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 2021 – L1 – SA – Q10 – Value Added Tax (VAT)

Multiple-choice question identifying who is not considered a vatable person under Nigerian tax law.

Question

Which of the following is NOT a vatable person?
A. A firm
B. A limited liability company
C. A sole trader
D. An individual
E. A public educational institution

Answer

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Tags: Exemptions, Tax Administration, VAT, Vatable Person
Level: Level 1

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

TAX – May 2018 – L2 – Q7 – Value Added Tax (VAT)

List goods and services exempted from VAT.

Question

a) State THREE goods and THREE services exempted from VAT.

b) Explain THREE differences between Value Added Tax (VAT) and Withholding Tax. (6 Marks)

Answer

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Tags: Goods, Services, VAT Exemptions
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: MAY 2018

TAX – May 2019 – L2 – Q6 – Companies Income Tax (CIT)

Compute total profit and tax liabilities, describe zero-rated VAT items, and discuss penalties for non-registration for VAT.

Question

Duru Cobbler Limited has been in the business of shoe manufacturing for many years. Information contained in the company’s statement of profit or loss for the year ended November 30, 2018, is as follows:

Details	Amount (N)
Revenue	18,546,000
Other income:
– Rental income (gross)	240,000
– Profit on sale of property, plant, and equipment	120,000
– Interest on bank deposits (net)	234,000
Total Other Income	594,000
Total Revenue	19,140,000
Less:
Staff salaries and wages	6,180,300
Finance cost	1,144,000
General administration expenses	10,585,190
Impairment loss	420,000
Depreciation and amortization	1,690,000
Total Expenses	20,019,490
Loss before tax	(879,490)
Income tax expense	–
Deferred tax provision	(64,380)
Loss after tax	(943,870)

Additional notes provided by the accountant:

Finance costs include bank charges and interest on overdrafts.
General administration expenses include:
- Bad debts of N655,000 from bulk sales of shoes to the managing director’s relations.
- Value added tax of N985,000 not imposed on some invoices.
Capital allowances for the relevant year amount to N1,294,000.

Required:
(a) Compute the total profit and tax liabilities payable by Duru Cobbler Limited for the relevant year of assessment. (10 Marks)
(b) Describe zero-rated goods and services under the Value Added Tax Act Cap VI LFN 2004 (as amended) and identify two transactions that may fall under this category. (3 Marks)
(c) Identify the penalties for non-registration for VAT. (2 Marks)

Answer

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Tags: Companies Income Tax, Penalties, Tax computation, VAT, Zero-Rated Goods
Level: Level 2

Topic: Companies Income Tax (CIT), Value-Added Tax (VAT)
Series: MAY 2019

PT – April 2022 – L2 – Q2a – Value Added Tax (VAT)

Describe activities under VAT that do not require meeting the threshold rule before registration is done.

Question

a) Meeting the threshold is a requirement for VAT registration. Others may come under voluntary registration. However, certain activities must be registered despite the above rules.

Required:
Describe activities under VAT, which do not require meeting the threshold rule before registration is done.
(9 marks)

Answer

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Tags: Auctioneer, Promoter of public entertainment, Threshold rule, VAT exceptions, VAT Registration

Topic: Tax Administration, Value-Added Tax (VAT)
Series: APR 2022

PT – April 2022 – L2 – Q2b – Value Added Tax (VAT)

Explain what constitutes the supply of services under the VAT Act 870 (Act 2013).

Question

b) What constitutes supply of services under the VAT Act 870 (Act 2013)?
(4 marks)

Answer

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Tags: Supply of Services, Taxable services, VAT Act, VAT on services

Topic: Taxation of Services, Value-Added Tax (VAT)
Series: APR 2022

PT – April 2022 – L2 – Q2c – Value Added Tax (VAT)

Explain what compulsory VAT registration entails under the VAT Act.

Question

c) What is Compulsory Registration under the types of VAT registration?
(2 marks)

Answer

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Tags: Compulsory registration, Ghana VAT Act, VAT enforcement, VAT Registration

Topic: Tax Administration, Value-Added Tax (VAT)
Series: APR 2022

PT – Nov 2019 – L2 – Q2b – Value-Added Tax (VAT)

Calculates withholding VAT, output VAT, and VAT payable by Akorfa Vinyo for equipment hire services.

Question

b) Akorfa Vinyo, an equipment hiring company, raises an invoice in the sum of GH¢500,000.00 in respect of hiring of equipment services to a withholding VAT agent (Sir James Enterprise). This supply excludes Value Added Tax (VAT of 12.5%), National Health Insurance Levy (NHIL of 2.5%), and Ghana Education Trust Fund Levy (GETFL of 2.5%).

Assume that this is the only supply of value-added activity done by Akorfa Vinyo in the period and payments are made in the same period.

Required:
i) Calculate the proportion of VAT that should be withheld by the agent in respect of payment of the invoice (the withholding VAT rate is 7%). (3 marks)
ii) Calculate the output VAT to be shown on the face of Akorfa’s monthly VAT Return. (3 marks)
iii) Calculate the VAT payable by Akorfa, if the total input VAT incurred for the period is GH¢25,000. (3 marks)
iv) Show the payment details by the Withholding Agent for the supply. (3 marks)

Answer

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Tags: Input VAT, Output VAT, Tax deduction, VAT, Withholding VAT
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: NOV 2019

PT – Nov 2019 – L2 – Q2a – Value-Added Tax (VAT)

Describes the procedure to follow when a VAT invoice is lost by the recipient.

Question

a) Percy Cool (Percy) supplied goods to Perry Hot (Perry), both are VAT-registered traders. Percy issued a VAT invoice accordingly on 15 February 2019. On 20 February 2019, Percy received a call from Perry indicating that he has lost the VAT invoice issued to him.

Required:
What should Percy do? (3 marks)

Answer

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Tags: Lost Invoice, VAT, VAT Administration, VAT Procedure
Level: Level 2

Topic: Value-Added Tax (VAT)
Series: NOV 2019

PT – May 2020 – L2 – Q2a – Value-Added Tax (VAT),

Examines the VAT implications for a non-resident company's purchase and servicing of vehicles in Ghana.

Question

Pamela Noi Ltd is a non-resident person. The Company’s Procurement Officer came down to Ghana to buy Ten (10) Toyota Vehicles manufactured by Safo Kantanka to be delivered in Mali. The vehicles are going to be used in Mali. The management of Pamela Noi Ltd requested that the vehicles be serviced in Ghana by High Class Mechanic, a popular mechanic in Accra-Ghana.

Required:

i) What is the Value Added Tax (VAT) implication on the vehicle to be acquired by Pamela Noi Ltd?
(2.5 marks)

ii) What is the VAT implication of the servicing of the vehicle in Ghana?
(2.5 marks)

Answer

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Tags: Non-resident, Tax Administration, Taxable Supplies, VAT
Level: Level 2

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

TXF – May 2020 – L2 – Q2b – Value-Added Tax (VAT)

This question asks for the computation of VAT withholding taxes for goods invoiced to a VAT Withholding Agent.

Question

Mutumna Ltd is a manufacturer and invoiced goods valued at GH¢20,000,000 to Lamlam Ltd, a resident company located in the Western Region of Ghana. Lamlam Ltd has been appointed as a Value Added Tax Withholding Agent.

Required:
Compute the VAT withholding taxes.
(3 marks)

Answer

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Tags: Tax Agents, Tax Compliance, VAT, Withholding Taxes
Level: Level 2