Question Tag: Tax computation

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ATAX – May 2017 – L3 – Q7b – Petroleum Profits Tax (PPT)

Explain "Memorandum of Understanding" in PPT computation and highlight the Year 2000 MOU details.

Question

i. Describe briefly your understanding of the term “Memorandum of Understanding” as it applies to Petroleum Profits Tax computation. (3 Marks)

ii. State FOUR highlights of the Year 2000 Memorandum of Understanding. (4 Marks)

Answer

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Tags: Memorandum of Understanding, Petroleum Profits Tax, Tax computation
Level: Level 3

Topic: Petroleum Profits Tax (PPT)

ATAX – May 2017 – L3 – Q6b – Corporate Tax Compliance and Reporting

Compute the Companies Income Tax liability for small businesses using the small business rate and explain the computations.

Question

You have been provided with the following information in respect of THREE small businesses:

You are required to:
i. Compute the Companies Income Tax liability for each of the companies for the relevant assessment year, using the small business rate. (3 Marks)
ii. Give reasons for your computations. (5 Marks)

Answer

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Tags: Companies Income Tax, Profit, Revenue, Small Business, Tax computation
Level: Level 3

Topic: Corporate Tax Compliance and Reporting

ATAX – May 2017 – L3 – Q3a – Capital Gains Tax (CGT)

Compute Capital Gains Tax for hire purchase transactions and explain the implications of hire purchase interest on CGT.

Question

Global Company Nigeria Limited, a construction company based in Abuja, commenced business on January 7, 2009. The company has struggled to acquire necessary equipment due to poor financial results.

At a directors’ meeting on November 6, 2012, the company decided to approach a finance house for assistance. They provided the following information:

The company purchased an excavator on hire purchase on March 1, 2013, and paid a deposit of N32,000,000.
The excavator’s cost price was N55,000,000, with the balance payable in 25 monthly installments of N1,200,000 starting April 1, 2013.

The excavator was sold as follows:

For N65,000,000 after installment payments on January 1, 2014.
For N69,000,000 after installment payments on November 1, 2014.

You are required to:

i. Calculate the Capital Gains Tax (CGT) for the relevant Assessment Year, assuming the sales values above. (14 Marks)
ii. Explain the implications of hire purchase interest on Capital Gains Tax computations. (2 Marks)

Answer

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Tags: Assessment Year, Capital gains tax, Hire Purchase, Tax computation
Level: Level 3

Topic: Capital Gains Tax (CGT)

ATAX – May 2019 – L3 – Q7b – Corporate Tax Compliance and Reporting

Compute the total tax liabilities for Alaba Trading Limited for the 2018 assessment year, considering its assessable profit, capital allowances, and dividend payable.

Question

For the assessment year 2018, below are the extracts from the tax computations of Alaba Trading Limited:

Item	Amount (₦)
Assessable profit	8,200,000
Capital allowances	5,400,000
Dividend payable	6,000,000

Required:
Determine the total tax liabilities of Alaba Trading Limited for the assessment year.

Answer

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Tags: Capital allowances, Corporate Tax, Dividend tax, Tax computation, Tax liabilities
Level: Level 3

Topic: Corporate Tax Compliance and Reporting

ATAX – May 2019 – L3 – Q1b – Petroleum Profits Tax (PPT)

Assess and compute the assessable profit, chargeable profit, chargeable tax, and total tax payable for a petroleum company, based on financial data.

Question

b. Priceless Oil Limited commenced crude oil production in Nigeria in 2006. The company has provided the following financial report for the year ended December 31, 2018:

Additional Information:

Posted price for exported crude oil averaged $52/barrel (at an exchange rate of ₦306 to $1).
Included in other income: ₦38,000,000 from crude transportation (cost: ₦16,250,000).
Natural gas contract with Tommy Limited: value ₦655,000,000, load factor 54%.
Depreciation of ₦120,250,000 was included in production costs.
Qualifying capital expenditures:

Type	Date	Location	Amount (₦)
Storage tank	March 12, 2018	On-shore	23,500,000
Plant and equipment	November 15, 2018	Continental Shelf of 130 metres of water depth	75,000,000

Capital allowances brought forward: ₦33,700,000; for the year: ₦88,500,000.
Admin expenses include ₦3,500,000 stamp duties for debentures.
Specific bad debts written off: ₦39,500,000.
Donations were wholly expended for petroleum operations.
₦12,250,000 was paid to retrieve petroleum-related data (included in miscellaneous expenses).
₦20,500,000 interest was paid to an associate company at market rate.

