Question Tag: Tax Appeal

Papa Ejima Limited, a manufacturing company, filed tax returns for the 2014 Assessment Year. The Federal Inland Revenue Service (FIRS) issued additional assessments totaling N360,000 for Value Added Tax (VAT) and N3,050,000 for Withholding Tax (WHT). The Managing Director disputes this assessment, asserting the accuracy of the company’s tax filings.

The records of the company for the Accounting Year ended December 31, 2013 showed:

Other relevant information includes:

1. Revenue:
   • Export sales: N58,500,000
   • Local sales: N129,000,000
2. Cost of sales:
   • Opening inventory (VAT inclusive): N22,800,000
   • Closing stock (VAT inclusive): N37,150,000
   • Purchase of raw material: N90,600,000
   • Freight charges: N18,700,000
   • Other direct materials: N27,550,000
3. Other income:
   • Foreign exchange gain: N4,800,000
   • Profit on sale of Non-current assets (sales proceeds is N21.5m): N8,850,000
   • Management fees from subsidiary companies: N17,600,000
4. Operating expenses:
   • Office rent: N18,000,000
   • Audit fees: N4,000,000
   • Consultancy fees to ZXY Ltd: N11,000,000
   • Directors’ fees: N7,500,000
   • Other expenses: N16,750,000
5. Additional details:
   • The company purchased Non-Current Assets (VAT inclusive): N84,000,000
   • VAT remitted to FIRS during the year: N1,976,235
   • WHT remitted to FIRS during the year: N6,650,000

Required:
As the tax consultant for the company, prepare a memo to advise the Managing Director on the appropriate objection and appeal procedures available to the company under the tax regulations.

(Total 15 Marks)