- 15 Marks
Question
Papa Ejima Limited, a manufacturing company, filed tax returns for the 2014 Assessment Year. The Federal Inland Revenue Service (FIRS) issued additional assessments totaling N360,000 for Value Added Tax (VAT) and N3,050,000 for Withholding Tax (WHT). The Managing Director disputes this assessment, asserting the accuracy of the company’s tax filings.
The records of the company for the Accounting Year ended December 31, 2013 showed:
| Description | Amount (N) |
|---|---|
| Revenue | 187,500,000 |
| Cost of sales | (102,500,000) |
| Gross Profit | 85,000,000 |
| Other income | 31,250,000 |
| Operating expenses | (57,250,000) |
| Interest and similar charges | (3,200,000) |
| Profit before tax | 55,800,000 |
| Taxation | (6,250,000) |
| Profit after tax | 49,550,000 |
| Dividend | (38,500,000) |
| Retained profit for the year | 11,050,000 |
Other relevant information includes:
- Revenue:
- Export sales: N58,500,000
- Local sales: N129,000,000
- Cost of sales:
- Opening inventory (VAT inclusive): N22,800,000
- Closing stock (VAT inclusive): N37,150,000
- Purchase of raw material: N90,600,000
- Freight charges: N18,700,000
- Other direct materials: N27,550,000
- Other income:
- Foreign exchange gain: N4,800,000
- Profit on sale of Non-current assets (sales proceeds is N21.5m): N8,850,000
- Management fees from subsidiary companies: N17,600,000
- Operating expenses:
- Office rent: N18,000,000
- Audit fees: N4,000,000
- Consultancy fees to ZXY Ltd: N11,000,000
- Directors’ fees: N7,500,000
- Other expenses: N16,750,000
- Additional details:
- The company purchased Non-Current Assets (VAT inclusive): N84,000,000
- VAT remitted to FIRS during the year: N1,976,235
- WHT remitted to FIRS during the year: N6,650,000
Required:
As the tax consultant for the company, prepare a memo to advise the Managing Director on the appropriate objection and appeal procedures available to the company under the tax regulations.
(Total 15 Marks)
Answer
MEMO
Date: November 17, 2017
To: The Managing Director, Papa Ejima Limited
From: Tax Partner, Richard Obaloluwa & Co.
Subject: Objection and Appeal Procedures for Additional Tax Assessment
The additional assessment issued by the FIRS can be challenged; however, specific procedures must be followed to file a valid objection and pursue an appeal if necessary. Here is a summary of the objection and appeal procedures:
- Notice of Objection
If the taxpayer disputes an assessment, it may submit a written notice of objection to the Chairman of the FIRS. The notice must:- Be filed within 30 days of receiving the assessment notice.
- Clearly state the grounds for objection.
- Response by FIRS
Upon receiving the objection notice, the FIRS may:- Review and revise the assessment, issuing a Notice of Revised Assessment if agreed upon, or
- Refuse to amend the assessment, issuing a Notice of Refusal to Amend.
- Appeal to the Tax Appeal Tribunal
If unsatisfied with FIRS’s response, the company may appeal to the Tax Appeal Tribunal (TAT), which will:- Notify both parties at least 7 days before the hearing.
- Conduct a public hearing where the taxpayer must demonstrate that the assessment is excessive.
- Decide whether to confirm, reduce, increase, or annul the assessment based on evidence.
- Further Appeals
If the TAT’s decision is unsatisfactory, the taxpayer can appeal to the Federal High Court on points of law, subject to conditions including:- Filing the appeal within 30 days of the TAT’s decision.
- Continuing further appeals to the Court of Appeal or the Supreme Court, as needed.
Please review this information, and let us know if further action or discussion with the Tax Authority is required.
Yours faithfully,
For: Richard Obaloluwa & Co,
Tax Partner
- Tags: Corporate Taxation, FIRS, Objection Procedures, Tax Appeal, Tax Dispute, VAT, WHT
- Level: Level 3
- Topic: Tax Administration and Dispute Resolution
- Series: NOV 2017
- Uploader: Dotse