Prepare and submit a report on the following computations:
i. Assessable profit (12 Marks)
ii. Chargeable profit (6 Marks)
iii. Chargeable tax (6 Marks)
iv. Total tax payable (6 Marks)

Answer

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Tags: Oil and Gas Taxation, Petroleum Profits Tax, PPT Act Cap P13 LFN 2004, Tax Compliance, Tax computation
Level: Level 3

Topic: Petroleum Profits Tax (PPT)

ATAX – May 2019 – L3 – Q1a – Petroleum Profits Tax (PPT)

Assess and compute the assessable profit, chargeable profit, chargeable tax, and total tax payable for a petroleum company, based on financial data.

Question

In line with provisions of the Petroleum Profits Tax Act Cap P13 LFN 2004 (as amended), explain “accounting period” of a petroleum exploration company. (2 Marks)

Answer

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Tags: Oil and Gas Taxation, Petroleum Profits Tax, PPT Act Cap P13 LFN 2004, Tax Compliance, Tax computation
Level: Level 3

Topic: Petroleum Profits Tax (PPT)

AT – Nov 2014 – L3 – SC – Q7 – Capital Gains Tax (CGT)

Compute total income for 2011 tax assessment and capital gains tax for relevant year.

Question

Mr. James Zonto lived in Canada for thirty years and decided to settle down permanently in Nigeria with effect from January 2007.

Based on advice from his secondary school classmate, Mr. James Zonto repatriated a huge amount of money to Nigeria. He took advantage of the better investment climate in Nigeria and acquired the following properties:

Uyo Duplex: Bought on 2 March 2008 for N25,320,000. Rental income: N855,000 per annum (net of withholding tax).
Fixed Deposit Account: Invested N14,000,000 on 4 January 2008 with Doronine Bank Plc, yielding interest (net of withholding tax) of N180,000 per month.
Onitsha Property: Acquired on 6 October 2008 for N31,500,000 with incidental expenses of N2,400,000. Annual rent: N1,800,000.
Okija House: Bought for N10,000,000 as a personal residence; not rented out.

In 2012, he decided to resettle in Toronto and took the following actions:

Uyo House: Sold for N47,450,000 after incurring the following expenses:
- Advertising: N650,000
- Valuation fees: N2,000,000
- Estate Agent’s Commission: N2,372,500
- Legal fees: N1,500,000
Fixed Deposit: Matured on 31 December 2011; not rolled over.
Onitsha Property: Sold one of the four duplexes for N14,175,000. Remaining duplexes valued at N40,500,000.
Okija House: Sold for N36,500,000 after incurring incidental expenses of N3,650,000.

Required:
(a) Compute the Total Income for Income Tax purposes for 2011 year of assessment.
(b) Compute the Capital Gains Tax payable for the relevant year of assessment.

Answer

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Tags: Capital gains tax, Disposal of assets, Fixed Deposit Income, Investment income, Rental Income, Tax computation
Level: Level 3

Topic: Capital Gains Tax (CGT)
Series: NOV 2014

ATAX – May 2021 – L3 – Q2 – Tax Incentives and Reliefs

Computation of adjusted profit and tax liabilities for Nature Agricultural Products Limited under pioneer status.

Question

The quest for economic development in every sector of the country has enabled the Federal Government to come up with various tax incentives, especially for pioneer companies.

Nature Agricultural Products Limited, a medium-sized company, was incorporated on January 10, 2015, as a manufacturer of animal feeds. The company thereafter applied for a pioneer status and was granted a pioneer certificate with a production day of March 1, 2015.

The following details were provided in respect of the business operations of the company:

(i)

(ii.) Capital expenditure incurred on or before February 28, 2018:

(iii) Accumulated profit as at February 28, 2018= N3,968,000
The management of the company did not apply for extension of the pioneer period.

