabilities for the relevant years of assessment relating to Pioneer Status only, and state the amount of Withholding Tax due from the shareholders. (11 Marks)

a. Four Industries Qualifying as Pioneer Industries:

  1. Agricultural production, including food processing and packaging.
  2. Manufacturing, such as aluminum products and roofing sheets.
  3. Mining and processing of minerals, including petroleum refining.
  4. Telecommunication and information technology.

b. Computation of Tax Liabilities and Withholding Tax for Ajanaku Nigeria Limited:

Step 1: Pioneer Period

  • Pioneer period runs from July 1, 2011, to June 30, 2014.

Step 2: Loss/Profit Exemption During Pioneer Period

  • Losses incurred during the pioneer period are disregarded for tax purposes.
  • Profits during the pioneer period are exempt from tax.

Step 3: Dividend Withholding Tax (WHT):

Year Gross Dividend (₦’000) Withholding Tax Rate (%) WHT Amount (₦’000)
2013 600 10 60
2014 1,500 10 150

Total Withholding Tax Due = ₦60,000 + ₦150,000 = ₦210,000.

Final Tax Liabilities:

  • Since Ajanaku Nigeria Limited’s profits during the pioneer period are exempt from tax, Tax Liability = ₦0.

Withholding Tax Due from Shareholders:

  • Total Withholding Tax on dividends for 2013 and 2014 is ₦210,000.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
  • 20 Marks

AT – Nov 2014 – L3 – SB – Q4 – Petroleum Profits Tax (PPT)

Analyze tax implications for Broadway Limited's pioneer status and relevant years of assessment.

Broadway Limited was incorporated on 31 May 2004, as a manufacturer of plastic products. Four Lebanese shareholders invested substantially, intending to become members of the Board of Directors. The company applied for a Pioneer Status under the Industrial Development (Income Tax Relief) Act, Cap. 17, LFN 2004 and was granted a Pioneer Certificate, with a Production Day certified as 1 August 2004.

The following information has been extracted from the company’s records:

Details Amount (N)
Net Profit for Financial Year Ended 31 July 2008 5,005,000
Depreciation 396,435

The Federal Inland Revenue Service (FIRS) certified the following expenditures up to and including the year ended 31 July 2007:

Expenditure Type Amount (N)
Industrial Building 6,142,500
Non-Industrial Building 2,990,000
Plant and Machinery 4,631,250
Motor Vehicles 4,062,500

The promoters declined to apply for an extension of the Pioneer period.

Required:
Advise the management on the tax implications for the relevant years of assessment.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
  • 15 Marks

AAA – Nov 2013 – L3 – SB – Q3 – Audit of Specialized Industries

Identify seven key audit concerns in the extractive industry, focusing on labor issues, community impact, and compliance with regulations.

XYL Limited has been granted a license to operate in the extractive industry in the middle belt of the country, where there is an abundant mineral resource called Topaz. This mineral is in great demand in the manufacturing industries of Western Europe.

Due to the need for heavy equipment requiring intensive capital outlay, indigenous companies could not invest in the sector. Moreover, the technical expertise required in mining this product is not locally available.

The company was not only granted the license but also granted a pioneer status. The local community where operations take place supply the necessary labor, both skilled and unskilled. After a year, the workers’ union found out that they were paid far less than what the company is paying in similar operations in nearby countries. As a result of labor union activities, many workers were retrenched, and the company started making use of locals who had just completed secondary school education. Union activities were proscribed.

Being an extractive industry, the local people were affected as they could no longer carry out their economic activities as before.

Your firm has just been appointed as auditors of XYL Limited after three years of operation.

You are required to:

Explain SEVEN areas of concern that would be of interest to you as auditor and provide reasons for their importance. (15 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
  • 11 Marks

ATAX – Nov 2016 – L3 – Q5b – Tax Incentives and Reliefs

Calculates tax liabilities for a pioneer company and withholding tax on dividends during the pioneer period.

