- 15 Marks
ATAX – May 2017 – L3 – Q2a – Taxation of Specialized Businesses
Explain the concepts of load factor, G-factor, and compute the value of chargeable natural gas sold.
Question
Oron Itu Petroleum Company Limited has been in the Oil and Gas business for several years. The company has just secured its first two contracts to supply consignments of Natural Gas to two companies in Ghana and Gambia.
The consignment to Ghana was valued at N589,000,000 while that to Gambia was valued at N375,500,000.
The relevant arm of the Nigerian National Petroleum Corporation (NNPC) issued Certificates of Export as follows:
| Contract No | Amount (N) | Load Factor |
|---|---|---|
| I | 589,000,000 | 580 |
| II | 375,500,000 | 620 |
The Managing Director, who has just resumed duty, could not understand the meaning of Load Factor. He has approached you as the Tax Consultant to advise him on the points raised.
The table below is provided for reference:
| Load Factor | G-Factor (% per annum) |
|---|---|
| 500 | 16.9 |
| 600 | 15.5 |
| 700 | 14.3 |
| 1000 | 13.6 |
You are required to:
(a) Explain briefly the following:
i. The reason behind having a load factor on the Consignee’s Certificate. (3 Marks)
ii. G-Factor. (1 Mark)
iii. Value of Chargeable Natural Gas. (2 Marks)
iv. Compute the Value of Gas sold. (9 Marks)
Find Related Questions by Tags, levels, etc.