Topic: Value-Added Tax (VAT)

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TAX – May 2015 – L2 – SC – Q6 – Value-Added Tax (VAT)

Analyze VAT compliance, loss carry forward, and compute tax liabilities for Hidden Treasures Limited based on provided financial data.

Question

HIDDEN TREASURES Limited is an agro-allied and trading organisation which specialises in Crop and Grain production, Animal husbandry, Sale and distribution of Grains (i.e. cowpeas, guinea corn, millet, rice, beans and groundnuts).

The company has been in business for many years and it has been filing annual Income Tax returns regularly except VAT returns. On 16 March 2015, the Federal Inland Revenue Service (FIRS) served a notice of Tax Audit covering 2010 – 2014 financial years.

The management believed erroneously that since it deals in VAT exempt goods, it did not need to file VAT returns on a monthly basis.

In preparation for the visit of the FIRS, the company’s management invited you on 23 March 2015, to their office and gave you the following extracts from the company’s Statement of Comprehensive Income and agreed Capital Allowances:

Year ended	Agric Production (₦)	Grain Distribution (₦)
Year ended 30/09/2010	Loss (770,000)	(225,000)
Year ended 30/09/2011	Profit 630,000	280,000
Year ended 30/09/2012	Loss (600,000)	(150,000)
Year ended 30/09/2013	Profit 990,000	140,000
Year ended 30/09/2014	Profit 30,000	120,000

Agreed Capital Allowances are as follows:

Tax Year	Capital Allowance (₦)
2011	70,000
2012	65,000
2013	125,000
2014	115,750
2015	85,000

You are required to:

a. State the provisions of the VAT law with regard to rendition of returns by Vatable persons. (2 Marks)

b. Show by analysis the amount of losses carried forward under each income head shown above. (8 Marks)

c. Compute the tax liabilities for each year. (5 Marks)

Answer

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Tags: Agricultural Production, Capital Allowance, Grain Distribution, Loss Carried Forward, Tax liabilities, VAT Compliance
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: MAY 2015

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 – May 2023 – L2 – SC – Q6 – Value-Added Tax (VAT)

Compute VAT remittance for Fountain Hotels' July 2022 transactions and explain VAT concepts.

Question

Fountain Hotels Limited is a group of hotels located in many parts of North Central Nigeria, providing accommodation and other hospitality services. It renders its returns at the end of each month in accordance with the Value Added Tax Act 2004 (as amended).

The following are the details of the transactions for the month of July 2022:

VAT on outdoor catering services: N600,000
VAT on food: N360,000
VAT on drinks: N240,000
VAT on other vatable hotel services: N270,000
VAT on drinks purchased: N150,000
VAT on foodstuff purchased: N210,000
VAT on kitchen equipment: N480,000
VAT on professional services: N240,000

Additional Information:

30% of outdoor catering services were on credit.
20% of food and drinks were on credit.
Other vatable hotel services were paid in full.
25% of VAT on drinks and foodstuff purchased were on credit.
VAT on kitchen equipment and professional services were paid in full.

Required:

a. Compute the VAT remittable to the Federal Inland Revenue Service in respect of July 2022 transactions. (9 Marks)

b. Write short notes on the following:
i. Revenue VAT (2 Marks)
ii. Zero-rated supplies and services (2 Marks)
iii. VAT on exports (2 Marks)

Answer

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Tags: Compliance, Hospitality Services, VAT Calculation, VAT on Exports, Zero-rated supplies
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: MAY 2023

TAX – May 2024 – L2 – SA – Q5 – Value Added Tax (VAT)

Compute VAT payable by Havillah Manufacturing Limited and identify VAT-exempt goods and services.

Question

Havillah Manufacturing Limited, engaged in manufacturing perfumes and other cosmetic products, has the following profit or loss statement for the year ended September 30, 2021:

Additional Information:

Turnover includes N64,350,000 from export sales and N141,900,000 from local sales.
Cost of Sales includes:
- Opening inventory (VAT inclusive): N24,915,000
- Closing inventory (VAT inclusive): N40,865,000
- Purchase of raw materials: N94,600,000
- Freight charges: N20,570,000
- Other direct materials: N13,530,000
Plant and machinery purchased for N24,750,000 is included in opening inventory, VAT inclusive.
VAT and withholding tax remitted during the year amounted to N2,173,180 and N1,787,500, respectively.

