Mining Taxation – Knowsia

ATAX – May 2022 – L3 – Q4 – Taxation of Specialized Businesses

Compute tax liabilities and discuss incentives for Dutse Mines in mining solid minerals

Question

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Question:

As investors and policymakers adapt to the global energy transition in a bid to offer an effective hedge against swings in oil prices, the Federal Government has recognised that it is beneficial for the country to diversify its economy. The attention of the country is now towards the development of the solid minerals sector. The Nigeria Minerals and Mining Act 2007 (as amended) was enacted to regulate the industry. Incentives for operators in the sector are as provided for in Section 5 of the Act.

One of the earliest investors in the mining sector, Dutse Mines (Nigeria) Limited, was granted a mining title by the Mining Cadastre Office (MCO) for exploitation of limestone in Nkalagu in the south-eastern zone of Nigeria in 2008. In spite of so many challenges the company is facing, it has managed to remain afloat in business.

The company has, of recent, been having tax disputes with the relevant tax authority, and your firm of chartered accountants has been engaged to help resolve them. In the 2022 tax returns filed by the company, the major area of dispute between the company and the tax authority was disparity in the treatment of certified exploration and processing expenditure of ₦60,000,000 incurred during the course of the year.

Your firm is provided with the following extracts (and supporting documents) from the books of the company for the year ended December 31, 2021:

Additional Information:

Sundry income included ₦8,500,000 realised as profit from disposal of the old excavating machine.
Allowance for doubtful debts consisted of:
- Bad debts written off: ₦2,500,000
- General allowance for doubtful debts: ₦10,500,000
- Specific allowance for doubtful debts: ₦8,000,000
- Loan to customer written off: ₦5,000,000
Donation included ₦5,000,000 given to victims of environmental degradation, as part of the company’s social responsibility to the host community.
Legal fees included ₦750,000 paid as a penalty for late filing of tax returns.
The tax written down values of qualifying capital expenditure at the end of 2021 tax year were:
- Motor vehicles (2 years remaining): ₦25,000,000
- Furniture and fittings (utilised for 2 years): ₦22,500,000
- Mining expenditure (6 years remaining): ₦40,000,000

Required:

As the Manager (Tax Matters) assigned to handle this matter, you are to forward the report to your Senior Partner (Tax Matters) showing:

a. Computation of tax liabilities of the company for the relevant assessment year (14 Marks).
b. Comments on tax incentives available to a company in the mining of solid minerals in Nigeria (6 Marks).

Answer

Find Related Questions by Tags, levels, etc.

Tags: Allowable and Disallowable Expenses, Mining Taxation, Tax Incentives, Tax Liability Computation
Level: Level 3

Topic: Taxation of Specialized Businesses

AT – Nov 2023 – L3 – SC – Q7 – Taxation of Specialized Businesses

Calculation of tax liabilities under the Mining Act and an explanation of tax neutralities with applications to policy issues.

Question

Udi Nigeria Limited is a mining company which was established ten years ago. The company makes up its accounts to December 31 of every year. The Managing Director, who is an engineer, while having a chat with his former colleagues in the university during the week, heard for the first time, the concept of tax neutralities. He wondered how tax could be neutral.

On getting to the office the following week, he requested further information on tax neutralities from the accountant, but based on his personal opinion, the accountant’s response was not convincing enough.

The company is in the process of filing its annual returns for the year ended December 31, 2021, to the tax authorities. The Managing Director has directed the Financial Accountant to forward the following reports to you (being the company’s Tax Consultant) in respect of the company’s operational activities for the year:

Operational Results:

Description	N’000
Gross Turnover	125,490
Salaries and Wages	25,900
Depreciation of Mining Equipment	15,400
Transport and Traveling	2,100
Repairs and Maintenance	3,700
Allowance for Bad Debts	6,200
Electricity and Other Utilities	4,660
Legal and Professional Fees	4,850
Certified Exploration Expenditure	4,500
Administrative Expenses	1,450
Development and Processing Expenditure	2,500
Miscellaneous Expenses	3,420
Total Deductibles	74,680
Net Profit	50,810

Additional Information:

Repairs and maintenance included an amount of N1,500,000, being cost of fittings incurred at the operational site.
Capital allowances computed:
- Brought forward: N750,000
- Current year (excluding current year capital expenditure): N12,200,000
- Total: N12,950,000

Required:

As the company’s Tax Consultant, you are to prepare a report to the Managing Director of Udi Nigeria Limited, which will:

a. Show the tax liabilities payable by the company for the relevant assessment year in line with the provisions of Nigerian Minerals and Mining Act 2007 (as amended). (9 Marks)

b. Explain the concept of tax neutralities and its applications to specific policy issues. (6 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital allowances, Corporate Taxation, Mineral Resources, Mining Taxation, Nigerian Tax System, Policy Implications, Tax Compliance, Tax Neutrality
Level: Level 3

Topic: Taxation of Specialized Businesses
Series: NOV 2023

AT – Nov 2018 – L3 – Q5c – Tax administration, Minerals and mining

Explanation of how revenue from a shared processing facility is accounted for tax purposes in mining operations.

