Topic: Tax Administration and Enforcement

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TAX – Nov 2023 – L2 – Q7 – Tax Administration and Enforcement

Reasons for business cessation, computation of net terminal adjusted profit, and assessable profits

Question

Raposa Nigeria Limited, a company located in Sambisa Forest, Kutunwegi State of Nigeria, commenced operations on November 1, 2017. The accounting year-end was September 30. Due to government policy restricting rice importation, the business’s going concern was threatened, leading the Board of Directors to decide to cease operations on December 31, 2022.

The adjusted profits for the relevant periods are as follows:

Period	Adjusted Profit (N)
Period to September 30, 2019	2,100,000
Year ended September 30, 2020	2,400,000
Year ended September 30, 2021	3,640,000
Year ended September 30, 2022	6,300,000
Period to December 31, 2022	500,000

Additional Information:

A bad debt of N120,000, written off in the 2020 assessment year, was recovered in October 2021.
N20,000 was spent to recover this debt.
An expenditure of N350,000 incurred in the 2020 assessment year was accounted for in the profit or loss but was not paid until August 2022.

Upon cessation, the revenue authority planned a back-duty investigation and informed the taxpayer accordingly. As a tax consultant, you are invited to determine the assessable profits for the relevant periods from the commencement of trade to business cessation.

Required: a. State THREE reasons why a business may cease trading. (3 Marks)
b. Compute net terminal adjusted profit. (6 Marks)
c. Compute assessable profits for all the relevant years of assessment. (6 Marks)

Answer

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Tags: Assessable Profits, Back-Duty Investigation, Business Cessation, Tax adjustment, Terminal Profit
Level: Level 2

Topic: Tax Administration and Enforcement

TAX – Nov 2023 – L2 – Q6b – Tax Administration and Enforcement

Explain five key contents required in a Withholding Tax returns/payment schedule.

Question

It is expected that a schedule of Withholding Tax (WHT) payable should be prepared by applying the correct WHT rate on each transaction/payment made during the month. Thereafter, a cheque for the amount due to the Federal Inland Revenue Service is raised and forwarded together with the WHT schedule to one of the approved collecting banks for processing.

Required:
Explain FIVE contents of a WHT returns/payment schedule. (10 Marks)

Answer

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Tags: Federal Inland Revenue Service, Tax Returns, WHT Compliance, WHT Schedule, Withholding Tax
Level: Level 2

Topic: Tax Administration and Enforcement

TAX – Nov 2023 – L2 – Q6a – Tax Administration and Enforcement

Explain the functions and powers of the Nigerian Customs Service Board.

Question

The Nigeria Customs Service (NCS) is one of the major revenue-generating agencies for the Federal Government of Nigeria. The establishment of the Nigerian Customs Service Board, which is under the control of the Federal Ministry of Finance, is contained in section 1 of the Nigerian Customs Service Board Act Cap.C45 LFN 2004 (as amended). The Board is responsible for the administration of the Customs and Excise Management Act.

Required:
Explain the functions and powers of the Board. (5 Marks)

Answer

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Tags: Customs and Excise Management Act, Federal Ministry of Finance, Nigeria Customs Service, Revenue Generation
Level: Level 2

Topic: Tax Administration and Enforcement

TAX – Nov 2023 – L2 – Q3b – Tax Administration and Enforcement

Explain the roles and responsibilities of government, taxpayers, and revenue agencies in Nigeria’s National Tax Policy.

Question

In line with the provisions of the revised National Tax Policy (NTP) in 2017, explain the roles and responsibilities of the following stakeholders:

i. The government (3 Marks)
ii. The taxpayers (3 Marks)
iii. Revenue agencies (3 Marks)

Answer

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Tags: Government Roles, National Tax Policy, Revenue Agency Duties, Tax Administration, Taxpayer Responsibilities
Level: Level 2

Topic: Tax Administration and Enforcement

TAX – Nov 2023 – L2 – Q3a – Tax Administration and Enforcement

Describe the composition and functions of Nigeria’s tax administration bodies, including the Joint Tax Board and State Board of Internal Revenue.