Required: a. Compute the net VAT payable by Havillah Manufacturing Limited for the year. (10 Marks)
b. State FIVE VAT-exempt goods. (2½ Marks)
c. State FIVE VAT-exempt services. (2½ Marks)

Answer

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Tags: Exempt Goods, Exempt Services, Manufacturing, Net VAT Payable, VAT
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: MAY 2024

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 – Q5b – Value Added Tax (VAT)

Compute the total VAT payable to the Federal Inland Revenue Service (FIRS) for a series of transactions involving a textile company, wholesaler, and retailer.

Question

Olamide Limited is a textile company based in Abuja. The company sold its vatable products to a wholesaler, Qudus Enterprises, for N1,800,000. The wholesaler in turn sold the products to a retailer, Mr. Lekan, for N2,500,000, who finally sold to consumers for N5,000,000. Assume there was no closing inventory at each stage of the transactions.

Required:
Compute the total VAT payable to the Federal Inland Revenue Service.

Answer

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Tags: Input VAT, Output VAT, Tax computation, VAT
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: NOV 2016

TAX – Nov 2021 – L2 – Q6 – Value Added Tax (VAT)

Explanation of when goods and services are deemed to be supplied in Nigeria according to section 2 of the VAT Act.

Question

Taxable supplies of goods and services are those listed under the First Schedule of
the Value Added Tax Act Cap VI for 2004 (as amended). Essentially, these are goods
and services liable to value added tax at the prescribed rate.
Required:
Explain when goods and services shall be deemed to be supplied in Nigeria in
accordance with section 2 of VAT Act (as amended).

Answer

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Tags: Goods, Nigeria, Services, Supply, VAT
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: NOV 2021

TAX – Nov 2021 – L2 – Q3c – Value Added Tax (VAT)

Explanation of the merits and demerits of Value Added Tax (VAT) as a consumption tax.

Question

Explain the merits and demerits of VAT

Answer

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Tags: Consumption Tax, Tax Administration, Tax Efficiency, VAT
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: NOV 2021

TAX – Nov 2021 – L2 – Q3b – Value Added Tax (VAT)

Explanation of penalties associated with VAT non-compliance including failure to register, failure to notify of address changes, and failure to submit returns.

Question

Explain the penalties associated with the following:

i. Failure to register for VAT return (2 Marks)
ii. Failure to notify the FIRS of change of address or cessation of trade or business (2 Marks)
iii. Failure to submit VAT returns (2 Marks)

Answer

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Tags: Non-compliance, Penalties, Registration, Returns, VAT
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: NOV 2021

TAX – Nov 2021 – L2 – Q3a – Value Added Tax (VAT)

Calculation of total VAT payable by Adegboyega Enterprises to the Federal Inland Revenue Service (FIRS) for product sales.

Question

Adegboyega Enterprise is a manufacturing outfit based in Jankara, Lagos State. In 2020, the company sold its vatable product to a wholesaler, Ikeja Venture, for N3,500,000. The wholesaler sold the products to a retailer, Mrs. Adeosun, for N4,900,000, who finally sold it to consumers for N6,300,000 (VAT inclusive). Assume there was no closing inventory at each stage of the transaction.

Required:
a. Compute the total VAT payable to the Federal Inland Revenue Service by Adegboyega Enterprises on the transactions stated above.

Answer

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Tags: Manufacturing, Sales, Taxable Goods, VAT, VAT Computation
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: NOV 2021

TAX – May 2015 – L2 – SC – Q6 – Value-Added Tax (VAT)

Analyze VAT compliance, loss carry forward, and compute tax liabilities for Hidden Treasures Limited based on provided financial data.

Question

The management believed erroneously that since it deals in VAT exempt goods, it did not need to file VAT returns on a monthly basis.

Year ended	Agric Production (₦)	Grain Distribution (₦)
Year ended 30/09/2010	Loss (770,000)	(225,000)
Year ended 30/09/2011	Profit 630,000	280,000
Year ended 30/09/2012	Loss (600,000)	(150,000)
Year ended 30/09/2013	Profit 990,000	140,000
Year ended 30/09/2014	Profit 30,000	120,000

Agreed Capital Allowances are as follows:

Tax Year	Capital Allowance (₦)
2011	70,000
2012	65,000
2013	125,000
2014	115,750
2015	85,000

You are required to:

a. State the provisions of the VAT law with regard to rendition of returns by Vatable persons. (2 Marks)

b. Show by analysis the amount of losses carried forward under each income head shown above. (8 Marks)

c. Compute the tax liabilities for each year. (5 Marks)

Answer

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Tags: Agricultural Production, Capital Allowance, Grain Distribution, Loss Carried Forward, Tax liabilities, VAT Compliance
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: MAY 2015

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.

