Topic: Taxation of Companies

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ATAX – May 2016 – L3 – Q5 – Taxation of Companies

Compute the original and revised tax liabilities of Atlas Nigeria Limited, considering tax official adjustments.

Question

Atlas Nigeria Limited is into the sale of Mobile Phones, and the company’s year-end is December 31 of each year. The company’s Annual Tax Returns for the year ended December 31, 2012, were submitted in January 2014. Tax officials found a number of irregularities during a routine examination of the Tax Returns. They discovered that trade payables included N940,000 representing VAT for the two months to December 31, 2012. All sales attract VAT. There was no Input VAT during 2012. Tax officials were, however, of the opinion that the income of the company accrued uniformly throughout the 12 months of the year.

The accounts showed Adjusted Profits of N44,062,500, and Capital Allowances totaled N33,025,000. The tax liability arrived at was N4,406,250. The tax officials were not satisfied with the explanations received in connection with the Withholding Tax on the Director’s fee of N1,562,500, as well as Consultancy fee of N812,500. They also decided to write back 2/3 of the following expenses:

Printing and Stationery N168,750
Donations and Subscription N1,320,620
Losses claimed, amounting to N128,025 was disallowed. Included in the adjusted profit figure is N6,962,500 for Depreciation.

REQUIRED:

i. Show the computations resulting in the Original Tax Liability of N4,406,250 (5 marks)

ii. Compute a revised Tax liability based on the findings of the Tax Officials (10 marks)

Answer

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Tags: Adjusted Profits, Depreciation, Donations, Tax liabilities, Withholding Tax
Level: Level 3

Topic: Taxation of Companies

AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies

Identify NPDC activities, explain the importance of leases in petroleum operations, and compute adjusted profit, chargeable profit, and chargeable tax.

Question

Nigerian National Petroleum Corporation (NNPC) is one of the regulatory agencies in the Oil and Gas sector of the Nigerian economy. NNPC, through its subsidiaries, carries out various regulatory functions.

a. State any FIVE activities of the Nigerian Petroleum Development Company (NPDC), a subsidiary of NNPC. (5 Marks)

b. State the importance of an Oil Mining Lease and an Oil Prospecting Lease. (2 Marks)

c. **Mr. Gillani Azurhi intimated you about his desire to invest in any company engaged in petroleum operations. One of his friends advised him against the petroleum sector in view of the current low price of crude oil in the international market and the high cost of domestic operations. He declined the advice, arguing that the price will not remain at its current low level as Nigeria will not be in recession forever.

On his own, he carried out some research using the internet. He presented you with the following financial extracts of Joji Petroleum Company Limited, which he obtained from the internet:**

Details	Amount (₦’000)
Current year capital allowances	6,080
Previous years’ capital allowances (b/f)	8,901
Custom duty	125
Royalties not included in the accounts	1,638
Loss brought forward	6,250
Petroleum Profits Tax payable	1,336

Assume a tax rate of 85%. You are required to:
i. Compute and explain the significance of Adjusted Profit. (9 Marks)
ii. Compute and explain the significance of Chargeable Profit. (2 Marks)
iii. Compute and explain the significance of Chargeable Tax. (2 Marks)

Answer

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Tags: Adjusted Profit, Chargeable Profit, Chargeable Tax, NPDC Activities, Oil Mining Lease, Oil Prospecting Lease
Level: Level 3

Topic: Taxation of Companies
Series: NOV 2016

ATAX – May 2019 – L3 – Q5c – Double Taxation Reliefs and Credits

Advise on double taxation relief for SOKGlobal Limited and compute the applicable relief.

Question

SOKGlobal Limited is a wholly owned Nigerian company that deals with stationery items. It has a functional business unit in Cape Town, South Africa. The company’s operating results for the year ended December 31, 2017, are as follows:

Profit attributable to South Africa business: ₦8,740
Capital allowances agreed with tax officials for Nigeria and South Africa businesses were ₦5,500,000 and ₦2,210,000, respectively.

Required:
Advise the company on the double taxation relief applicable to the company, showing the necessary computations.

