Series: NOV 2020

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AT- Nov 2022 – L3 – Q4 – Regulatory Environment for Corporate Reporting

Discuss the significance, guiding actions, inconsistencies, compliance areas, and dispute resolution in transfer pricing under Nigeria’s 2018 regulations.

Question

Transfer pricing has become a topical issue in the world of taxation in recent years. This trend is partly driven by the need to prevent fiscal evasion and avoid economic double taxation. Various governments, both in developed and emerging countries, have continued to issue regulations to guide the operations of transfer pricing systems within their jurisdictions.

In Nigeria, the first step toward establishing a legal framework for regulating transfer pricing took place in August 2012, with the enactment of Income Tax (Transfer Pricing) Regulations Number 1, 2012. Due to shortcomings in the implementation of this regulation, it was revoked, and the Income Tax (Transfer Pricing) Regulations 2018 was subsequently enacted.

One critical principle, enshrined in various transfer pricing regulations, that every taxpayer must comply with when dealing with transactions between related entities is the arm’s length principle. This principle has gained significant attention among academics, regulatory institutions, and professionals, with ongoing debate surrounding its application.

Required:

a. Explain the significance of transfer pricing to both the taxpayers and tax authorities. (2 Marks)

b. In complying with the arm’s length principle, discuss two guiding actions which enterprises and multinationals must follow in their intercompany dealings. (3 Marks)

c. Identify and explain four methods multinational companies might use in financial dealings with associated or subsidiary entities that deviate from the arm’s length principle. (6 Marks)

d. In the administration of the Transfer Pricing Regulations 2018, highlight and discuss three fundamental compliance areas for taxpayers and tax practitioners. (6 Marks)

e. Explain the resolution process for disputes that arise between a taxpayer and tax authorities under the Transfer Pricing Regulations 2018. (3 Marks)

(Total: 20 Marks)

Answer

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Tags: Arm's Length Principle, Economic Double Taxation, Fiscal Evasion, Multinational Enterprises, Transfer Pricing
Level: Level 3

Topic: Regulatory Environment for Corporate Reporting
Series: NOV 2020

CR – Nov 2017 – L3 – Q3 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Evaluate Funda Plc's accounting policies for specific transactions, recommending adjustments as per IFRS where appropriate.

Question

Funda Plc. is a listed utility service company in Nigeria providing water, electricity, and cable services. The directors prepared draft financial statements for the year ended June 30, 2017, following IFRS guidelines to support a loan application. Employees, owning 5% of ordinary shares, raised concerns about certain accounting policies applied by Funda Plc.

The draft income statement for the year ended June 30, 2017, is as follows:

	N’m
Revenue	410.0
Cost of Sales	(275.0)
Gross Profit	135.0
Other Operating Costs	(65.0)
Profit Before Taxation	70.0

Employee Representatives’ Queries on Accounting Policies:

Sale of Water Filters
Funda Plc. sold 30 industrial water filters to a steelmaker, offering a 20% discount and granting the steelmaker a put option to repurchase the filters at 35% of the purchase price after six years, despite the filters’ expected ten-year life. Funda Plc. has recognized the entire revenue upfront.
Connection Fees
A refundable connection fee is charged for electricity connections, to be returned upon customer disconnection. No minimum notice is required, and costs can be deducted from refunds. The fee was fully recognized in the year as revenue.
Activation Fees
Non-refundable activation fees for digital cable services were fully recognized in revenue.
Deposits for Domestic Electrical Goods
Customers place a 25% deposit on orders, with the balance payable on delivery. Deposits are retained if orders are canceled but refunded if Funda Plc. fails to deliver. Revenue includes N10 million from deposits, with 90% of orders fulfilled.

Required:
Prepare a report explaining the suitability of Funda Plc.’s accounting policies for each transaction and recommend the appropriate IFRS treatment where necessary.

Answer

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Tags: Deposits, Financial instruments, IAS Compliance, Non-Refundable Fees, Put Options, Revenue Recognition
Level: Level 3

Topic: Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)
Series: NOV 2020

BL – Nov 2020 – L1 – SB – Q1d – Company Law

List powers exercised by the Annual General Meeting (AGM) of a company.

Question

One of the two organs of a company is the general meeting of members.

Required:
State FOUR powers of the Annual General Meeting.

