Question Tag: Losses Treatment

According to the National Bureau of Statistics, the solid mining sector contributed 7.86% to the overall gross domestic product (GDP), in the first quarter of 2024. Although, this figure is higher than those recorded in the first quarter of 2023 (6.73%) and fourth quarter of 2023 (4.47%), in real terms, the mining sector grew by 6.30% year-on-year in the first quarter of 2024.

The abysmal performance of the sector to the growth and development of the Nigerian economy has been a cause of concern to the government. In a bid to address this issue, the Federal Government has unveiled series of transformative strides aimed at revitalising the sector.

At the forefront of this transformation is the complete overhauling of the procedures involved in the possession and purchase of minerals as provided for in Sections 92 – 96 of the Nigerian Minerals and Mining Act, 2007 (as amended).

The Federal Government is also reviewing the possibility of encouraging both incorporated and proposed mining companies enjoy the various taxation incentives as enshrined in the Industrial Development (Income Tax Relief) Act and other pioneer incentives regulations released by the Nigerian Investment Promotion Commission (NIPC) in 2014 and 2017.

The Managing Director of a mining company, which was incorporated three years ago, has approached your firm of Chartered Accountants to provide advice on government policy direction in the sector.

Required: As the Manager in charge of corporate tax matters in the accounting firm, you have been directed by the Principal Partner to prepare a report for his review before sending same to the client, addressing the following:

a. Possession and purchase of minerals in accordance with the provisions of the Principal Act (5 Marks)

b. Tax incentives available to pioneer industries (3 Marks)

c. Treatment of losses and capital allowances for pioneer products (5 Marks)

d. Restrictions applicable to pioneer industries (2 Marks)