Answer

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Tags: Corporate Tax, Double Taxation, Foreign Tax Credit, International Taxation, Tax Relief
Level: Level 3

Topic: Double Taxation Reliefs and Credits, Taxation of Companies

ATAX – May 2019 – L3 – Q3 – Taxation of Companies

Prepare capital allowance computations and tax liabilities for Pardo Nigeria Limited based on its financial data and asset acquisitions.

Question

Pardo Nigeria Limited is a manufacturer of polythene bags. It was incorporated on January 1, 2013, but commenced business operations on March 1, 2013. The following is the summary of its adjusted profits for the respective years:

Period Ended	Adjusted Profit (₦’000)
December 31, 2013	7,200
December 31, 2014	10,700
December 31, 2015	12,650
December 31, 2016	15,220
December 31, 2017	19,850

The company acquired the following assets:

Date	Asset Type	Amount (₦’000)
April 5, 2013	Factory building	5,400
January 17, 2014	Office furniture	2,750
December 1, 2014	Motor vehicle	4,500
January 3, 2015	Production plant	1,820

The company sold some of its assets on December 31, 2017 as follows:

Asset Type	Cost (₦’000)	Proceeds (₦’000)
Office furniture	250,000	35
Production plant	650,000	60

As the newly appointed tax consultant to the company, the managing director sought your advice on both capital allowances available to the company and the tax liabilities resulting from them for the relevant years. He, however, informed you during the finalization of the engagement that the factory building was purchased second-hand from a company that had ceased operation six months earlier.

Required:
Prepare a report addressed to the managing director of the company showing, for all the relevant years:

a. Capital allowance computations (9 Marks)
b. Tax liabilities payable (11 Marks)

Answer

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Tags: Asset Disposal, Capital Allowance, Corporate Tax, Tax Compliance, Tax liabilities
Level: Level 3

Topic: Taxation of Companies

ATAX – May 2021 – L3 – Q1 – Taxation of Companies

Computation of CIT and TET for 2017-2019, advisory on AfCFTA impacts on trade, and evaluation of Country-by-Country Reporting obligations.

Question

DIY Limited was incorporated on June 12, 2010, and commenced commercial activities on October 1, 2011.
The primary activities of the company are the manufacture, distribution, and sale of solar panels for domestic use. DIY Limited has its main factory in Daura, Katsina State, Northern Nigeria, and distributors in Kaduna, Abeokuta, Onitsha, and Ilorin.

Extracts from the company’s audited financial statements for 2016 to 2018 are as follows:

Note:

20% of “other overheads” represent depreciation and amortization for each year.
Capital allowances for the respective years represent 150% of depreciation and amortization.

Chief Musa Jugula (MJ), the owner and founder of DIY Limited, owns 70% of the shares of the company while the remaining 30% shares are currently held by his three children and two wives.

Chief MJ is considering expanding into Ghana, exploring either a branch or a subsidiary model. He is also interested in the African Continental Free Trade Area agreement and its implications compared to the ECOWAS region.

Forecast financial performance for 2021 to 2023:

Required:

a. Compute the Companies Income Tax (CIT) and Tertiary Education Tax (TET) payable by DIY Limited for 2017 to 2019 years of assessment and comment on any issues you consider as enablers or hindrances to investment promotion in Nigeria. Assume a tax written-down value of qualifying capital expenditure (QCE) of ₦230 million, unutilized losses of ₦28 million, and capital allowances brought forward of ₦50 million for the 2017 year of assessment.

b. As the Managing Partner of Poknos & Co, write a brief advice to Chief Musa Jugula about the African Continental Free Trade Area agreement and how the treaty compares to that of Economic Community of West African States (ECOWAS) region from the perspective of trade in goods. Your advice should cover both opportunities and challenges that may arise from the implementation of the African Continental Free Trade Agreement. (10 Marks)

c. Advise with reasons:
i. If DIY Limited is liable to prepare and submit Country-by-Country Reports (CbCR). (5 Marks)
ii. The relevant tax authority where the Country-by-Country Reports (CbCR) should be submitted, assuming it is applicable to the company. (5 Marks)

Answer

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Topic: Taxation of Companies

ATAX – May 2022 – L3 – Q1 – Taxation of Companies

Determination of tax liabilities, treatment of donations, and exemptions of dividends based on CIT Act provisions.

