- 15 Marks
TAX – Nov 2016 – L2 – Q7 – Value Added Tax (VAT)
Discuss the VAT position of Trevor Optimal Nigeria Limited and recommend actions to address Input VAT buildup.
Question
Trevor Optimal Nigeria Limited has been operating in the oil and gas sector in Nigeria since January 1, 2005. The company is engaged in the importation and sale of oil tools. With the introduction of the Reverse Charge Mechanism in Nigeria, the company has accumulated Input VAT since 2008, which, as of December 31, 2015, stood at N6,000,000. This Input VAT resulted from the importation of oil tools that the company sells to oil companies.
The company’s Output VAT is withheld by its customers at source and remitted to the Federal Inland Revenue Service (FIRS). This practice has left the company with a significant buildup of Input VAT without any Output VAT to offset it.
The Chief Executive Officer has expressed concern over this buildup of Input VAT and has invited you for a meeting to discuss the issue. The CEO reasoned that as long as the company continues in its line of business, the Input VAT will continue to grow and has requested you to advise the company.
Required:
a. Provide brief information for the Chief Executive Officer on why the company is in the current position. (5 Marks)
b. Advise the Chief Executive Officer on the best action to follow in accordance with the law. (5 Marks)
c. State the steps required by FIRS to grant a tax refund to a taxpayer. (5 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Input VAT, Output VAT, Reverse Charge Mechanism, Tax advice, Tax Refund
- Level: Level 2
- Topic: Tax Administration and Enforcement, Value-Added Tax (VAT)
- Series: NOV 2016