Question

a. Tax administration in Nigeria involves the practical interpretations and application of the tax laws. The bodies charged with the administration of tax in Nigeria are the Federal, State, and Local Governments. The tax authorities of these tiers of government derive their power from Federal laws.

i. State the composition of the Joint Tax Board. (3 Marks)

ii. Outline FOUR functions of the State Board of Internal Revenue. (3 Marks)

iii. State FIVE levies and taxes collectible by the Local Government Revenue Committee. (5 Marks)

Answer

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Tags: Joint Tax Board, Local Government Taxes, Nigeria Tax Administration, State Board of Internal Revenue, Tax Collection
Level: Level 2

Topic: Tax Administration and Enforcement

TAX – Nov 2023 – L2 – Q2 – Tax Administration and Enforcement

Discuss the tax law provisions for a change in accounting year end, revenue practice, and compute assessable profits.

Question

Forward Nigeria Limited, a Nigerian manufacturing company, has been operating for several years with an accounting year-end on June 30. The company recently decided to change its year-end to September 30. The adjusted profits for the relevant periods are as follows:

Period	Adjusted Profit (N)
Year ended June 30, 2014	2,700,000
Year ended June 30, 2015	3,300,000
Period ended September 30, 2015	1,500,000
Year ended September 30, 2016	4,200,000
Year ended September 30, 2017	3,600,000

Additional Information:

Income overstated:
- June 30, 2015: N250,000
- September 30, 2016: N280,000
Expenditure understated:
- June 30, 2014: N160,000
- September 30, 2017: N150,000

Required: a. Explain the tax law provisions for a business changing its accounting year-end. (5 Marks)

b. Describe the Revenue practice related to these provisions. (3 Marks)

c. Compute the assessable profits for all affected years of assessment, considering the tax law and Revenue practice. (12 Marks)

Answer

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Tags: Accounting Year-End, Adjusted Profits, Assessable Profits, Revenue Practice, Tax law
Level: Level 2

Topic: Tax Administration and Enforcement

TAX – Nov 2014 – L2 – Q7 – Value Added Tax (VAT)

Calculate the VAT payable for Zuba Construction Company and advise on the timing and contents of a VAT appeal notice.

Question

Zuba Construction Company Limited is an irrigation and building construction company. The company has been in the business for many years.

The company appointed you as the tax representative to provide tax advisory services and deal with the VAT office on its behalf.

On commencement of your assignment, you discovered that there was a dispute on the determination of the amount of VAT payable to the Revenue by the Company. To assist you in the assignment, the following information was made available to you:

Date	Details	Amount (N)
1/8/13	Bought a concrete mixer	700,000
2/8/13	Bought sand	40,000
3/8/13	Bought gravel	40,000
5/8/13	Bought scaffolding	1,800,000
5/8/13	Bought photocopier machine	50,000
7/8/13	Bought tables	15,000
14/8/13	Bought poker vibrator	300,000
14/8/13	Bought chairs	20,000
14/8/13	Progress payment received	2,000,000
24/8/13	Progress payment received	1,500,000

Additional Note: VAT was paid on all the company’s purchases.

You are required to:

a. Compute VAT payable (if any) for the month of August 2013.
(8 Marks)

b. Advise your client on when and how VAT payment should be made.
(4 Marks)

c. Itemize the contents of a Notice of Appeal against VAT Assessments.
(3 Marks)

Answer

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Tags: construction industry, Progress Payments, VAT Appeal Process, VAT Payable, VAT Payment Timing
Level: Level 2

Topic: Tax Administration and Enforcement, Value-Added Tax (VAT)

TAX – Nov 2014 – L2 – Q6 – Tax Administration and Enforcement

Draft an objection letter addressing a Best of Judgment assessment and provide relevant tax liability calculations for Osondu Bako Company Ltd.

Question

Osondu Bako Company Limited has been in business for many years as a general business entrepreneur.

The Company prepares its accounts to 31 December of every year. The Company, however, submitted its audited Financial Statements for the year ended 31 December 2012 on 27 May 2013.

The Company applied for a Tax Clearance Certificate on 26 August 2014, but the issuance of the certificate was delayed by the Revenue. Instead of issuing the Tax Clearance Certificate, a Best of Judgment assessment of N3,450,000 was raised on the company.

The date on the Notice of Assessment was 30 May 2014, but it was served on the company on 31 August 2014.