Question

Dadinkowa Nigeria Limited has been in business since 2009 as a manufacturer of sugar cubes. The company sources its raw materials, sugar cane, from the Northern part of the country. However, due to local security challenges, the company has faced supply disruptions since 2016.

Additionally, the company has disagreements with tax authorities regarding the treatment of certain items (e.g., donations and dividend income) in their financial statements and returns. High overhead costs, especially energy expenses, have worsened operational challenges.

At a recent board meeting, the directors proposed either a temporary closure or relocating to a neighboring country if conditions do not improve in the next fiscal year. The General Manager shared this with you during your visit as the company’s tax consultant, seeking your advice to address these issues.

A scheduled meeting with the Managing Director requires you to prepare a comprehensive tax report addressing:

Determination of the company’s tax liabilities for the relevant tax year.
Analysis of the treatment of donations and exemptions of dividend income under the Companies Income Tax Act (CITA).

The profit or loss account for the year ended December 31, 2021, is as follows:

Profit or Loss Account:

Extract from the company’s statement of financial position as at December 31, 2021 revealed:

The following additional information was made available:

(v) Interest on loan was paid on a facility obtained from a licensed Nigerian deposit money bank at commercial interest rate.
(vi) General and administrative expenses were made up of:

(vii) Donations and subscriptions
Included in donations was N12,000,000 paid to a fund created by the Federal Government for victims of communal crisis that took place where the company is situated.
(viii) The tax written down values of the qualifying capital expenditure (QCE) items as at December 31, 2020 were:

(ix) Additions to QCEs during the year ended December 31, 2021 were:

(x) Unrelieved capital allowances brought forward were N15,200,000.
(xi) Unabsorbed losses from previous years were:

Required:

As the company’s Tax Consultant, you are to draft a report to the Managing Director for the scheduled meeting expected to hold next week. This is expected to address the following:
a. Determination of the company’s tax liabilities for the relevant tax year. (20 Marks)
b. Comment, in line with the provisions of Companies Income Tax Act Cap C21 LFN 2004 (as amended) on:
i. The treatment of donations made by the company during the year under review (5 Marks)
ii. Exemption of dividends from taxation (5 Marks)

Answer

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Tags: Allowable and Disallowable Expenses, Capital allowances, Dividend Exemptions, Donations, Tax Incentives, Taxation of Companies
Level: Level 3

Topic: Taxation of Companies

ATAX – Nov 2016 – L3 – Q1 – Taxation of Companies

Discusses tax planning concepts, anti-avoidance measures, tax evasion, double taxation, and non-tax factors influencing investor choices.

Question

Zezee Nigeria Limited was incorporated on September 7, 2012, but did not commence business until July 1, 2013. Based on its Memorandum and Articles of Association, the company was established to carry on distributorship and general contracting.

Extracts from Statements of Profit or Loss and Other Comprehensive Income:

Additional information:

(i) Other Income comprises:

(ii) Administrative expenses include:

(iii) Details of Property, Plant and Equipment are as follows:

(iv) On January 2, 2015, the company bought another Motor
vehicle for N1,800,000

(v) Extracts of the Statements of Financial Position are given below:

You were recently appointed the Tax Consultant to the company. The directors sought your advice on whether or not to exercise the company’s right of election for the relevant years of assessment.
For all the relevant years of assessment, you are required to:
a. Compute the Adjusted Profit/Loss. (9 Marks)
b. Determine the Assessable Profit/Loss and advise the Company on whether or not to exercise its right of election. (6 Marks)
c. Compute the capital allowances. (4½ Marks)
d. Compute the tax liabilities. (10½ Marks)

Answer

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Tags: Anti-Avoidance, Double Taxation, Investment Tax Factors, Tax Evasion, Tax Planning
Level: Level 3

Topic: Taxation of Companies

ATAX – Nov 2020 – Q4 – Taxation of Companies

Write a report on Nigerian tax incentives and their objectives for a Mexican investor planning to explore the Nigerian market.