Question

A mining company with two contracts operating in the Western and Ashanti Regions of Ghana has one processing facility for its mining operations from both contracts. This has engaged the attention of the Ghana Revenue Authority for some time now regarding how to handle its activities for tax purposes.

Required:
As a final-level tax candidate, how will revenue received from a shared processing facility by a mining company be accounted for tax purposes?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Mineral Operations, Mining Taxation, Revenue Allocation, Shared Processing
Level: Level 3

Topic: Minerals and mining, Tax administration in Ghana
Series: NOV 2018

AT – MAR 2024 – L3 – Q5a – Minerals and Mining

Discusses allowable deductions, rehabilitation fund treatment, and financial costs in the mining sector.

Question

You have been invited as a student of Taxation to speak at a stakeholder workshop on mining and mineral operations in the extractive industry. In the letter of invitation, the Organisers indicated that you are to submit a detailed write-up of your presentation on the following issues.

Required:
i) Allowable deduction peculiar to the extractive industry. (3 marks)
ii) Approved Rehabilitation Fund and the tax treatment of contributions into the fund and expenses incurred in respect of rehabilitation under the Income Tax Act, 2015 (Act 896). (3 marks)
iii) The tax treatment of relevant financial costs included in the costs incurred in respect of minerals and mining operations under the Income Tax Act, 2015 (Act 896). (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Allowable Deductions, Extractive Industry, Financial Costs, Mining Taxation, Rehabilitation Fund
Level: Level 3

Topic: Minerals and mining
Series: MAR 2024

ATAX – May 2022 – L3 – Q4 – Taxation of Specialized Businesses

Compute tax liabilities and discuss incentives for Dutse Mines in mining solid minerals

Question

———————————————————————
Question:

Your firm is provided with the following extracts (and supporting documents) from the books of the company for the year ended December 31, 2021:

Additional Information:

Sundry income included ₦8,500,000 realised as profit from disposal of the old excavating machine.
Allowance for doubtful debts consisted of:
- Bad debts written off: ₦2,500,000
- General allowance for doubtful debts: ₦10,500,000
- Specific allowance for doubtful debts: ₦8,000,000
- Loan to customer written off: ₦5,000,000
Donation included ₦5,000,000 given to victims of environmental degradation, as part of the company’s social responsibility to the host community.
Legal fees included ₦750,000 paid as a penalty for late filing of tax returns.
The tax written down values of qualifying capital expenditure at the end of 2021 tax year were:
- Motor vehicles (2 years remaining): ₦25,000,000
- Furniture and fittings (utilised for 2 years): ₦22,500,000
- Mining expenditure (6 years remaining): ₦40,000,000

Required:

As the Manager (Tax Matters) assigned to handle this matter, you are to forward the report to your Senior Partner (Tax Matters) showing:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Allowable and Disallowable Expenses, Mining Taxation, Tax Incentives, Tax Liability Computation
Level: Level 3

Topic: Taxation of Specialized Businesses

AT – Nov 2023 – L3 – SC – Q7 – Taxation of Specialized Businesses

Calculation of tax liabilities under the Mining Act and an explanation of tax neutralities with applications to policy issues.

Question

Operational Results:

Description	N’000
Gross Turnover	125,490
Salaries and Wages	25,900
Depreciation of Mining Equipment	15,400
Transport and Traveling	2,100
Repairs and Maintenance	3,700
Allowance for Bad Debts	6,200
Electricity and Other Utilities	4,660
Legal and Professional Fees	4,850
Certified Exploration Expenditure	4,500
Administrative Expenses	1,450
Development and Processing Expenditure	2,500
Miscellaneous Expenses	3,420
Total Deductibles	74,680
Net Profit	50,810

Additional Information:

Repairs and maintenance included an amount of N1,500,000, being cost of fittings incurred at the operational site.
Capital allowances computed:
- Brought forward: N750,000
- Current year (excluding current year capital expenditure): N12,200,000
- Total: N12,950,000

Required:

As the company’s Tax Consultant, you are to prepare a report to the Managing Director of Udi Nigeria Limited, which will:

a. Show the tax liabilities payable by the company for the relevant assessment year in line with the provisions of Nigerian Minerals and Mining Act 2007 (as amended). (9 Marks)

b. Explain the concept of tax neutralities and its applications to specific policy issues. (6 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital allowances, Corporate Taxation, Mineral Resources, Mining Taxation, Nigerian Tax System, Policy Implications, Tax Compliance, Tax Neutrality
Level: Level 3

Topic: Taxation of Specialized Businesses
Series: NOV 2023

AT – Nov 2018 – L3 – Q5c – Tax administration, Minerals and mining

Explanation of how revenue from a shared processing facility is accounted for tax purposes in mining operations.

