- 20 Marks
TAX – May 2024 – L2 – SA – Q3 – Taxation of Non-Residents
Discuss significant economic presence in digital transactions and calculate the taxable income for Alhaji Yanko Abdulahi’s trust.
Question
a. Section 6 (6A) of the Personal Income Tax Act Cap P8 LFN 2004, as amended by the Finance Act 2020, states that the Minister by Order can determine what constitutes the significant economic presence of a non-resident, executor, or trustee.
Required:
i. In relation to what constitutes a significant economic presence, discuss Digital transactions (4 Marks)
ii. Discuss Services (4 Marks)
b. Alhaji Yanko Abdulahi was a successful businessman in Kano before he died. He is survived by two children, Yahaya and Binta.
A trust was created for the benefit of his two children. The trustee’s records for the year ended December 31, 2021, revealed the following information:
| Item | Amount (N) |
|---|---|
| Rental income (gross) | 2,400,000 |
| Profit from trading activities | 32,160,800 |
| Interest received (gross) | 840,000 |
| Other income | 630,500 |
Additional Information:
- Yahaya is entitled to a fixed annuity of N148,000 per annum.
- Allowance for trustee expenses: N62,000.
- Capital allowance agreed with the Revenue: N1,260,000.
- Trustee remuneration per trust deed:
- Fixed – N25,000 per annum
- Variable – 2% of computed income
- Provision made for payment of N150,000 as discretionary payments to each child.
- 60% of distributable income is shared between Yahaya and Binta in the ratio 55:45, respectively.
Required:
Compute the income of the trust assessable to tax in the hands of the trustee. (12 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Beneficiaries, Digital Transactions, Economic Presence, Taxable Income, Trust Income
- Level: Level 2
- Topic: Taxation of Non-Residents
- Series: MAY 2024