Question

The quest by various governments in Nigeria since the 1990s to use tax incentives to change the narrative of being a mono-product foreign exchange earner has attracted interests from both local and foreign investors to the hitherto forgotten non-oil sector. However, some of the foreign investors are not conversant with these tax incentives available to investors in the manufacturing, mining, and telecommunication industries.

You have been appointed as a tax consultant to a Mexican billionaire through his agent in Nigeria, IBK Associates, with interests in many sectors such as agriculture, aviation, manufacturing, and telecommunication in the Latin American region. He intends to explore the Nigerian business environment within the next six months.

Required:
You are to write a report to the Mexican through his agent in Nigeria highlighting the following areas:
a. Objectives of Nigerian tax incentives (4 Marks)
b. Forms of tax incentives (2 Marks)
c. Various tax incentives available to operators in the:
i. Manufacturing sector (6 Marks)
ii. Agriculture (2 Marks)
iii. Telecommunications (2 Marks)
d. Other non-tax factors foreign investors consider in determining a jurisdiction as an investment destination (4 Marks)

Answer

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Tags: Foreign Investment, Non-Oil Sector, Tax Incentives
Level: Level 3

Topic: Taxation of Companies

ATAX – Nov 2020 – Q1 – Taxation of Companies

Analyze tax implications for Sunchi Limited's operations in Nigeria and corporate tax obligations for resident and non-resident companies.

Question

The recent trade tariff war on goods exported between the United States and China has opened a vista for corporate players in the two countries and their allies to venture into new areas considered to be business-friendly.

Sunchi Limited, Shanghai, is a computer accessories company that was incorporated in China in 2003. The company established its subsidiary outlet, Sunchi West Africa Holdings, in Ibadan, Nigeria, on January 1, 2018. The Nigerian company adopted December 31, annually (same as the parent company) as its end of financial year.

The first set of consolidated accounts was audited by a reputable audit firm based in China. Taxes for both business operations were also paid in China.

The Nigerian tax inspectors from the Federal Inland Revenue Service demanded for annual returns and tax computations from the subsidiary company but the General Manager of the company claimed that the company had paid personal income tax of its employees and directors, value-added tax on imported equipment, and relevant custom duties. Furthermore, since the parent company is not registered in Nigeria, there is no reason why it should be liable to companies’ income tax. The issue is yet to be resolved.

The Managing Director of the subsidiary company in Nigeria, with the permission of the head office in China, appointed you as the company‘s tax consultant to help unravel the issue of payment of companies’ income tax by resident and non-resident companies operating in Nigeria. He also submitted to you the statement of profit or loss for the year ended December 31, 2018, after conversion of the transactions in head office‘s Chinese currency (Yuan) to Nigerian Naira.

(i) Miscellaneous income:
This consists of income realised from the sale of component parts to the head office. The transaction was made at open market price.

(ii) Legal expenses comprise:

Description	Amount (N’000)
Debt collection	800
Preliminary expenses	2,100
Land acquisition	550
Retainership fee	750
Total	4,200

Required:
As the company‘s tax consultant, you are to prepare a report to the management of Sunchi Limited taking into consideration the following:
a. Resident and non-resident companies (4 Marks)
b. Circumstances under which profit of a non-resident company will be liable to tax in Nigeria. (10 Marks)
c. Relationship between a:

Nigeria branch and the parent company (3 Marks)
Nigeria subsidiary and the parent company (3 Marks)
d. Overseas branch of a Nigerian company (3 Marks)
e. Overseas subsidiary of a Nigerian company (3 Marks)
f. Advise on, if any, the companies income tax payable by the two business operations in Nigeria. (14 Marks)

Answer

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Tags: Corporate Tax, Income Tax, Non-Resident Companies, Tax Compliance
Level: Level 3

Topic: Taxation of Companies

AT – May 2018 – L3 – SA – Q1 – Taxation of Corporations

Discuss multiple taxation, jurisdiction, withholding tax, and penalties related to Rex Pharmaceuticals.

Question

You are the tax controller of Rex Pharmaceuticals (Nigeria) Limited, having its head office at Ketu in Epe local government of Lagos State.

In the past three years, the company had been subjected to an array of taxes by different revenue authorities within Lagos State and indeed the entire country.