Answer

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Tags: Annual General Meeting, Company Law, Corporate Powers, Shareholder Rights
Level: Level 1

Topic: Company Law
Series: NOV 2020

BL – Nov 2020 – L1 – SB – Q6c – Partnership Law

Assess the legality of different partnership arrangements.

Question

Comment on the legality of the following relationships operating as partnerships:

i. A partnership of 16 persons established for charitable purposes
ii. Adex cooperative society consisting of 500 members
iii. Black and Blue law firm consisting of 31 lawyers
iv. Stone Partnership firm comprising Segun aged 28, Tunde aged 17
v. A partnership of volunteers for the purpose of helping persons displaced by flood.

Answer

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Tags: Charitable Purpose, Cooperative Society, Law Firm, Legal Entity, Minor Partnership, Partnership, Volunteers
Level: Level 1

Topic: Partnership Law
Series: NOV 2020

BL – Nov 2020 – L1 – SB – Q6b – Law of Contract

Define express terms, implied terms, conditions, and warranties in a contract.

Question

Contractual agreements usually contain terms that are different in nature and importance.

Required:
Define the following terms:
i. Express terms
ii. Implied terms
iii. Conditions
iv. Warranties

Answer

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Tags: Conditions, Contract Terms, Express Terms, Implied Terms, Warranties
Level: Level 1

Topic: Law of Contract
Series: NOV 2020

BL – Nov 2020 – L1 – SB – Q6a – The Nigerian Legal System

List tests to determine intent to steal during taking or conversion.

Question

Taking or conversion with intent to defraud is an element of stealing.

Required:
State FIVE tests of determining whether or not an accused has an intention to steal at the time of taking or converting a thing.

Answer

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Tags: Conversion, Criminal Intent, Criminal Law, Fraud, Theft
Level: Level 1

Topic: The Nigerian Legal System
Series: NOV 2020

BL – Nov 2020 – L1 – SB – Q5d – Negotiable Instruments

Explain different cheque crossing types and define negotiable instruments.

Question

Crossing of cheques has legal implications in banking transactions, and a cheque is a type of negotiable instrument.

Required:
i. A cheque instruction to “pay Ronke the sum of N50,000.00” without crossing the face of the cheque with two parallel lines.
ii. “Pay Andrew N100,000” with two parallel lines traversing the face of the cheque.
iii. “Pay Mary N150,000” with two parallel lines with Congo Bank written in between the two parallel lines on the face of the cheque.
iv. “Pay Ngozi N200,000” and by cheque with two parallel lines and the words “account payee only” written in between the two parallel lines.
v. Define negotiable instruments.

Answer

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Tags: Banking Transactions, Cheques, Crossing, Negotiable Instruments, Payment Instructions
Level: Level 1

Topic: Negotiable Instruments
Series: NOV 2020

BL – Nov 2020 – L1 – SB – Q5c – Agency Law

List the duties of an agent in an agency contract.

Question

Parties under a contract of agency have certain rights and duties.

Required:
State FIVE duties of an agent under a contract of agency.

Answer

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Tags: Agency, Agent Duties, Contractual Obligations, Principal-Agent Relationship
Level: Level 1

Topic: Agency Law
Series: NOV 2020

BL – Nov 2020 – L1 – SB – Q5b – Employment Law

Define an employment contract and list grounds for dismissal by an employer.

Question

Contracts of employment may be created and brought to an end in different ways.

Required:
i. Explain contract of employment.
ii. State THREE reasons for which an employer could dismiss an employee.

Answer

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Tags: Employment Contract, Grounds for Dismissal, Labor Law, Termination
Level: Level 1

Topic: Employment law
Series: NOV 2020

BL – Nov 2020 – L1 – SB – Q5a – Alternative Dispute Resolution

Define arbitration and describe an arbitral award.

Question

Arbitration is a type of alternative dispute resolution mechanism.

Required:
Explain arbitration and arbitral award.

Answer

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Tags: Alternative Dispute Resolution, Arbitral Award, Arbitration, Dispute Settlement
Level: Level 1

Topic: Alternative Dispute Resolution
Series: NOV 2020

TAX – Nov 2020 – L1 – SA – Q20 – Taxation of Non-Residents

Identify the minimum tax rate for foreign companies operating in air, sea, and telecommunication businesses in Nigeria.

