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AT – Nov 2017 – L3 – Q7 – Tax Implications of Mergers and Acquisitions

Advise on tax implications for Aba Foods merger/acquisition options with Ifedi Foods.

Question

The prevailing economic condition has led to the business cessation of many SMEs. Aba Foods Limited, a well-known food and beverage company in Abia State, faced difficulties in securing long-term loans, preventing the replacement of its outdated equipment and leading to losses. To ensure continuity, the company considered mergers or acquisitions and entered discussions with Chief Egodi of Ifedi Group. Chief Egodi, concerned about the tax implications of potential arrangements, sought advice from your firm, Aliyara & Co., Chartered Accountants.

Required:
Provide a presentation in the form of advice:

(a) Explain the tax implications of Aba Foods Limited merging with Ifedi Foods and Beverage Limited, with Ifedi inheriting all assets and liabilities. (5 Marks)
(b) Explain the tax implications if Ifedi Foods and Beverage Limited is reconstituted to take over Aba Foods’ assets and liabilities. (5 Marks)
(c) Explain the tax implications if Ifedi Foods and Aba Foods enter a Joint Venture or Partnership Agreement. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Acquisition, Capital gains tax, FIRS, Merger, Partnership, Taxation, VAT, WHT
Level: Level 3

Topic: Tax Implications of Mergers and Acquisitions
Series: NOV 2017

AT – Nov 2017 – L3 – Q5 – Tax Administration and Dispute Resolution

Outline objection and appeal procedures for FIRS additional assessment.

Question

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:

Description	Amount (N)
Revenue	187,500,000
Cost of sales	(102,500,000)
Gross Profit	85,000,000
Other income	31,250,000
Operating expenses	(57,250,000)
Interest and similar charges	(3,200,000)
Profit before tax	55,800,000
Taxation	(6,250,000)
Profit after tax	49,550,000
Dividend	(38,500,000)
Retained profit for the year	11,050,000

Other relevant information includes:

Revenue:
- Export sales: N58,500,000
- Local sales: N129,000,000
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
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
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
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)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Taxation, FIRS, Objection Procedures, Tax Appeal, Tax Dispute, VAT, WHT
Level: Level 3

Topic: Tax Administration and Dispute Resolution
Series: NOV 2017

TAX – May 2015 – L2 – SA – Q1 – Tax Audits and Investigations

Required to prepare tax documentation and compute liabilities for BICCI Nigeria Limited in response to FIRS tax audit report.

Question

You have been invited to make a presentation to the Board of Directors of BICCI Nigeria Limited. Your performance at the presentation will determine your appointment as the Tax Consultant to the company.

BICCI Nigeria Limited, a trading company, was incorporated on 2 March 2009. It commenced business on 2 October of the same year, making accounts up to 30 September annually. The shareholders invested N18 million in non-current assets before the company commenced business in 2009.

Other information provided:

Authorized, Issued, and Fully Paid-Up Capital – N10 million.
Value Added Tax (VAT) and Withholding Tax (WHT) returns filed for 2010–2013 were carried out 2 months after each transaction month.
Companies Income Tax (CIT) and Tertiary Education Tax (TET) returns were filed on 30 June for the 2011 to 2014 Assessment Years.

Extracts from the accounts (2010–2013):

On 15 July 2014, FIRS inspectors visited BICCI, informing management of an upcoming tax audit on 25 August 2014. They requested the following documents:

Audited Accounts (2010–2013)
Bank Statements (2010–2013)
Trial Balance for each year
Evidence of Tax Returns filed (CIT, VAT, WHT, TET)
General Ledger printouts
Proof of tax payments
Tax registration evidence
Tax Clearance Certificates
WHT Credit Notes, if any

FIRS Interim Tax Audit Report (summarized):

Item	2013	2012	2011	2010
Revenue (N’000)	25,320	21,522	13,989	7,694
VAT on Revenue	8,862	7,533	4,896	3,462
Undisclosed Revenue	16,458	13,989	9,093	4,232
Directors’ Current Account	19,578	21,228	19,250	18,000
Payments under WHT:
– Directors’ Fees	1,625	2,125	1,145	960
– Rent	3,500	3,500	2,625	2,625
– Professional Fees	1,200	1,200	950	950
– Commission	2,825	1,875	970	376

Additional Adjustments:

Cost of Sales written back: 60%
Selling & Distribution expenses written back: 60%
Admin expenses written back: 60%

Requirements:

a. List the documents required by FIRS for the Interim Tax Audit. (3 Marks)
b. Calculate BICCI Nigeria Limited’s potential tax liabilities per the Interim Tax Audit. (12 Marks)
c. Prepare a schedule for VAT and WHT receipts collected by BICCI. (7 Marks)
d. Advise management on possible tax consequences if they do not respond to the audit. (8 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Compliance, Deferred Tax, Financial Statements, Tax Audit, Tax Liability, VAT, WHT
Level: Level 2

Topic: Tax Audits and Investigations
Series: MAY 2015

AT – Nov 2017 – L3 – Q7 – Tax Implications of Mergers and Acquisitions

Advise on tax implications for Aba Foods merger/acquisition options with Ifedi Foods.

Question

Required:
Provide a presentation in the form of advice:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Acquisition, Capital gains tax, FIRS, Merger, Partnership, Taxation, VAT, WHT
Level: Level 3

Topic: Tax Implications of Mergers and Acquisitions
Series: NOV 2017

AT – Nov 2017 – L3 – Q5 – Tax Administration and Dispute Resolution

Outline objection and appeal procedures for FIRS additional assessment.