Required:

a. Compute the adjusted profit for the relevant years. (3 Marks)

b. Compute the tax liabilities for the relevant assessment years. (17 Marks)

Answer

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Tags: Adjusted Profit, Pioneer Companies, Tax computation, Tax Incentives
Level: Level 3

Topic: Tax Incentives and Reliefs

ATAX – Nov 2018 – L3 – Q4b – Capital Gains Tax (CGT)

Computation of capital gains tax for jewelry sold on installment with multiple assessment years.

Question

(b) Fidelis Agom recently decided to relocate to Sweden as a result of a new appointment offered to him by a multinational company. His wife, Chioma, decided to sell all her jewelry, which she acquired for a sum of N6.3 million. The buyer, Chief Mrs. Ngozi Danladi, was unable to pay immediately the sum of N8.4 million. She therefore decided to enter into a sale agreement with Chioma Agom to pay in four installments within an interval of three months as follows:

N3.5 million
N2.1 million
N2.1 million
N0.7 million

The first installment was paid on November 10, 2013, which was the day of the sale.

You are required to:
Compute the capital gains tax for the relevant years of assessment.
(5 Marks)

Answer

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Tags: Assessment Year, Capital gains tax, Installment Payment, Jewelry Sale, Tax computation
Level: Level 3

Topic: Capital Gains Tax (CGT)

ATAX – Nov 2018 – L3 – Q2 – Taxation of Specialized Businesses

Calculation of petroleum profits tax for Olu Oil Limited considering local and export crude oil sales, gas contracts, and various expenses.

Question

Olu Oil Limited has been in the oil prospecting business in one of the major oil fields in the Niger Delta region of Nigeria since 2009. The company has provided the following operational results for the year ended December 31, 2015:

(i) Type of crude oil and sales statistics:

Bonny Light: 35,000 barrels exported at 39º API
Bonny Medium: 25,200 barrels exported at 35º API
Forcados: 16,300 barrels exported at 32º API

Price per barrel:

Bonny Light: $52.03 at 35º API
Bonny Medium: $49.04 at 35º API
Forcados: $48.29 at 35º API

Adjustment for API variance: Actual realized price was arrived at after adjusting for the variance in API. Thus, for every API, $0.03 was the variance in price at 35º API.

(ii) Local sales of crude oil: 32,750 barrels of crude oil was produced and sold in the domestic market at the rate of N345 per barrel.

(iii) Natural gas sales from two contracts:

Contract	Value (N)	Load Factor
Obi Ltd	42,285,000	62
Oba Ltd	27,775,000	74

(iv) Miscellaneous income: N125,800,300, including N105,500,000 from the sale of refined petroleum products. Attributable expenses of N88,240,000 were included in management and administrative expenses.

(vi) Miscellaneous income included N105,500,000, from the sale of refined petroleum products. An equivalent attributable expenses of N88,240,000 was included in management and administrative expenses.
(vii) Interest paid included N5,350,000, which was paid to Prince Limited, an associated company.
(viii) Donations included:

(ix) The pension scheme was approved by the Joint Tax Board.

(x) Exchange loss on remittance amounting to N3,200,000 was included in management and administrative expenses.
(xi) The schedule of qualifying capital expenditure includes:

(xii) Capital allowances brought forward was N12,700,000.
(xiii) The rate of exchange was N360 to a US Dollar.
(xiv) NNPC provides the relevant schedule as follows:

Required:
Evaluate the transactions and advise the management on:
(a.) Assessable profit (14 Marks)
(b.) Chargeable profit (2 Marks)
(c.) Chargeable tax (2 Marks)
(d.) Total tax liability payable (2 Marks)

Answer

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Tags: API Adjustment, Crude Oil Pricing, Donations, Miscellaneous Income, Natural Gas Contracts, Nigerian Oil Fields, Oil Prospecting, Petroleum taxation, Tax computation
Level: Level 3

Topic: Taxation of Specialized Businesses

TAX – Nov 2023 – L2 – Q4 – Taxation of Trusts and Estates

Compute the net income assessable in the hands of trustees and assessable income of each beneficiary.