Ajanaku Nigeria Limited was incorporated as a pioneer company on March 15, 2011, focusing on aluminum roofing sheets. It received a Pioneer Certificate with Production Day as July 1, 2011. Extracts from its Audited Financial Statements are as follows:

Gross dividends declared:

  • 2013: N600,000
  • 2014: N1,500,000

Withholding tax rate on dividends for these years is 10%. Ignore Minimum Tax provisions. The initial tax relief period was not extended.

You are required to:

  • Compute the tax liabilities for the relevant years of assessment relating to Pioneer Status only.
  • State the amount of Withholding Tax due from the shareholders. (11 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
  • 30 Marks

AT- Nov 2022 – L3 – Q1 – Income Taxes (IAS 12)

Calculate adjusted profit and tax liabilities for Owoeye Machine Tools, considering pioneer period capital allowances.

As a result of the developing nature of Nigeria’s economy, there are some industries and products that are not well developed on a scale that can adequately cater to the needs of the populace. One of the investment incentives available to industries and products in this category is contained in the Industrial Development (Income Tax Relief) Act 1971. Application has to be made to the Federal Government to enjoy any of these numerous investment incentives.

Owoeye Machine Tools Nigeria Limited was incorporated on January 20, 2016, and was initially granted a pioneer certificate on April 1, 2016. At the end of the pioneer period, the company, due to negligence, failed to follow due process in applying for an extension of the pioneer certificate. The company retained March 31 as its financial year-end. The following records and information were obtained from the company:

  1. Qualifying Capital Expenditure on property, plant, and equipment (certified by the Federal Inland Revenue Service) incurred during the pioneer period:
    Asset Type Amount (N’000)
    Industrial building 23,800
    Building (non-industrial) 11,600
    Motor vehicles 6,200
    Plant 10,400
    Furniture and fittings 5,800
  2. Statement of Adjusted Profits/(Losses) during the Pioneer Period:
    Period Profit/(Loss) (N’000)
    Year ended March 31, 2017 (44,450)
    Year ended March 31, 2018 (23,140)
    Year ended March 31, 2019 8,700
  3. Both the qualifying capital expenditure on property, plant, and equipment and adjusted profits/(losses) were certified by the Federal Inland Revenue Service.
  4. The company made a gross turnover of N312,450,000 and an adjusted profit of N52,250,000 during the year ended March 31, 2020.
  5. Extract from the Statement of Profit or Loss for the Year Ended March 31, 2021:
    Item Amount (N’000)
    Gross turnover 320,220
    Less: Cost of sales (176,550)
    Gross profit 143,670
    Expenses
    Salaries and wages 48,430
    Transport and traveling 2,360
    Motor running expenses 1,580
    Postage and telephone 1,150
    Bank charges 870
    Repairs and maintenance 3,660
    Auditors’ remuneration 1,500
    Legal and professional fees 2,000
    Depreciation 15,770
    Donations 1,600
    Allowance for doubtful debts 7,000
    Administrative expenses 10,070
    Total Expenses 95,990
    Net Profit 47,680
  6. Notes:
    • Legal and Professional Fees: Includes N1,400,000 paid for land acquisition for the business.
    • Allowance for Doubtful Debts: Includes N1,350,000 for specific provision, N4,150,000 for general provision, and N1,500,000 for bad debts written off.
    • Administrative Expenses: Includes N850,000 paid for a feasibility study on a proposed product line.
    • Qualifying Capital Expenditure Schedule for the year ended March 31, 2021:
      Asset Type Date of Acquisition Amount (N’000)
      Motor vehicles (2) April 15, 2020 3,200
      Plant (1) July 1, 2020 5,000
      Furniture and fittings (4) February 13, 2021 1,200

Required:

As the company’s Tax Manager, you are to prepare a report for the attention of the Managing Director showing the company’s:

a. Adjusted profit for the year ended March 31, 2021

(6 Marks)
b. Tax liabilities for the 2021 and 2022 assessment years (24 Marks)
(Total: 30 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
  • 30 Marks

AT – Nov 2017 – L3 – Q1 – Taxation of Companies

Explain conditions for pioneer status and compute tax for HUSNA Ltd.