Stated below is information relating to the financial statements of the company for the year ended 31 December 2012:

Financial Statement Item	Naira (N’000)
Profit per Accounts	3,400
Depreciation	380
Capital Allowances agreed with Revenue	590
Revenue	12,050
Net Assets	8,400
Gross Profit	960
Share Capital	10,000

The company paid all the tax liabilities. Despite this, the Chief Executive Officer was surprised and concerned upon receiving the Notice of Best of Judgment Assessment from the tax authority. Consequently, you have been engaged by the company as a Tax Consultant.

You are required to:

Write a Letter of Objection to the Tax office in respect of the Best of Judgment Assessment along with relevant workings.
(15 Marks)

Answer

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Tags: Best of Judgment Assessment, Tax Administration, Tax Clearance Certificate, Tax Objection
Level: Level 2

Topic: Tax Administration and Enforcement

TAX – May 2017 – L2 – SB – Q2 – Tax Administration and Enforcement

Explanation of transactions requiring a Tax Clearance Certificate and the procedures for hearing an appeal before the Tax Appeal Tribunal.

Question

a. Mr. Bull Dozer has just submitted his application for an export license to the Nigerian Export Promotion Council. The Council demanded a Tax Clearance Certificate before granting him the export license.

Mr. Bull Dozer was concerned and approached you to explain whether the presentation of this document is required for all government transactions in Nigeria.

Required:
State TEN transactions in respect of which a Tax Clearance Certificate may be demanded by a government agency. (10 Marks)

b. The Tax Appeal Tribunal has the authority to adjudicate on tax disputes and controversies when the appellant does not discontinue the appeal.

Required:
List TEN procedures for hearing the appeal before the Tax Appeal Tribunal. (10 Marks)

Answer

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Tags: Government Transactions, Nigeria, Tax Appeal Tribunal, Tax Clearance Certificate, Tax Dispute Resolution
Level: Level 2

Topic: Tax Administration and Enforcement
Series: MAY 2017

TAX – Nov 2014 – L2 – Q3 – Companies Income Tax (CIT)

Determine basis periods, tax liabilities, and conditions for loss reliefs and capital allowances for Gab Pal Limited.

Question

Gab Pal Limited commenced business on 1 May 2008. The company makes up its accounts to 31 August each year. Below is the data for the company’s trading activities:

Year	Adjusted Profit/Loss (₦’000)
Period ended 31 August 2009 (16 months)	(390,000)
Year ended 31 August 2010	170,000
Year ended 31 August 2011	150,000

The capital allowances for the relevant assessment years are as follows:

Assessment Year	Capital Allowance (₦’000)
2008	20,000
2009	18,000
2010	12,000
2011	8,000
2012	5,000

Requirements:

a. Determine the basis periods and the tax liabilities for the relevant years. (Ignore the Taxpayer’s right of election) (10 Marks)

b. State the TWO types of Loss reliefs acceptable to the tax authority. (2 Marks)

c. State the conditions that must be satisfied by a taxpayer to enjoy the loss reliefs stated in (b). (5 Marks)

d. State the conditions for the grant of Capital Allowances to taxpayers

Answer

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Tags: Basis Period, Capital Allowance, Loss relief, Tax liabilities
Level: Level 2

Topic: Companies Income Tax (CIT), Tax Administration and Enforcement
Series: NOV 2014

TAX – Nov 2014 – L2 – Q2 – Companies Income Tax (CIT)

Calculate assessable profits, capital allowances, and total profits for MESINOY Ltd. upon winding up.

Question

MESINOY Limited has been carrying on business in Nigeria for many years. The company makes up its accounts to 31 December each year. Due to the increasing costs of operating in Nigeria, the board of directors decided to wind up the company’s business in Nigeria and relocate to a more tax-friendly country as of 31 May 2011.

Tax laws specify that a company winding up its business must comply with specific regulations. MESINOY Limited’s unutilized Capital Allowances were agreed upon by the tax authority, amounting to N460,000. The company applied for a claim to carry back this unutilized Capital Allowance, which was granted by the tax authority. Below are the adjusted profits for the relevant periods:

Year Ended	Adjusted Profit (₦)
31 December 2009	520,000
31 December 2010	450,000
31 May 2011	300,000

Additionally, a bad debt of N58,000 was recovered on 30 November 2011.