Apart from the Companies Income Tax, Withholding Tax is another tax that the company‟s management is concerned about. The Managing Director is very much worried that this multiplicity of taxes is taking its toll on the company‟s financials.

The company is already facing myriads of problems ranging from high cost of capital which led to increase in cost of production and attendant reduction in profit. The company‟s goods are becoming uncompetitive compared with imported similar goods. The long term effect is either reduction in work force or relocation to a more favourable economic environment. The Managing Director has invited you to his office to discuss the following issues:

(i) Whether as a corporate body, the company ought to be subjected to myriads of taxes beyond the corporate tax;

(ii) The jurisdiction of the tiers of government in the imposition and collection of taxes;

(iii) Withholding Tax;

(iv) Pay-As-You-Earn (PAYE) as it affects the staff; and

(v) Capital Gains Tax.

You have also been provided with the following information:

The company‟s technical agreement with the foreign head office and the need to remit funds;
Non-resident directors are to receive N2,500,000;
Staff P.A.Y.E has been centralised;
Dividend has been paid to shareholders in different parts of the country, and those resident in Kogi State of Nigeria, received N375,000;
Land for a factory in Abuja was purchased from Alhaji Garuba Maito who resides in Kano;
The company received N4,500,000 as net dividend from an associated company, Laiketop Limited, for the year ended September 30, 2014;
In the audited financial statements of Rex Pharmaceuticals for the year ended December 31, 2015, a dividend of N9,500,000 was proposed. Out of this amount, N3,500,000 was from dividend received from Laiketop Limited while the balance was from a Total Profit of N22,500,000 from other trading activities; and
Out of the thirty employees in Abuja, five are resident in Suleja, Niger State.

You are required to prepare a memo to the Managing Director explaining the following:

(a) i. Double/Multiple Taxation.
ii. Double Taxation Treaty.
iii. Multiple Taxation in Nigeria.
iv. Measures put in place to reduce cases of multiple taxation in Nigeria.
v. Withholding Tax with respect to (i) to (v).
vi. Penalty for non-deduction/remittance of Withholding Tax. (12 Marks)

(b) The arms of government empowered to legislate on tax matters by the Constitution. (4 Marks)

(d) i. The appropriate description of the income received from Laiketop Limited.
ii. The tax due from other trading activities of Rex Pharmaceuticals.
iii. Amount to be recouped by Rex Pharmaceuticals, if any.
iv. Net amount received by shareholders of Rex Pharmaceuticals.
v. Relevant section of the law to buttress your points in (i) and (ii) above. (10 Marks)

Answer

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Tags: Capital gains tax, Corporate Tax, PAYE, Tax Compliance, Tax Planning, Withholding Tax
Level: Level 3

Topic: Taxation of Companies
Series: MAY 2018

ATAX – May 2016 – L3 – Q5 – Taxation of Companies

Compute the original and revised tax liabilities of Atlas Nigeria Limited, considering tax official adjustments.

Question

Printing and Stationery N168,750
Donations and Subscription N1,320,620
Losses claimed, amounting to N128,025 was disallowed. Included in the adjusted profit figure is N6,962,500 for Depreciation.

REQUIRED:

i. Show the computations resulting in the Original Tax Liability of N4,406,250 (5 marks)

ii. Compute a revised Tax liability based on the findings of the Tax Officials (10 marks)

Answer

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Tags: Adjusted Profits, Depreciation, Donations, Tax liabilities, Withholding Tax
Level: Level 3

Topic: Taxation of Companies

AT – Nov 2016 – L3 – SB – Q2 – Taxation of Companies

Identify NPDC activities, explain the importance of leases in petroleum operations, and compute adjusted profit, chargeable profit, and chargeable tax.