HUSNA Nigeria Limited was incorporated on May 13, 2015, to manufacture adhesives using gum arabic. The company, led by Mr. Onyeocha Ben, sought to benefit from the Industrial Development (Income Tax Relief) Act. They applied and were granted a Pioneer Certificate, with the production day certified as July 1, 2015.

The company’s financial records provide the following data:

(i) Accumulated profit as of June 30, 2016 – ₦41,250,000
(ii) Capital expenditure during the Pioneer period (certified by FIRS):

  • Building – ₦20,000,000
  • Property, Plant & Equipment – ₦18,750,000
  • Motor vehicles – ₦12,500,000
  • Furniture & Fittings – ₦6,250,000

(iii) Adjusted profits from the new trade after the pioneer period:

  • For 6 months to December 31, 2016 – ₦15,000,000
  • For the year to December 31, 2017 – ₦22,500,000

Required:
a. Explain briefly the conditions for granting a Pioneer Status to a company.
b. Compute the tax liabilities of the company for the relevant assessment years.
c. Differentiate between Tax Audit and Tax Investigation.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
  • 15 Marks

AT – Nov 2016 – L3 – SC – Q5 – Tax Incentives and Reliefs

Identify industries qualifying as Pioneer Industries and compute tax liabilities and withholding tax for Ajanaku Nigeria Limited.

a. **One of the incentives available to industries in Nigeria is contained in the Industrial Development (Income Tax Relief) Act 1971, which grants tax holidays to companies in the industries that meet the conditions for being designated “Pioneer Industries.”

Under the Industrial Development (Income Tax Relief) Act 1971, state any FOUR industries that qualify to be regarded as Pioneer Industries.** (4 Marks)

b. Ajanaku Nigeria Limited was incorporated as a pioneer company on March 15, 2011, with a focus on the manufacture of aluminum roofing sheets. It was granted a Pioneer Certificate with Production Day given as July 1, 2011. Extracts of Audited Financial Statements are as shown below:

Period 6 Months to 31/12/11 Year to 31/12/12 Year to 31/12/13 Six Months to 30/6/14
(Loss) / Profit (3,750) (4,800) 2,250 4,500
After Charging: Depreciation 2,800 2,500 1,700 1,000
Withholding Tax on Rent Included 500 250 – –
Donations to:
Epe Traditional Dance Troupe 10 – – –
Nigerian Red Cross – 100 – –
Borno State General Hospital – – 120 –

Additional Information:

  • Ajanaku Nigeria Limited declared gross dividends of ₦600,000 and ₦1,500,000 for 2013 and 2014, respectively.
  • Withholding tax rates on dividends for the relevant years are 10%.
  • Ignore minimum tax provisions.
  • The company’s initial tax relief period was not extended.

Required:
Compute the tax liabilities for the relevant years of assessment relating to Pioneer Status only, and state the amount of Withholding Tax due from the shareholders. (11 Marks)

a. Four Industries Qualifying as Pioneer Industries:

  1. Agricultural production, including food processing and packaging.
  2. Manufacturing, such as aluminum products and roofing sheets.
  3. Mining and processing of minerals, including petroleum refining.
  4. Telecommunication and information technology.

b. Computation of Tax Liabilities and Withholding Tax for Ajanaku Nigeria Limited:

Step 1: Pioneer Period

  • Pioneer period runs from July 1, 2011, to June 30, 2014.

Step 2: Loss/Profit Exemption During Pioneer Period

  • Losses incurred during the pioneer period are disregarded for tax purposes.
  • Profits during the pioneer period are exempt from tax.

Step 3: Dividend Withholding Tax (WHT):

Year Gross Dividend (₦’000) Withholding Tax Rate (%) WHT Amount (₦’000)
2013 600 10 60
2014 1,500 10 150

Total Withholding Tax Due = ₦60,000 + ₦150,000 = ₦210,000.

Final Tax Liabilities:

  • Since Ajanaku Nigeria Limited’s profits during the pioneer period are exempt from tax, Tax Liability = ₦0.

