- 10 Marks
Question
According to Act 896, the Commissioner-General shall not allow a deduction in respect of domestic expenditure and excluded expenditure incurred by a person.
Required:
Explain what constitutes domestic expenditure and excluded expenditure in line with the provisions in the Income Tax Act, 2015 (Act 896). (10 marks)
Answer
- Domestic Expenditure
Domestic expenditure refers to costs incurred by an individual for personal or household maintenance. It includes:
- Expenses for maintaining the individual, such as shelter, meals, entertainment, or other leisure activities.
- Commuting costs from home to work.
- The cost of clothing, except for specific work uniforms that are not suitable for wearing outside of work.
- Educational expenses not directly relevant to the individual’s business or education that does not lead to a degree or diploma.
- Excluded Expenditure
Excluded expenditure refers to costs that are not deductible under the tax laws, including:
- Taxes payable under the Income Tax Act.
- Bribes and corrupt practices.
- Fines, penalties, or interest for breaching any laws.
- Expenses related to exempt income or final withholding payments.
- Contributions to retirement funds, unless they are included in an employee’s taxable income.
- Dividends of a company
- Tags: Domestic expenditure, Excluded Expenditure, Income Tax Act, Tax deduction
- Level: Level 2
- Topic: Corporate Tax Liabilities
- Series: AUG 2022
- Uploader: Theophilus