Question

Required:
As a final-level tax candidate, how will revenue received from a shared processing facility by a mining company be accounted for tax purposes?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Mineral Operations, Mining Taxation, Revenue Allocation, Shared Processing
Level: Level 3

Topic: Minerals and mining, Tax administration in Ghana
Series: NOV 2018

AT – MAR 2024 – L3 – Q5a – Minerals and Mining

Discusses allowable deductions, rehabilitation fund treatment, and financial costs in the mining sector.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Allowable Deductions, Extractive Industry, Financial Costs, Mining Taxation, Rehabilitation Fund
Level: Level 3

Topic: Minerals and mining
Series: MAR 2024

Question Tag: Mining Taxation

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ATAX – May 2022 – L3 – Q4 – Taxation of Specialized Businesses

Compute tax liabilities and discuss incentives for Dutse Mines in mining solid minerals

Required:

AT – Nov 2023 – L3 – SC – Q7 – Taxation of Specialized Businesses

Calculation of tax liabilities under the Mining Act and an explanation of tax neutralities with applications to policy issues.

AT – Nov 2018 – L3 – Q5c – Tax administration, Minerals and mining

Explanation of how revenue from a shared processing facility is accounted for tax purposes in mining operations.

AT – MAR 2024 – L3 – Q5a – Minerals and Mining

Discusses allowable deductions, rehabilitation fund treatment, and financial costs in the mining sector.

ATAX – May 2022 – L3 – Q4 – Taxation of Specialized Businesses

Compute tax liabilities and discuss incentives for Dutse Mines in mining solid minerals

Required:

AT – Nov 2023 – L3 – SC – Q7 – Taxation of Specialized Businesses

Calculation of tax liabilities under the Mining Act and an explanation of tax neutralities with applications to policy issues.

AT – Nov 2018 – L3 – Q5c – Tax administration, Minerals and mining

Explanation of how revenue from a shared processing facility is accounted for tax purposes in mining operations.

AT – MAR 2024 – L3 – Q5a – Minerals and Mining

Discusses allowable deductions, rehabilitation fund treatment, and financial costs in the mining sector.

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ATAX – May 2022 – L3 – Q4 – Taxation of Specialized Businesses

Compute tax liabilities and discuss incentives for Dutse Mines in mining solid minerals

Required:

You're reporting an error for "ATAX – May 2022 – L3 – Q4 – Taxation of Specialized Businesses"

AT – Nov 2023 – L3 – SC – Q7 – Taxation of Specialized Businesses

Calculation of tax liabilities under the Mining Act and an explanation of tax neutralities with applications to policy issues.

You're reporting an error for "AT – Nov 2023 – L3 – SC – Q7 – Taxation of Specialized Businesses"

AT – Nov 2018 – L3 – Q5c – Tax administration, Minerals and mining

Explanation of how revenue from a shared processing facility is accounted for tax purposes in mining operations.

You're reporting an error for "AT – Nov 2018 – L3 – Q5c – Tax administration, Minerals and mining"

AT – MAR 2024 – L3 – Q5a – Minerals and Mining

Discusses allowable deductions, rehabilitation fund treatment, and financial costs in the mining sector.

You're reporting an error for "AT – MAR 2024 – L3 – Q5a – Minerals and Mining"

ATAX – May 2022 – L3 – Q4 – Taxation of Specialized Businesses

Compute tax liabilities and discuss incentives for Dutse Mines in mining solid minerals

Required:

You're reporting an error for "ATAX – May 2022 – L3 – Q4 – Taxation of Specialized Businesses"

AT – Nov 2023 – L3 – SC – Q7 – Taxation of Specialized Businesses

Calculation of tax liabilities under the Mining Act and an explanation of tax neutralities with applications to policy issues.

You're reporting an error for "AT – Nov 2023 – L3 – SC – Q7 – Taxation of Specialized Businesses"

AT – Nov 2018 – L3 – Q5c – Tax administration, Minerals and mining

Explanation of how revenue from a shared processing facility is accounted for tax purposes in mining operations.

You're reporting an error for "AT – Nov 2018 – L3 – Q5c – Tax administration, Minerals and mining"

AT – MAR 2024 – L3 – Q5a – Minerals and Mining

Discusses allowable deductions, rehabilitation fund treatment, and financial costs in the mining sector.

You're reporting an error for "AT – MAR 2024 – L3 – Q5a – Minerals and Mining"

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