Withholding Tax Due from Shareholders:

  • Total Withholding Tax on dividends for 2013 and 2014 is ₦210,000.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
  • 20 Marks

AT – Nov 2014 – L3 – SB – Q4 – Petroleum Profits Tax (PPT)

Analyze tax implications for Broadway Limited's pioneer status and relevant years of assessment.

Broadway Limited was incorporated on 31 May 2004, as a manufacturer of plastic products. Four Lebanese shareholders invested substantially, intending to become members of the Board of Directors. The company applied for a Pioneer Status under the Industrial Development (Income Tax Relief) Act, Cap. 17, LFN 2004 and was granted a Pioneer Certificate, with a Production Day certified as 1 August 2004.

The following information has been extracted from the company’s records:

Details Amount (N)
Net Profit for Financial Year Ended 31 July 2008 5,005,000
Depreciation 396,435

The Federal Inland Revenue Service (FIRS) certified the following expenditures up to and including the year ended 31 July 2007:

Expenditure Type Amount (N)
Industrial Building 6,142,500
Non-Industrial Building 2,990,000
Plant and Machinery 4,631,250
Motor Vehicles 4,062,500

The promoters declined to apply for an extension of the Pioneer period.

Required:
Advise the management on the tax implications for the relevant years of assessment.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
  • 15 Marks

AAA – Nov 2013 – L3 – SB – Q3 – Audit of Specialized Industries

Identify seven key audit concerns in the extractive industry, focusing on labor issues, community impact, and compliance with regulations.

XYL Limited has been granted a license to operate in the extractive industry in the middle belt of the country, where there is an abundant mineral resource called Topaz. This mineral is in great demand in the manufacturing industries of Western Europe.

Due to the need for heavy equipment requiring intensive capital outlay, indigenous companies could not invest in the sector. Moreover, the technical expertise required in mining this product is not locally available.

The company was not only granted the license but also granted a pioneer status. The local community where operations take place supply the necessary labor, both skilled and unskilled. After a year, the workers’ union found out that they were paid far less than what the company is paying in similar operations in nearby countries. As a result of labor union activities, many workers were retrenched, and the company started making use of locals who had just completed secondary school education. Union activities were proscribed.

Being an extractive industry, the local people were affected as they could no longer carry out their economic activities as before.

Your firm has just been appointed as auditors of XYL Limited after three years of operation.

You are required to:

Explain SEVEN areas of concern that would be of interest to you as auditor and provide reasons for their importance. (15 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
  • 11 Marks

ATAX – Nov 2016 – L3 – Q5b – Tax Incentives and Reliefs

Calculates tax liabilities for a pioneer company and withholding tax on dividends during the pioneer period.

Ajanaku Nigeria Limited was incorporated as a pioneer company on March 15, 2011, focusing on aluminum roofing sheets. It received a Pioneer Certificate with Production Day as July 1, 2011. Extracts from its Audited Financial Statements are as follows:

Gross dividends declared:

  • 2013: N600,000
  • 2014: N1,500,000

Withholding tax rate on dividends for these years is 10%. Ignore Minimum Tax provisions. The initial tax relief period was not extended.

You are required to:

  • Compute the tax liabilities for the relevant years of assessment relating to Pioneer Status only.
  • State the amount of Withholding Tax due from the shareholders. (11 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
  • 30 Marks

AT- Nov 2022 – L3 – Q1 – Income Taxes (IAS 12)

Calculate adjusted profit and tax liabilities for Owoeye Machine Tools, considering pioneer period capital allowances.

As a result of the developing nature of Nigeria’s economy, there are some industries and products that are not well developed on a scale that can adequately cater to the needs of the populace. One of the investment incentives available to industries and products in this category is contained in the Industrial Development (Income Tax Relief) Act 1971. Application has to be made to the Federal Government to enjoy any of these numerous investment incentives.