Question

The records of the two trustees of Olalomi Children Settlement created in favor of the three children—Olami, Olambe, and Olaide—revealed the following as of December 31, 2020:

Income Type	Amount (N)
Rental income (gross)	398,900
Trading income	210,000
Dividend (gross)	196,000
Profit on sale of non-current assets	600,000

Additional Information:

The interest received was from Gbogbo-Ero Commercial Bank Limited.
Other allowable expenses amounted to N23,000.
Each beneficiary was entitled to a quarter of the net distributable income.
Fixed annuity to the beneficiaries was N42,000 (gross) to be shared equally.
Trustee’s remuneration per trust deed was fixed at N25,000 each, plus 2.5% of the total computed income.
Discretionary payments were made to Olami (N10,000), Olambe (N34,000), and Olaide (N29,000).
Agreed capital allowance was N87,600.
Administrative and other expenses amounted to N106,000.

Required: a. Compute the net income assessable in the hands of the trustees. (14 Marks)
b. Compute the assessable income in the hands of each beneficiary. (6 Marks)

Answer

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Tags: Allowable expenses, Beneficiaries Income, Settlement Trust, Tax computation, Trustees Income
Level: Level 2

Topic: Taxation of Trusts and Estates

TAX – Nov 2023 – L2 – Q1 – Personal Income Tax (PIT)

Compute the personal income tax payable by a proprietor with specific adjustments for disallowable expenses and capital allowances.

Question

Alhaji Nura Imam, having spent over 20 years as an employee of Apex Limited, retired on November 1, 2020. On January 2, 2021, he registered a business under the name of Nura Imam Enterprises. The profit or loss account of the enterprise for the year ended December 31, 2021, is as follows:

You were provided with the following additional information:

(v) Agreed capital allowance on qualifying capital expenditure was N1,240,000.
(vi) Alhaji Imam received a gratuity of N4,000,000 during the year.
(vii) Alhaji Imam is blessed with five children, all within the ranges of 10 to 21 years.
(viii) The proprietor has a life assurance policy on which he pays a premium of N1,200,000 annually.

Required: Compute the personal income tax payable by Alhaji Nura Imam for the relevant assessment year. (30 Marks)

Answer

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Tags: Adjusted Profit, Consolidated Relief Allowance, Disallowable expenses, Personal income tax, Proprietor, Tax computation
Level: Level 2

Topic: Personal Income Tax

AT – Nov 2017 – L3 – Q6 – Tax Administration and Dispute Resolution

Company on the total tax liabilities

Question

Pategi and Abu are brothers based in Hackettstown, New Jersey, USA. In 2009, they, along with ten other African-Americans, incorporated a telecommunications company named Pategi Telecommunications Limited. The company, headquartered in the USA, has a representative office in Share, Kwara State, Nigeria. In the year ended December 31, 2014, the following transactions were extracted from the company’s records:

Number of Minutes of Telecommunication Transactions:
- U.S. to other parts of the World: 1,705,000 minutes
- U.S. to Nigeria: 374,000 minutes
- Nigeria to U.S.: 426,250 minutes
- Nigeria to Canada: 550,000 minutes
- U.S. to Canada through Nigeria: 794,750 minutes
  Total Minutes: 3,850,000 minutes
Worldwide Expenses Incurred (Naira):
- Refurbishment: N7,150,000
- Rent: N1,100,000
- Depreciation: N25,991,563
- Salaries and Wages: N4,065,188
- Other Disallowable Expenses: N9,658,000
- Administrative Expenses: N4,820,750
  Total Expenses: N52,785,501
Telecommunication Charges:
- Average charge rate per minute: $0.50
- Applicable exchange rate: N198 to $1.00

Required:
Advise the company on the total tax liabilities for the relevant year of assessment. (Total 15 Marks)

Answer

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Tags: Cross-Border Transactions, Exchange Rate, International Taxation, Revenue, Tax Assessment, Tax computation, Tax liabilities, Telecommunications
Level: Level 3

Topic: Tax Administration and Dispute Resolution
Series: NOV 2017

AT – Nov 2017 – L3 – Q3 – Double Taxation Reliefs and Credits

Outline objectives of the MOU with oil companies and compute double tax credit for Salim Consultants.