Requirements:

a. Compute the Assessable Profits of the company for the relevant years of assessment. (5 Marks)

b. Calculate the Capital Allowances to be rolled back to the relevant years. (5 Marks)

c. Compute the Total Profits for the relevant years of assessment. (5 Marks)

d. Briefly explain Best of Judgment (BoJ) Assessment. (5 Marks)

Answer

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Tags: Assessable Profits, Capital Allowance, Tax Rollbacks, Winding-up Business
Level: Level 2

Topic: Accounting for Government Assets and Liabilities, Companies Income Tax (CIT), Tax Administration and Enforcement
Series: NOV 2014

TAX – Nov 2015 – L2 – Q2c – Tax Administration and Enforcement

This question involves advising on the proper procedure to challenge an outrageous tax assessment served by FIRS.

Question

As a Tax Consultant, the Managing Director of your client brought an Assessment Notice served on the company by the Federal Inland Revenue Service complaining that the assessment was outrageous. You observed that the amount assessed was higher than the assessment based on the documents submitted by you.

Required:
State what you would advise your client to do under this circumstance.

Answer

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Tags: Disputed Tax Assessment, Federal Inland Revenue Service (FIRS), Notice of Objection, Tax Appeal Tribunal
Level: Level 2

Topic: Tax Administration and Enforcement
Series: NOV 2015

TAX – Nov 2020 – L1 – SA – Q6 – Tax Administration and Enforcement

: State the contents of a tax return, conditions for TCC issuance, and transactions requiring TCC.

Question

All limited liability companies in Nigeria shall at least once in a year without notice or demand from the Federal Inland Revenue Service (FIRS), file a return with the FIRS in a prescribed form which contains the relevant information and documents.

In Nigeria, a tax clearance certificate (TCC) is issued only upon the application by the taxpayer. Therefore, in issuing the certificate, the relevant tax authority would have satisfied itself that the tax assessed on the income of the applicant for the three years immediately preceding the current year of assessment has been fully paid, or that no tax is due on such income, or that the applicant is not liable to tax for any of the three years.

Required:
a. State FOUR contents of a tax return. (8 Marks)
b. State THREE conditions precedent for the issuance of a TCC. (6 Marks)
c. State SIX transactions for which a TCC is required. (6 Marks)

Total: 20 Marks

Answer

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Tags: Nigerian Tax System, Required Transactions, Tax Clearance Certificate, Tax Return, TCC Conditions
Level: Level 1

Topic: Tax Administration and Enforcement
Series: NOV 2020

TAX – Nov 2020 – L1 – SA – Q5 – Tax Administration and Enforcement

Identify the correct name for the management board of the Federal Inland Revenue Service.

Question

The management board of the Federal Inland Revenue Service is known as:
A. Federal Inland Revenue Service Board
B. Federal Internal Revenue Service Board
C. Board of Federal Inland Revenue Service
D. Board of Federal Revenue Service
E. Federal Board of Inland Revenue Service

Answer

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Tags: FIRS, Management Board, Tax Administration, Tax authority
Level: Level 1

Topic: Tax Administration and Enforcement
Series: NOV 2020

TAX – Nov 2020 – L1 – SA – Q2 – Tax Administration and Enforcement

Identify the member who is not part of the FIRSB Technical Committee.

Question

The Technical Committee of the Federal Inland Revenue Service Board (FIRSB) is composed of the following members, EXCEPT:
A. The Executive Chairman of Federal Inland Revenue Service (FIRS)
B. All directors and heads of department of FIRS
C. The Legal Adviser to FIRS
D. Secretary to FIRSB
E. Director, Federal Ministry of Finance

Answer

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Level: Level 1

Topic: Tax Administration and Enforcement
Series: NOV 2020

TAX – May 2022 – L2 – SA – Q6 – Tax Administration and Enforcement

Identify the badges of trade and compute the minimum tax payable for a given year of assessment.

Question

a. The difficulty in determining what constitutes a trade has led to many litigations and the huge number of tax cases that exist on the issue. The problem from the decided cases is that of finding an absolute test for identifying a trade.