Owoeye Machine Tools Nigeria Limited was incorporated on January 20, 2016, and was initially granted a pioneer certificate on April 1, 2016. At the end of the pioneer period, the company, due to negligence, failed to follow due process in applying for an extension of the pioneer certificate. The company retained March 31 as its financial year-end. The following records and information were obtained from the company:

  1. Qualifying Capital Expenditure on property, plant, and equipment (certified by the Federal Inland Revenue Service) incurred during the pioneer period:
    Asset Type Amount (N’000)
    Industrial building 23,800
    Building (non-industrial) 11,600
    Motor vehicles 6,200
    Plant 10,400
    Furniture and fittings 5,800
  2. Statement of Adjusted Profits/(Losses) during the Pioneer Period:
    Period Profit/(Loss) (N’000)
    Year ended March 31, 2017 (44,450)
    Year ended March 31, 2018 (23,140)
    Year ended March 31, 2019 8,700
  3. Both the qualifying capital expenditure on property, plant, and equipment and adjusted profits/(losses) were certified by the Federal Inland Revenue Service.
  4. The company made a gross turnover of N312,450,000 and an adjusted profit of N52,250,000 during the year ended March 31, 2020.
  5. Extract from the Statement of Profit or Loss for the Year Ended March 31, 2021:
    Item Amount (N’000)
    Gross turnover 320,220
    Less: Cost of sales (176,550)
    Gross profit 143,670
    Expenses
    Salaries and wages 48,430
    Transport and traveling 2,360
    Motor running expenses 1,580
    Postage and telephone 1,150
    Bank charges 870
    Repairs and maintenance 3,660
    Auditors’ remuneration 1,500
    Legal and professional fees 2,000
    Depreciation 15,770
    Donations 1,600
    Allowance for doubtful debts 7,000
    Administrative expenses 10,070
    Total Expenses 95,990
    Net Profit 47,680
  6. Notes:
    • Legal and Professional Fees: Includes N1,400,000 paid for land acquisition for the business.
    • Allowance for Doubtful Debts: Includes N1,350,000 for specific provision, N4,150,000 for general provision, and N1,500,000 for bad debts written off.
    • Administrative Expenses: Includes N850,000 paid for a feasibility study on a proposed product line.
    • Qualifying Capital Expenditure Schedule for the year ended March 31, 2021:
      Asset Type Date of Acquisition Amount (N’000)
      Motor vehicles (2) April 15, 2020 3,200
      Plant (1) July 1, 2020 5,000
      Furniture and fittings (4) February 13, 2021 1,200

Required:

As the company’s Tax Manager, you are to prepare a report for the attention of the Managing Director showing the company’s:

a. Adjusted profit for the year ended March 31, 2021

(6 Marks)
b. Tax liabilities for the 2021 and 2022 assessment years (24 Marks)
(Total: 30 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
  • 30 Marks

AT – Nov 2017 – L3 – Q1 – Taxation of Companies

Explain conditions for pioneer status and compute tax for HUSNA Ltd.

HUSNA Nigeria Limited was incorporated on May 13, 2015, to manufacture adhesives using gum arabic. The company, led by Mr. Onyeocha Ben, sought to benefit from the Industrial Development (Income Tax Relief) Act. They applied and were granted a Pioneer Certificate, with the production day certified as July 1, 2015.

The company’s financial records provide the following data:

(i) Accumulated profit as of June 30, 2016 – ₦41,250,000
(ii) Capital expenditure during the Pioneer period (certified by FIRS):

  • Building – ₦20,000,000
  • Property, Plant & Equipment – ₦18,750,000
  • Motor vehicles – ₦12,500,000
  • Furniture & Fittings – ₦6,250,000

(iii) Adjusted profits from the new trade after the pioneer period:

  • For 6 months to December 31, 2016 – ₦15,000,000
  • For the year to December 31, 2017 – ₦22,500,000

Required:
a. Explain briefly the conditions for granting a Pioneer Status to a company.
b. Compute the tax liabilities of the company for the relevant assessment years.
c. Differentiate between Tax Audit and Tax Investigation.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error

Elevate your professional expertise across key business domains with our comprehensive training programs

Our offerings

Contact Info

  • +233203701923
    +233543919232
  • info@knowsia.com

Customer

Get In Touch

Follow us on our social media and get daily updates.

Facebook-f Twitter Linkedin-in Envelope