Question Tag: Tax computation

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  • 7 Marks

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

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

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)

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  • 8 Marks

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.

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)

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  • 16 Marks

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.

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:

  1. For N65,000,000 after installment payments on January 1, 2014.
  2. 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)

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  • 5 Marks

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.

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.

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  • 30 Marks

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.

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:

  1. Posted price for exported crude oil averaged $52/barrel (at an exchange rate of ₦306 to $1).
  2. Included in other income: ₦38,000,000 from crude transportation (cost: ₦16,250,000).
  3. Natural gas contract with Tommy Limited: value ₦655,000,000, load factor 54%.
  4. Depreciation of ₦120,250,000 was included in production costs.
  5. 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
  1. Capital allowances brought forward: ₦33,700,000; for the year: ₦88,500,000.
  2. Admin expenses include ₦3,500,000 stamp duties for debentures.
  3. Specific bad debts written off: ₦39,500,000.
  4. Donations were wholly expended for petroleum operations.
  5. ₦12,250,000 was paid to retrieve petroleum-related data (included in miscellaneous expenses).
  6. ₦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)

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  • 2 Marks

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.

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)

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  • 15 Marks

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

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

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:

  1. Uyo Duplex: Bought on 2 March 2008 for N25,320,000. Rental income: N855,000 per annum (net of withholding tax).
  2. 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.
  3. Onitsha Property: Acquired on 6 October 2008 for N31,500,000 with incidental expenses of N2,400,000. Annual rent: N1,800,000.
  4. 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.

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  • 20 Marks

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

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

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)

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  • 5 Marks

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

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

(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)

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  • 20 Marks

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.

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)

 

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  • 20 Marks

AT – May 2016 – L3 – Q1 – Tax administration in Ghana, Business income – Corporate income tax

Compute the tax liabilities and take-home pay for an employee provided various benefits and allowances for the 2014 Year of Assessment.

Mr. Frank Danso was employed by Ghana Trust Ltd on 1st September 2010 on a salary scale of GH¢4,500 x 500-7,500 as the financial controller of the company. He is provided with the following as part of his conditions of service for the 2014 Year of Assessment:

i) Well-furnished rented flat by his employers in respect of which he pays GH¢100 per month as rent by way of deductions at source.
ii) Watchman allowance of GH¢200 per annum, paid directly to Mr. Frank Danso.
iii) Risk allowance of GH¢905 per annum.
iv) Leave allowance of GH¢500 per annum.
v) Garden boy allowance of GH¢100 per quarter paid directly to Mr. Frank Danso.
vi) Medical allowance of GH¢680 per annum.
vii) Meals allowance of GH¢50 per month.
viii) Two maidservants each on wages of GH¢200 per annum. The amount is paid to the maid servants directly by the company.
ix) Bonus of 40% on annual basic salary.
x) Entertainment allowance of GH¢400 a year (accountable).
xi) Duty post allowance of GH¢100 per month.
xii) He has Life Assurance Policies with EIC Ltd. Below are the details:

Policy Sum Assured (GH¢) Annual Premium (GH¢)
A 4,000 420
B 2,800 240
C 16,000 1,650
D 5,000 525

xiii) He is entitled to a company car and fuel for both official and private use.
xiv) He has two wives and ten children; four of whom are in SHS in Accra, and the rest are gainfully employed; he caters for 3 of his aged relatives.
xv) He contributes 7% of his salary towards the company’s Provident Fund which has been approved by the National Pension Authority, and he also contributes 5.5% of his salary to the SSNIT.

Required:
a) Compute his tax liabilities for the 2014 Year of Assessment using 2014 rates.
(15 marks)

b) Determine his take-home pay for the 2014 Year of Assessment.
(5 marks)

Total: 20 marks

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  • 10 Marks

AT – Nov 2016 – L3 – Q4b – Business income – Corporate income tax

Calculate the tax payable by Bambara Ltd and comment on the treatment of specific income and expenses

b) Bambara Ltd has the following summarized income statement relating to the 2015 year of assessment:

GH¢
Revenue 100,000
Cost of Sales 65,000
Gross Profit 35,000
Operating expenses 20,000
Net profit 15,000

Upon a closer scrutiny, the following came up:

i) Dividend net of withholding tax received from A Ltd was GH¢10,000. The amount received was added to revenue above. Bambara Ltd has 10% equity interest in A Ltd.
ii) Bad debts of GH¢1,000 were recovered. This was adjusted to the Income Surplus Account.
iii) A penalty of GH¢2,000 was paid and has been added to operating costs to determine the net profit as disclosed.
iv) Capital allowance agreed with Ghana Revenue Authority was GH¢1,000, and depreciation of GH¢1,300 was added to operating costs.
v) Taxes paid in previous quarters amounting to GH¢1,200 were added to operating costs to determine the net profit.
vi) It came to light that an amount of GH¢11,400 net of 5% withholding tax relating to the supply of goods was not brought into the accounts at all on account of omission. The withholding tax was certified correct.

Required:
Determine the tax payable by Bambara Ltd and comment on any four reasons for the inclusion and/or non-inclusion of the transactions in the determination of income. (10 marks)

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  • 10 Marks

AT – Nov 2016 – L3 – Q1a&b – Business income – Corporate income tax

Calculate the tax due to GRA for the year 2014 based on the income statement of Samada Insurance Company.

You have been appointed as the Tax Manager of Samada Insurance Company. The Executive Director has expressed his persistent worry with the Chief Accountant to accurately calculate the company’s tax obligations to agree with what is assessed by the Ghana Revenue Authority each year. He has thus, provided you with the Income Statement below for your consideration and advice.

SAMANDA INSURANCE COMPANY LIMITED
Income Statement for the years ended 2013 and 2014

  1. Additional Information:
    i) Capital allowance agreed for the year 2014 was GH¢2,450,000
    ii) Reserve is calculated at 40% of Net premium.

Required:
a) Compute the tax due to the GRA for 2014 year of Assessment. (8 marks)

b) Support your computations with relevant explanations. (2)

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  • 10 Marks

AT – Nov 2019 – L3 – Q5c – Petroleum operations

Compute the tax payable for Kaeka Ltd and comment on the treatment of research and development expenditure.

Kaeka Ltd operates in the Upstream Petroleum Sector. The following relates to its 2018 year of assessment:

Required:
i) Compute the tax payable. (8 marks)
ii) Comment on the treatment of research and development expenditure. (2 marks)

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