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 – May 2023 – L2 – SC – Q6 – Value-Added Tax (VAT)

Compute VAT remittance for Fountain Hotels' July 2022 transactions and explain VAT concepts.

Question

The following are the details of the transactions for the month of July 2022:

VAT on outdoor catering services: N600,000
VAT on food: N360,000
VAT on drinks: N240,000
VAT on other vatable hotel services: N270,000
VAT on drinks purchased: N150,000
VAT on foodstuff purchased: N210,000
VAT on kitchen equipment: N480,000
VAT on professional services: N240,000

Additional Information:

30% of outdoor catering services were on credit.
20% of food and drinks were on credit.
Other vatable hotel services were paid in full.
25% of VAT on drinks and foodstuff purchased were on credit.
VAT on kitchen equipment and professional services were paid in full.

Required:

a. Compute the VAT remittable to the Federal Inland Revenue Service in respect of July 2022 transactions. (9 Marks)

b. Write short notes on the following:
i. Revenue VAT (2 Marks)
ii. Zero-rated supplies and services (2 Marks)
iii. VAT on exports (2 Marks)

Answer

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Tags: Compliance, Hospitality Services, VAT Calculation, VAT on Exports, Zero-rated supplies
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: MAY 2023

TAX – May 2024 – L2 – SA – Q5 – Value Added Tax (VAT)

Compute VAT payable by Havillah Manufacturing Limited and identify VAT-exempt goods and services.

Question

Havillah Manufacturing Limited, engaged in manufacturing perfumes and other cosmetic products, has the following profit or loss statement for the year ended September 30, 2021:

Additional Information:

Turnover includes N64,350,000 from export sales and N141,900,000 from local sales.
Cost of Sales includes:
- Opening inventory (VAT inclusive): N24,915,000
- Closing inventory (VAT inclusive): N40,865,000
- Purchase of raw materials: N94,600,000
- Freight charges: N20,570,000
- Other direct materials: N13,530,000
Plant and machinery purchased for N24,750,000 is included in opening inventory, VAT inclusive.
VAT and withholding tax remitted during the year amounted to N2,173,180 and N1,787,500, respectively.

Required: a. Compute the net VAT payable by Havillah Manufacturing Limited for the year. (10 Marks)
b. State FIVE VAT-exempt goods. (2½ Marks)
c. State FIVE VAT-exempt services. (2½ Marks)

Answer

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Tags: Exempt Goods, Exempt Services, Manufacturing, Net VAT Payable, VAT
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: MAY 2024

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

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 – Q5b – Value Added Tax (VAT)

Compute the total VAT payable to the Federal Inland Revenue Service (FIRS) for a series of transactions involving a textile company, wholesaler, and retailer.

Question

Required:
Compute the total VAT payable to the Federal Inland Revenue Service.

Answer

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Tags: Input VAT, Output VAT, Tax computation, VAT
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: NOV 2016

TAX – Nov 2021 – L2 – Q6 – Value Added Tax (VAT)

Explanation of when goods and services are deemed to be supplied in Nigeria according to section 2 of the VAT Act.

Question

Answer

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Tags: Goods, Nigeria, Services, Supply, VAT
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: NOV 2021

TAX – Nov 2021 – L2 – Q3c – Value Added Tax (VAT)

Explanation of the merits and demerits of Value Added Tax (VAT) as a consumption tax.

Question

Explain the merits and demerits of VAT

Answer

Find Related Questions by Tags, levels, etc.

Tags: Consumption Tax, Tax Administration, Tax Efficiency, VAT
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: NOV 2021

TAX – Nov 2021 – L2 – Q3b – Value Added Tax (VAT)

Explanation of penalties associated with VAT non-compliance including failure to register, failure to notify of address changes, and failure to submit returns.

Question

Explain the penalties associated with the following:

i. Failure to register for VAT return (2 Marks)
ii. Failure to notify the FIRS of change of address or cessation of trade or business (2 Marks)
iii. Failure to submit VAT returns (2 Marks)

Answer

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Tags: Non-compliance, Penalties, Registration, Returns, VAT
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: NOV 2021

TAX – Nov 2021 – L2 – Q3a – Value Added Tax (VAT)

Calculation of total VAT payable by Adegboyega Enterprises to the Federal Inland Revenue Service (FIRS) for product sales.

Question

Required:
a. Compute the total VAT payable to the Federal Inland Revenue Service by Adegboyega Enterprises on the transactions stated above.

Answer

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Tags: Manufacturing, Sales, Taxable Goods, VAT, VAT Computation
Level: Level 2