Question

Which of the following is the minimum tax rate applicable to foreign companies operating in air, sea, and telecommunication businesses in Nigeria?
A. 20%
B. 10%
C. 7½%
D. 5%
E. 2%

Answer

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Tags: Air and Sea Businesses, Foreign companies, Minimum Tax Rate, Nigerian Tax System
Level: Level 1

Topic: Taxation of Non-Residents
Series: NOV 2020

TAX – Nov 2020 – L1 – SA – Q19 – Capital Gains Tax (CGT)

Calculate the balancing charge on the disposal of an asset.

Question

An asset with a tax written down value of N850,000 was sold for N1,230,000; what is the balancing charge?
A. N2,080,000
B. N1,230,000
C. N850,000
D. N380,000
E. N425,000

Answer

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Tags: Balancing Charge, Capital gains tax, Disposal of assets, Tax Written Down Value
Level: Level 1

Topic: Capital Gains Tax (CGT)
Series: NOV 2020

TAX – Nov 2020 – L1 – SA – Q18 – Taxation of Trusts and Estates

Identify the term used for a person receiving real property under a Will.

Question

The person who receives a real property under a Will is a:
A. Legatee
B. Remainder man
C. Personal representative
D. Annuitant

Answer

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Tags: Inheritance, Real Property, Trusts and Estates, Wills
Level: Level 1

Topic: Taxation of Trusts and Estates
Series: NOV 2020

TAX – Nov 2020 – L1 – SA – Q17 – Personal Income Tax (PIT)

Identify which tax subject is not covered under the Personal Income Tax Act.

Question

Which of the following does NOT relate to the provision of the Personal Income Tax Act Cap P8 LFN 2004 (as amended)?
A. Taxation of employees
B. Taxation of estates, trusts, and settlements
C. Taxation of partners
D. Taxation of sole traders
E. Taxation of limited liability companies

Answer

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Tags: Nigerian Tax System, Personal income tax, PITA, Taxation Scope
Level: Level 1

Topic: Personal Income Tax
Series: NOV 2020

TAX – Nov 2020 – L1 – SA – Q16 – Taxation of Specialized Businesses

Identify which factor does not affect the relief rate under the Land Use Charge Law of Lagos State, 2018.

Question

Under the Land Use Charge Law of Lagos State, 2018, relief rate may reflect the following factors, EXCEPT:
A. Status of the owner (the age and retirement)
B. State of origin
C. Depreciation rate of the property
D. Whether or not the owner is physically challenged
E. The length of time for which an owner has been resident in the property in question

Answer

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Tags: Lagos State Tax Law, Land Use Charge, Property Tax Relief, Relief Rate
Level: Level 1

Topic: Taxation of Specialized Businesses
Series: NOV 2020

TAX – Nov 2020 – L1 – SA – Q15 – Taxation of Specialized Businesses

Identify the definition of "market value" under the Land Use Charge Law of Lagos State, 2018.

Question

Under the Land Use Charge Law of Lagos State, 2018, “market value” means:
A. Total sum of land value and building development
B. Building development
C. The total developed floor area of building on the plot of land in square metres
D. The average construction value of medium quality buildings and improvement in the neighbourhood
E. The average market value of a land parcel in the neighbourhood

Answer

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Tags: Lagos State Tax Law, Land Use Charge, Market Value, Property Tax
Level: Level 1

Topic: Taxation of Specialized Businesses
Series: NOV 2020

TAX – Nov 2020 – L1 – SA – Q14 – Stamp Duties

Identify which instrument is not assessed by fixed duties under the Stamp Duties Act.

Question

Which of the following is NOT an instrument being assessed by fixed duties?
A. Payment receipts
B. Cheque leaves
C. Guarantor forms
D. Proxy forms
E. Bills of exchange

Answer

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Tags: Fixed Duties, Instruments, Nigerian Tax System, Stamp Duties
Level: Level 1

Topic: Stamp Duties
Series: NOV 2020

TAX – Nov 2020 – L1 – SA – Q13 – Stamp Duties

Identify which instrument is not required to be stamped under the Stamp Duties Act.

Question

Under the Stamp Duties Act Cap S8 LFN 2004, which of the following instruments is NOT required by law to be stamped?
A. Leases
B. Contract notes
C. Bills of lading
D. Mortgages
E. Instruments relating to reconstruction and amalgamation

Answer

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Tags: Instruments, Nigerian Tax System, Stamp Duties Act, Stamp Duty Requirements
Level: Level 1

Topic: Stamp Duties
Series: NOV 2020

TAX – Nov 2018 – L1 – SA – Q12 – Value Added Tax (VAT)

Calculate the output VAT for a vatable product sold to a final consumer.