Question

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

Description	Amount (N)
Revenue	187,500,000
Cost of sales	(102,500,000)
Gross Profit	85,000,000
Other income	31,250,000
Operating expenses	(57,250,000)
Interest and similar charges	(3,200,000)
Profit before tax	55,800,000
Taxation	(6,250,000)
Profit after tax	49,550,000
Dividend	(38,500,000)
Retained profit for the year	11,050,000

Other relevant information includes:

Revenue:
- Export sales: N58,500,000
- Local sales: N129,000,000
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
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
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
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

(Total 15 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Taxation, FIRS, Objection Procedures, Tax Appeal, Tax Dispute, VAT, WHT
Level: Level 3

Topic: Tax Administration and Dispute Resolution
Series: NOV 2017

TAX – May 2015 – L2 – SA – Q1 – Tax Audits and Investigations

Required to prepare tax documentation and compute liabilities for BICCI Nigeria Limited in response to FIRS tax audit report.

Question

Other information provided:

Authorized, Issued, and Fully Paid-Up Capital – N10 million.
Value Added Tax (VAT) and Withholding Tax (WHT) returns filed for 2010–2013 were carried out 2 months after each transaction month.
Companies Income Tax (CIT) and Tertiary Education Tax (TET) returns were filed on 30 June for the 2011 to 2014 Assessment Years.

Extracts from the accounts (2010–2013):

On 15 July 2014, FIRS inspectors visited BICCI, informing management of an upcoming tax audit on 25 August 2014. They requested the following documents:

Audited Accounts (2010–2013)
Bank Statements (2010–2013)
Trial Balance for each year
Evidence of Tax Returns filed (CIT, VAT, WHT, TET)
General Ledger printouts
Proof of tax payments
Tax registration evidence
Tax Clearance Certificates
WHT Credit Notes, if any

FIRS Interim Tax Audit Report (summarized):

Item	2013	2012	2011	2010
Revenue (N’000)	25,320	21,522	13,989	7,694
VAT on Revenue	8,862	7,533	4,896	3,462
Undisclosed Revenue	16,458	13,989	9,093	4,232
Directors’ Current Account	19,578	21,228	19,250	18,000
Payments under WHT:
– Directors’ Fees	1,625	2,125	1,145	960
– Rent	3,500	3,500	2,625	2,625
– Professional Fees	1,200	1,200	950	950
– Commission	2,825	1,875	970	376

Additional Adjustments:

Cost of Sales written back: 60%
Selling & Distribution expenses written back: 60%
Admin expenses written back: 60%

Requirements:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Compliance, Deferred Tax, Financial Statements, Tax Audit, Tax Liability, VAT, WHT
Level: Level 2

Topic: Tax Audits and Investigations
Series: MAY 2015

Question Tag: WHT

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AT – Nov 2017 – L3 – Q7 – Tax Implications of Mergers and Acquisitions

Advise on tax implications for Aba Foods merger/acquisition options with Ifedi Foods.

AT – Nov 2017 – L3 – Q5 – Tax Administration and Dispute Resolution

Outline objection and appeal procedures for FIRS additional assessment.

TAX – May 2015 – L2 – SA – Q1 – Tax Audits and Investigations

Required to prepare tax documentation and compute liabilities for BICCI Nigeria Limited in response to FIRS tax audit report.

AT – Nov 2017 – L3 – Q7 – Tax Implications of Mergers and Acquisitions

Advise on tax implications for Aba Foods merger/acquisition options with Ifedi Foods.

AT – Nov 2017 – L3 – Q5 – Tax Administration and Dispute Resolution

Outline objection and appeal procedures for FIRS additional assessment.

TAX – May 2015 – L2 – SA – Q1 – Tax Audits and Investigations

Required to prepare tax documentation and compute liabilities for BICCI Nigeria Limited in response to FIRS tax audit report.

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AT – Nov 2017 – L3 – Q7 – Tax Implications of Mergers and Acquisitions

Advise on tax implications for Aba Foods merger/acquisition options with Ifedi Foods.

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AT – Nov 2017 – L3 – Q5 – Tax Administration and Dispute Resolution

Outline objection and appeal procedures for FIRS additional assessment.

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TAX – May 2015 – L2 – SA – Q1 – Tax Audits and Investigations

Required to prepare tax documentation and compute liabilities for BICCI Nigeria Limited in response to FIRS tax audit report.

You're reporting an error for "TAX – May 2015 – L2 – SA – Q1 – Tax Audits and Investigations"

AT – Nov 2017 – L3 – Q7 – Tax Implications of Mergers and Acquisitions

Advise on tax implications for Aba Foods merger/acquisition options with Ifedi Foods.

You're reporting an error for "AT – Nov 2017 – L3 – Q7 – Tax Implications of Mergers and Acquisitions"

AT – Nov 2017 – L3 – Q5 – Tax Administration and Dispute Resolution

Outline objection and appeal procedures for FIRS additional assessment.

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TAX – May 2015 – L2 – SA – Q1 – Tax Audits and Investigations

Required to prepare tax documentation and compute liabilities for BICCI Nigeria Limited in response to FIRS tax audit report.

You're reporting an error for "TAX – May 2015 – L2 – SA – Q1 – Tax Audits and Investigations"

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