Question

a. Outline FIVE objectives of the Memorandum of Understanding which the Federal Government of Nigeria entered into with the Oil Producing Companies on January 1, 1986.

b. SALIM CONSULTANTS LIMITED, incorporated in 2012, is a corporate advisory firm in Nigeria. In 2015, it expanded to Burundi to explore business opportunities there. The directors are interested in the Double Taxation Agreement but have not benefited from it before.

Below is a summary of the Income Statements for the year ended December 31, 2016:

Description	Nigeria (N)	Burundi (N)	Total (N)
Gross Advisory fees	57,000,000	21,750,000	78,750,000
Other Income	960,000	1,800,000	2,760,000
Total	57,960,000	23,550,000	81,510,000
Deduct Expenses:
Deal Execution Expenses	(30,225,000)	(9,750,000)	(39,975,000)
Office Rent	(1,800,000)	(675,000)	(2,475,000)
Depreciation	(5,100,000)	(2,700,000)	(7,800,000)
Loss on sale of Non-Current Assets	–	(525,000)	(525,000)
Foreign Exchange Loss Provision	(960,000)	–	(960,000)
Other Operating Expenses	(3,240,000)	(1,380,000)	(4,620,000)
Net Operating Profit	16,635,000	8,520,000	25,155,000

Additional information:
(i) N2,130,000 was paid to the Burundi Tax Authority after claiming N4,800,000 Capital Allowance. Capital Allowance claimable in Nigeria was N7,800,000.
(ii) Other income of N960,000 is profit from the sale of Non-Current Assets, while N1,800,000 is gains from the disposal of securities.

Required:
a. Explain briefly what is meant by Double Taxation Relief.
b. Compute the Double Tax Credit claimable by the Company assuming there is a Double Taxation Agreement with Burundi.

Answer

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Tags: Double Taxation, Memorandum of Understanding, Tax computation, Tax Credit
Level: Level 3

Topic: Double Taxation Reliefs and Credits
Series: NOV 2017

AT – Nov 2017 – L3 – Q2 – Taxation of Companies

Compute assessable profit, chargeable profit, and tax for Skkye Petroleum Plc.

Question

Skkye Petroleum Plc. began operations over ten years ago and uses December 31 as its accounting date. The following details were extracted from the accounting records for the year ended December 31, 2016:

Crude oil exported – 3,500,000 barrels
Crude oil used locally – 1,200,000 barrels at N100 per barrel
Incidental income from petroleum operations – ₦26,750,000
Exploration and drilling costs – ₦30,000,000
Management and administration expenses – ₦240,500,000
Non-productive rents – ₦8,300,000
Provision for bad debts:
- General – ₦7,500,000
- Specific – ₦11,200,000
Depreciation – ₦7,250,000
Losses brought forward – ₦13,200,000

Qualifying capital expenditures:

Pipeline and storage tanks (March 2016, Continental Shelf, 190 meters depth) – ₦48,000,000
Plant and machinery (June 2014, Territorial Waters, 90 meters depth) – ₦63,800,000
Furniture and fittings (May 2013, Territorial Waters, 95 meters depth) – ₦21,000,000
Buildings (April 2015, onshore) – ₦71,000,000

Breakdown of Management and Administration expenses:

Donations to XYZ Political Party – ₦8,500,000
Expenditure on information regarding petroleum deposits – ₦4,700,000
Companies income tax of an associated company – ₦5,000,000
Interest on inter-company loans (market terms) – ₦2,600,000
Staff salaries – ₦175,000,000
Royalties on export sales – ₦6,200,000
Repairs and renewals on PPE for petroleum operations – ₦2,900,000
Rent for land/buildings under an Oil Prospecting License – ₦3,600,000
Other administrative expenses – ₦32,000,000

The international market price of crude oil in 2016 was USD $75 per barrel, with an exchange rate of USD $1 = ₦280.