Question

In 2018, a vatable product was sold to a final consumer for N210,000 (VAT inclusive). The output VAT was:
A. N10,500
B. N10,000
C. N7,500
D. N5,000
E. N2,500

Answer

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Tags: Nigerian Tax System, Output VAT, VAT Calculation, Vatable Product
Level: Level 1

Topic: Value-Added Tax (VAT), Customs, and Excise Duties
Series: NOV 2020

TAX – Nov 2020 – L1 – SA – Q11 – Value Added Tax (VAT)

Identify which information is not required on a tax invoice for goods or services.

Question

A tax invoice issued for goods sold or services rendered must contain the following information, EXCEPT:
A. Type/nature of goods
B. Customer’s name and address
C. Rate of VAT applied
D. Bio data of taxpayer
E. Taxpayer’s identification number

Answer

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Tags: Invoice Requirements, Nigerian Tax System, Tax Invoice, VAT
Level: Level 1

Topic: Value-Added Tax (VAT), Customs, and Excise Duties
Series: NOV 2020

Series: NOV 2020

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AT- Nov 2022 – L3 – Q4 – Regulatory Environment for Corporate Reporting

Discuss the significance, guiding actions, inconsistencies, compliance areas, and dispute resolution in transfer pricing under Nigeria’s 2018 regulations.

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CR – Nov 2017 – L3 – Q3 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Evaluate Funda Plc's accounting policies for specific transactions, recommending adjustments as per IFRS where appropriate.

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BL – Nov 2020 – L1 – SB – Q1d – Company Law

List powers exercised by the Annual General Meeting (AGM) of a company.

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BL – Nov 2020 – L1 – SB – Q6c – Partnership Law

Assess the legality of different partnership arrangements.

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BL – Nov 2020 – L1 – SB – Q6b – Law of Contract

Define express terms, implied terms, conditions, and warranties in a contract.

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BL – Nov 2020 – L1 – SB – Q6a – The Nigerian Legal System

List tests to determine intent to steal during taking or conversion.

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BL – Nov 2020 – L1 – SB – Q5d – Negotiable Instruments

Explain different cheque crossing types and define negotiable instruments.

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BL – Nov 2020 – L1 – SB – Q5c – Agency Law

List the duties of an agent in an agency contract.

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BL – Nov 2020 – L1 – SB – Q5b – Employment Law

Define an employment contract and list grounds for dismissal by an employer.

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BL – Nov 2020 – L1 – SB – Q5a – Alternative Dispute Resolution

Define arbitration and describe an arbitral award.

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TAX – Nov 2020 – L1 – SA – Q20 – Taxation of Non-Residents

Identify the minimum tax rate for foreign companies operating in air, sea, and telecommunication businesses in Nigeria.

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TAX – Nov 2020 – L1 – SA – Q19 – Capital Gains Tax (CGT)

Calculate the balancing charge on the disposal of an asset.

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TAX – Nov 2020 – L1 – SA – Q18 – Taxation of Trusts and Estates

Identify the term used for a person receiving real property under a Will.

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TAX – Nov 2020 – L1 – SA – Q17 – Personal Income Tax (PIT)

Identify which tax subject is not covered under the Personal Income Tax Act.

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TAX – Nov 2020 – L1 – SA – Q16 – Taxation of Specialized Businesses

Identify which factor does not affect the relief rate under the Land Use Charge Law of Lagos State, 2018.

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TAX – Nov 2020 – L1 – SA – Q15 – Taxation of Specialized Businesses

Identify the definition of "market value" under the Land Use Charge Law of Lagos State, 2018.

You're reporting an error for "TAX – Nov 2020 – L1 – SA – Q15 – Taxation of Specialized Businesses"

TAX – Nov 2020 – L1 – SA – Q14 – Stamp Duties

Identify which instrument is not assessed by fixed duties under the Stamp Duties Act.

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TAX – Nov 2020 – L1 – SA – Q13 – Stamp Duties

Identify which instrument is not required to be stamped under the Stamp Duties Act.

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TAX – Nov 2018 – L1 – SA – Q12 – Value Added Tax (VAT)

Calculate the output VAT for a vatable product sold to a final consumer.

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TAX – Nov 2020 – L1 – SA – Q11 – Value Added Tax (VAT)

Identify which information is not required on a tax invoice for goods or services.

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