The conclusion had always been that there are no fixed rules but that each case could be examined on its own facts.
Required:
State FOUR considerations that influence the identification of badges of trade. (8 Marks)

b. Ndakogi Nigeria Limited commenced business in 2007. The extract of the statement of profit or loss of the company for the year ended December 31, 2021, has revealed the following:

Required:
Compute the minimum tax payable

Answer

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Tags: Badges of Trade, Minimum Tax, Nigerian Tax Law, Tax computation
Level: Level 2

Topic: Tax Administration and Enforcement
Series: MAY 2022

TAX – May 2022 – L2 – SA – Q3 – Tax Administration and Enforcement

Identify the taxes and levies collectible by the Federal, State, and Local Governments in Nigeria, in light of a recent court ruling.

Question

The Federal Government of Nigeria expanded the taxes and levies which the tiers of government can impose through the Schedule to the Taxes and Levies (Approved List for Collection) Act (Amendment) Order, 2015. In this Order made by the Minister of Finance, several new tax/levy heads, such as infrastructure maintenance/development levy, wharf landing charge/fee, consumption tax, the National Information Technology Development levy, etc., were introduced.

However, on May 8, 2020, the Federal High Court sitting in Lagos, delivered judgment in suit number FHC/L/CS/1082/2019, between The Registered Trustees of Hotel Owners and Managers Association of Lagos (suing for itself and on behalf of all its members) vs The Attorney-General of the Federation and others. The court held that the Ministerial Order of 2015 is unconstitutional, null, and void.

The court submitted that the Constitution vests the legislature with the power to make laws. The court further stated that schedules to a law are part and parcel of the law and, as such, only the legislature can amend schedules to a law. The implication of this ruling is that all the taxes and levies that were added to those in the Taxes and Levies (Approved List for Collection) Act Cap. T2 LFN 2004, via the Ministerial Order 2015, are illegal and cannot be enforced.

Since the judgment, your firm has been faced with a series of inquiries from taxpayers on the taxes/levies they are now expected to pay.

Required:
a. State five (5) taxes collectible by the Federal Government.
b. State five (5) taxes/levies collectible by the State Governments.
c. State ten (10) taxes/levies collectible by the Local Governments.

Answer

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Tags: Federal Taxes, Local Government Levies, State Taxes, Tax Jurisdiction, Tax law
Level: Level 2

Topic: Tax Administration and Enforcement
Series: MAY 2022

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)

Answer

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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

TAX – Nov 2016 – L2 – Q4 – Tax Administration and Enforcement

Explain the grounds for objecting to tax assessments, functions and composition of the Joint Tax Board, and taxes collectible by federal and state tax authorities.

Question

Mr. Drury is a sole proprietor who has approached you regarding the assessment given to him by the tax authority. He has registered his intention to object to the assessment and needs your professional advice.

You are required to explain briefly the following:
a. Grounds for a valid objection to a tax assessment (3 Marks)
b. The composition of the Joint Tax Board (2 Marks)
c. Functions of the Joint Tax Board (5 Marks)
d. Taxes that are exclusively collectible by the Federal Inland Revenue Service (5 Marks)
e. Taxes that are collectible by both the Federal Inland Revenue Service and State Internal Revenue Service (5 Marks

Answer

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Tags: FIRS Taxes, Joint Tax Board, Objection to Tax, State Taxes
Level: Level 2

Topic: Tax Administration and Enforcement
Series: NOV 2016

TAX – Nov 2016 – L2 – Q2 – Tax Administration and Enforcement

Explain the composition and functions of the State Board of Internal Revenue and list taxes collectible by State Governments.

Question

The present economic recession in Nigeria has called for the review of the activities of every State Board of Internal Revenue. One State Government from the South West recently called for the forum of Tax Consultants. As one of the consultants, you are required to explain the following:

a. Composition of the State Board of Internal Revenue and what constitutes a quorum. (7 Marks)
b. Any THREE functions of the State Board of Internal Revenue. (6 Marks)
c. Any SEVEN taxes collectible by a State Government. (7 Marks)

Answer

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Tags: State Board of Internal Revenue, State Taxes, Tax Authorities, Tax Collection
Level: Level 2