Question

a. State any FIVE activities of the Nigerian Petroleum Development Company (NPDC), a subsidiary of NNPC. (5 Marks)

b. State the importance of an Oil Mining Lease and an Oil Prospecting Lease. (2 Marks)

On his own, he carried out some research using the internet. He presented you with the following financial extracts of Joji Petroleum Company Limited, which he obtained from the internet:**

Details	Amount (₦’000)
Current year capital allowances	6,080
Previous years’ capital allowances (b/f)	8,901
Custom duty	125
Royalties not included in the accounts	1,638
Loss brought forward	6,250
Petroleum Profits Tax payable	1,336

Answer

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Tags: Adjusted Profit, Chargeable Profit, Chargeable Tax, NPDC Activities, Oil Mining Lease, Oil Prospecting Lease
Level: Level 3

Topic: Taxation of Companies
Series: NOV 2016

ATAX – May 2019 – L3 – Q5c – Double Taxation Reliefs and Credits

Advise on double taxation relief for SOKGlobal Limited and compute the applicable relief.

Question

Profit attributable to South Africa business: ₦8,740
Capital allowances agreed with tax officials for Nigeria and South Africa businesses were ₦5,500,000 and ₦2,210,000, respectively.

Required:
Advise the company on the double taxation relief applicable to the company, showing the necessary computations.

Answer

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Tags: Corporate Tax, Double Taxation, Foreign Tax Credit, International Taxation, Tax Relief
Level: Level 3

Topic: Double Taxation Reliefs and Credits, Taxation of Companies

ATAX – May 2019 – L3 – Q3 – Taxation of Companies

Prepare capital allowance computations and tax liabilities for Pardo Nigeria Limited based on its financial data and asset acquisitions.

Question

Period Ended	Adjusted Profit (₦’000)
December 31, 2013	7,200
December 31, 2014	10,700
December 31, 2015	12,650
December 31, 2016	15,220
December 31, 2017	19,850

The company acquired the following assets:

Date	Asset Type	Amount (₦’000)
April 5, 2013	Factory building	5,400
January 17, 2014	Office furniture	2,750
December 1, 2014	Motor vehicle	4,500
January 3, 2015	Production plant	1,820

The company sold some of its assets on December 31, 2017 as follows:

Asset Type	Cost (₦’000)	Proceeds (₦’000)
Office furniture	250,000	35
Production plant	650,000	60

Required:
Prepare a report addressed to the managing director of the company showing, for all the relevant years:

a. Capital allowance computations (9 Marks)
b. Tax liabilities payable (11 Marks)

Answer

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Tags: Asset Disposal, Capital Allowance, Corporate Tax, Tax Compliance, Tax liabilities
Level: Level 3

Topic: Taxation of Companies

ATAX – May 2021 – L3 – Q1 – Taxation of Companies

Computation of CIT and TET for 2017-2019, advisory on AfCFTA impacts on trade, and evaluation of Country-by-Country Reporting obligations.

Question

Extracts from the company’s audited financial statements for 2016 to 2018 are as follows:

Note:

20% of “other overheads” represent depreciation and amortization for each year.
Capital allowances for the respective years represent 150% of depreciation and amortization.

Chief Musa Jugula (MJ), the owner and founder of DIY Limited, owns 70% of the shares of the company while the remaining 30% shares are currently held by his three children and two wives.

Forecast financial performance for 2021 to 2023:

Required:

Answer

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Topic: Taxation of Companies

ATAX – May 2022 – L3 – Q1 – Taxation of Companies

Determination of tax liabilities, treatment of donations, and exemptions of dividends based on CIT Act provisions.

Question

A scheduled meeting with the Managing Director requires you to prepare a comprehensive tax report addressing:

Determination of the company’s tax liabilities for the relevant tax year.
Analysis of the treatment of donations and exemptions of dividend income under the Companies Income Tax Act (CITA).

The profit or loss account for the year ended December 31, 2021, is as follows:

Profit or Loss Account:

Extract from the company’s statement of financial position as at December 31, 2021 revealed:

The following additional information was made available:

(v) Interest on loan was paid on a facility obtained from a licensed Nigerian deposit money bank at commercial interest rate.
(vi) General and administrative expenses were made up of:

(ix) Additions to QCEs during the year ended December 31, 2021 were:

(x) Unrelieved capital allowances brought forward were N15,200,000.
(xi) Unabsorbed losses from previous years were:

Required:

Answer

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Tags: Allowable and Disallowable Expenses, Capital allowances, Dividend Exemptions, Donations, Tax Incentives, Taxation of Companies
Level: Level 3

Topic: Taxation of Companies

ATAX – Nov 2016 – L3 – Q1 – Taxation of Companies

Discusses tax planning concepts, anti-avoidance measures, tax evasion, double taxation, and non-tax factors influencing investor choices.