Required:
a. Compute the assessable profit.
b. Compute the chargeable profit.
c. Compute the assessable tax.
d. Compute the chargeable tax.
e. Compute the Tertiary Education Tax.

Answer

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Tags: Assessable Profit, Chargeable Profit, Petroleum Operations, Tax computation, Tertiary Education Tax
Level: Level 3

Topic: Taxation of Companies
Series: NOV 2017

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

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

Question

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.

Answer

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Tags: Pioneer Status, Tax Audit, Tax computation, Tax Investigation, Tax liabilities
Level: Level 3

Topic: Taxation of Companies
Series: NOV 2017

TAX – May 2015 – L2 – SB – Q3 – Companies Income Tax (CIT)

Steps involved in changing accounting date and computing assessable profits under both old and new dates, and cessation implications.

Question

Hopeful Limited, a manufacturing company, has been having declining profits and liquidity problems since 2010. The company changed its accounting year-end in 2010 from 31 May to 31 December.

The shareholders injected ₦10 million into the company in January 2011, which boosted its profits in 2011 and 2012.

Even with the increase in profits in 2011 and 2012, the Managing Director was of the opinion that it is better to cut the company’s losses, once and for all, by winding-up the company. However, the Finance Director disagreed and argued that since the company’s performance was now improving, it should continue to operate.

The Company’s Accountant has prepared the financial statements and the following are extracts:

Year	Profits (₦)
Year ended 31 May 2009	540,000
Year ended 31 May 2010	300,000
Seven months to 31 December 2010	645,000
Year ended 31 December 2011	1,575,000
Year ended 31 December 2012	1,876,500

The Chairman of Hopeful Limited invited you to his office on 12 June 2013, to educate him on the two concepts of change of accounting date and cessation of business as well as their tax implications.

Required:

a. Identify the steps involved in the event that HOPEFUL Limited adopts the change of accounting date. (6 Marks)
b. Compute the Assessable profits for 2011 – 2013, if the option to change accounting date is accepted, using both the old and the new dates. (7 Marks)
c. Compute the Assessable profits for the relevant years if the cessation option is accepted using the normal basis and the revised basis of assessment. (7 Marks)

Answer

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Tags: Assessable Profit, Change of Accounting Date, Companies Income Tax, Financial Accounting, Tax computation, Tax Planning
Level: Level 2

Topic: Companies Income Tax (CIT)
Series: MAY 2015

TAX – Nov 2014 – L2 – Q4 – Personal Income Tax

Calculate annual and monthly tax liabilities for Mr. David Olaleye.

Question

Mr. David Olaleye retired from the Ministry of Water Resources, Ogun State, on 31 December 2012 and was paid a gratuity of ₦4,000,000. He secured employment with OLAK Limited on 1 January 2013 as a Senior Marketing Manager, with a salary of ₦8,400,000 per annum. He is married with a wife and six children.

His records at the end of his first year of employment revealed:

He was given an official car with a market value of ₦2,500,000.
The company pays ₦820,000 annually for his official accommodation.
He has a life assurance policy with Okonkwo Assurance Plc. (Sum assured: ₦480,000; Monthly premium: ₦4,200).
He contributes ₦20,000 monthly to an approved pension scheme.
He spent ₦17,000 annually for the upkeep of his two aged parents.
He contributes ₦15,000 per month to the National Health Insurance Fund and ₦20,000 per month to the National Housing Fund.

Requirements:

a. Compute the annual and monthly tax liabilities of Mr. David Olaleye for the relevant tax year. (12 Marks)
b. Explain what constitutes Gross Emoluments under the Personal Income Tax (Amendment) Act 2011. (3 Marks)
c. List the benefits of applying computer models in tax administration. (5 Marks)

Answer

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Tags: Benefits in kind, Gross Emoluments, Personal income tax, Tax computation
Level: Level 2

Topic: Personal Income Tax
Series: NOV 2014

TAX – Nov 2014 – L2 – Q1 – The Nigerian Tax System

Compute CIT and Education Tax for Chief Ozone's business based on given financials.

Question

Chief Ozone, a versatile business personality who has been in business for many years, decided to set up a new family business. He commenced the new business of publishing books on 1 July 2008, under the name Seye Ventures Limited. The accounting year-end is 31 December each year.