Question

Extracts from Statements of Profit or Loss and Other Comprehensive Income:

Additional information:

(i) Other Income comprises:

(ii) Administrative expenses include:

(iii) Details of Property, Plant and Equipment are as follows:

(iv) On January 2, 2015, the company bought another Motor
vehicle for N1,800,000

(v) Extracts of the Statements of Financial Position are given below:

Answer

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Tags: Anti-Avoidance, Double Taxation, Investment Tax Factors, Tax Evasion, Tax Planning
Level: Level 3

Topic: Taxation of Companies

ATAX – Nov 2020 – Q4 – Taxation of Companies

Write a report on Nigerian tax incentives and their objectives for a Mexican investor planning to explore the Nigerian market.

Question

Answer

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Tags: Foreign Investment, Non-Oil Sector, Tax Incentives
Level: Level 3

Topic: Taxation of Companies

ATAX – Nov 2020 – Q1 – Taxation of Companies

Analyze tax implications for Sunchi Limited's operations in Nigeria and corporate tax obligations for resident and non-resident companies.

Question

The first set of consolidated accounts was audited by a reputable audit firm based in China. Taxes for both business operations were also paid in China.

(i) Miscellaneous income:
This consists of income realised from the sale of component parts to the head office. The transaction was made at open market price.

(ii) Legal expenses comprise:

Description	Amount (N’000)
Debt collection	800
Preliminary expenses	2,100
Land acquisition	550
Retainership fee	750
Total	4,200

Nigeria branch and the parent company (3 Marks)
Nigeria subsidiary and the parent company (3 Marks)
d. Overseas branch of a Nigerian company (3 Marks)
e. Overseas subsidiary of a Nigerian company (3 Marks)
f. Advise on, if any, the companies income tax payable by the two business operations in Nigeria. (14 Marks)

Answer

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Tags: Corporate Tax, Income Tax, Non-Resident Companies, Tax Compliance
Level: Level 3

Topic: Taxation of Companies

AT – May 2018 – L3 – SA – Q1 – Taxation of Corporations

Discuss multiple taxation, jurisdiction, withholding tax, and penalties related to Rex Pharmaceuticals.

Question

You are the tax controller of Rex Pharmaceuticals (Nigeria) Limited, having its head office at Ketu in Epe local government of Lagos State.

In the past three years, the company had been subjected to an array of taxes by different revenue authorities within Lagos State and indeed the entire country.

(i) Whether as a corporate body, the company ought to be subjected to myriads of taxes beyond the corporate tax;

(ii) The jurisdiction of the tiers of government in the imposition and collection of taxes;

(iii) Withholding Tax;

(iv) Pay-As-You-Earn (PAYE) as it affects the staff; and

(v) Capital Gains Tax.

You have also been provided with the following information:

The company‟s technical agreement with the foreign head office and the need to remit funds;
Non-resident directors are to receive N2,500,000;
Staff P.A.Y.E has been centralised;
Dividend has been paid to shareholders in different parts of the country, and those resident in Kogi State of Nigeria, received N375,000;
Land for a factory in Abuja was purchased from Alhaji Garuba Maito who resides in Kano;
The company received N4,500,000 as net dividend from an associated company, Laiketop Limited, for the year ended September 30, 2014;
In the audited financial statements of Rex Pharmaceuticals for the year ended December 31, 2015, a dividend of N9,500,000 was proposed. Out of this amount, N3,500,000 was from dividend received from Laiketop Limited while the balance was from a Total Profit of N22,500,000 from other trading activities; and
Out of the thirty employees in Abuja, five are resident in Suleja, Niger State.

You are required to prepare a memo to the Managing Director explaining the following:

(b) The arms of government empowered to legislate on tax matters by the Constitution. (4 Marks)

Answer

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Tags: Capital gains tax, Corporate Tax, PAYE, Tax Compliance, Tax Planning, Withholding Tax
Level: Level 3