Extracts from the financial records are as follows:

Period	31/12/08 (6 Months)	Year Ended 31/12/09
Revenue	N1,850,000	N2,320,000
Cost of Sales	(N500,000)	(N900,000)
Gross Profit (A)	N1,350,000	N1,420,000

Deductions:

Item	31/12/08	31/12/09
Newspapers	N75,000	N95,000
Depreciation	N150,000	N200,000
Salaries	N45,000	N55,000
Transport expenses	N85,000	N64,000
General provision for bad debts	N50,000	N46,000
Vehicle repairs	N95,000	N73,000
Formation expenses	N35,000	–
Purchase of equipment	N78,000	N68,000
Donation to political party	N25,000	N42,000
Loss on sale of Non-Current Assets	–	N60,000
Medical expenses	N30,000	N40,000
Total Cost (B)	N668,000	N743,000

Net Profit Calculation: Net Profit (A – B):

For period ending 31/12/08: N682,000
For year ending 31/12/09: N677,000

Additional Information:

Agreed Capital Allowances:
- 2009 Year of Assessment: N240,000
- 2010 Year of Assessment: N120,000

Chief Ozone traveled for a meeting, which led to discussions on compliance with taxation laws regarding change of accounting date.

Chief Ozone travelled from Benin to Abuja for a meeting between a team of
businessmen and the Federal Minister of Trade. During the meeting, the Minister
informed the delegates that for the operations of any business entity to be considered
for approval, it must comply with taxation laws.

Some of the delegates at the meeting gave different interpretations to the provisions of
the tax laws on the Change of Accounting Date. Chief Ozone was of the opinion that
whether a company changes its accounting date or not, normal tax computations
should apply. Mr. Jay, one of those who attended the meeting was of the opinion that
the procedure for determining the Change of Accounting Date was not clear to him.

The meeting was postponed till another date since the issues raised remained
unresolved.

Required:

a. Using the extracts provided, compute the Income and Tertiary Education taxes
for 2009 and 2010 Years of Assessment.
NOTE: Ignore the tax payer’s right of election. (15 Marks)

b. Explain briefly the rules on Change of Accounting Date under the Companies
Income Tax Act (CITA) that may resolve the issues of the pending delegates’
meeting. (10 Marks)

c. State the procedure for determining Companies Income Tax Liability arising
from a Change in Accounting Date. (5 Marks)

Answer

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Tags: Change of Accounting Date, CIT, Income Assessment, Tax computation
Level: Level 2

Topic: The Nigerian Tax System
Series: NOV 2014

PSAF – Nov 2015 – L2 – Q3c – Government Revenue

Compute Irepodun State Government's revenue budget for 2015 fiscal year.

Question

Irepodun State is inhabited by 8,000,000 citizens. The State is expected to generate revenue from different sources. The following details are provided for the 2015 fiscal year:

(i) The number of taxable adults residing in the State is 3,500,000. The rate of tax payable per resident is N20,000 per taxable adult on average per annum.
(ii) There are 22,500 industries which are expected to pay land use charges of N10,000 per industry.
(iii) There are 2,300,000 residential buildings expected to pay land use charge of N4,500 per house per annum.
(iv) The modern markets built by the State Government will generate N12,000 per annum per stall and N5,000 per annum per seller and hawker operating in the markets. There are 3,000 modern stalls and 250,000 sellers and hawkers assumed to operate in the markets each year. The local governments within the areas of the markets’ location are entitled to 50% of revenue generated from the markets.
(v) There are 5,000 mass transit buses owned by the State Government, each of which generates N5,000 per business day. Assume 28 business days in a month.
(vi) The State expects the following additional revenue in the year:

Revenue Source	N’Million
Statutory allocation from the Federation	25,000
Miscellaneous Revenue	3,000

Required:

Compute the revenue budget of Irepodun State Government for the fiscal year 2015.

Answer

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Tags: Fiscal Planning, Public Sector Revenue, Revenue Budget, Tax computation
Level: Level 2

Topic: Government Revenue
Series: NOV 2015

Question Tag: Tax computation

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