Question Tag: Tax Incentives

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  • 20 Marks

ATAX – May 2016 – L3 – Q3 – Petroleum Profits Tax (PPT)

Analyze the taxation effects of incentives on Joint Ventures vs. Sole Risk operations, compute Tax Inversion Penalty, and explain Mineral Rights Acquisition Costs.

Ugheli Limited is operating a Joint Venture with NNPC under the Year 2000 Memorandum of Understanding, while Eket Limited operates under the Sole Risk Operation agreement.

The following information reflects the two companies’ operations for the month of July 2014:

Required:

(a)
i. Using the above information, compare the effects of Incentives on Joint Venture Operation as against the Sole Risk Operation using the two companies’ operations. (7 Marks)

ii. What is the purpose of Tax Inversion Penalty (TIP)? (4 Marks)

iii. Determine the Tax Inversion Penalty and the Revised Government Take from the operations of the two companies. (Tax Inversion Rate is 35%) (3 Marks)

(b) Explain the term “Mineral Rights Acquisition Costs.” (3 Marks)

(c) Explain briefly the differences between Joint Venture and Sole Risk Agreements under the Year 2000 Memorandum of Understanding. (3 Marks)

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  • 5 Marks

ATAX – May 2017 – L3 – Q4a – Tax Incentives and Reliefs

List five incentives provided by the Federal Government of Nigeria to attract investors to the solid minerals sector.

Oil and Gas are major sources of revenue for the Federal Government of Nigeria (FGN). This has become a burden to the government due to its inability to control the volume of production and price. To ameliorate this burden, the FGN is seeking alternative sources of revenue, and solid minerals have been identified.

Required:
State FIVE incentives put in place by the Federal Government of Nigeria (FGN) to attract potential investors to the solid minerals sector. (5 Marks)

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  • 5 Marks

ATAX – May 2017 – L3 – Q2b – Tax Incentives and Reliefs

List five tax incentives for companies utilizing associated gas in downstream operations.

State FIVE incentives available to a company engaged in the utilization of associated gas. (5 Marks)

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  • 20 Marks

AT – Nov 2014 – L3 – SB – Q2 – Tax Incentives and Reliefs

Prepare a presentation discussing objectives of tax incentives and benefits in Export Processing Zones for German investors.

Your firm has been commissioned by the Nigerian Business Forum to present a thirty-minute paper at a seminar organised for some German Investors who wish to establish in certain sectors of the Nigerian Economy.

The Nigerian Business Forum made your task very easy by narrowing down your submissions to the available tax incentives which may be enjoyed by business establishments within Nigeria.

Based on the discussions between the Managing Partner and the Chairman of the Nigerian Business Forum, the following areas which should serve as guide for your presentation were highlighted:

  1. Objectives of Tax Incentives
  2. Available Tax Incentives in the Export Processing Zones in Nigeria

The Managing Partner is currently on six weeks annual leave abroad and has asked you to review the above using the guidelines provided.

You are well trained to use Power Point Microsoft Application to present this kind of report to the select group. This means that the presentation must be outlined in clear terms because of the limited time available.

You are required to prepare your presentation to cover:
a. Introduction (2 Marks)
b. Objectives of Tax Incentives (4 Marks)
c. Tax Incentives for companies operating within the Export Processing Zone (14 Marks)

(Total 20 Marks)

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  • 20 Marks

ATAX – May 2021 – L3 – Q2 – Tax Incentives and Reliefs

Computation of adjusted profit and tax liabilities for Nature Agricultural Products Limited under pioneer status.

The quest for economic development in every sector of the country has enabled the Federal Government to come up with various tax incentives, especially for pioneer companies.

Nature Agricultural Products Limited, a medium-sized company, was incorporated on January 10, 2015, as a manufacturer of animal feeds. The company thereafter applied for a pioneer status and was granted a pioneer certificate with a production day of March 1, 2015.

The following details were provided in respect of the business operations of the company:

(i)

(ii.) Capital expenditure incurred on or before February 28, 2018:

(iii) Accumulated profit as at February 28, 2018= N3,968,000
The management of the company did not apply for extension of the pioneer period.

Required:

a. Compute the adjusted profit for the relevant years. (3 Marks)

b. Compute the tax liabilities for the relevant assessment years. (17 Marks)

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  • 20 Marks

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

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

———————————————————————
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:

  1. Sundry income included ₦8,500,000 realised as profit from disposal of the old excavating machine.
  2. 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
  3. Donation included ₦5,000,000 given to victims of environmental degradation, as part of the company’s social responsibility to the host community.
  4. Legal fees included ₦750,000 paid as a penalty for late filing of tax returns.
  5. 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).

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  • 30 Marks

ATAX – May 2022 – L3 – Q1 – Taxation of Companies

Determination of tax liabilities, treatment of donations, and exemptions of dividends based on CIT Act provisions.

Dadinkowa Nigeria Limited has been in business since 2009 as a manufacturer of sugar cubes. The company sources its raw materials, sugar cane, from the Northern part of the country. However, due to local security challenges, the company has faced supply disruptions since 2016.

Additionally, the company has disagreements with tax authorities regarding the treatment of certain items (e.g., donations and dividend income) in their financial statements and returns. High overhead costs, especially energy expenses, have worsened operational challenges.

At a recent board meeting, the directors proposed either a temporary closure or relocating to a neighboring country if conditions do not improve in the next fiscal year. The General Manager shared this with you during your visit as the company’s tax consultant, seeking your advice to address these issues.

A scheduled meeting with the Managing Director requires you to prepare a comprehensive tax report addressing:

  1. Determination of the company’s tax liabilities for the relevant tax year.
  2. Analysis of the treatment of donations and exemptions of dividend income under the Companies Income Tax Act (CITA).

The profit or loss account for the year ended December 31, 2021, is as follows:

Profit or Loss Account:

Extract from the company’s statement of financial position as at December 31, 2021 revealed:

The following additional information was made available:

(v) Interest on loan was paid on a facility obtained from a licensed Nigerian deposit money bank at commercial interest rate.
(vi) General and administrative expenses were made up of:

(vii) Donations and subscriptions
Included in donations was N12,000,000 paid to a fund created by the Federal Government for victims of communal crisis that took place where the company is situated.
(viii) The tax written down values of the qualifying capital expenditure (QCE) items as at December 31, 2020 were:

(ix) Additions to QCEs during the year ended December 31, 2021 were:

(x) Unrelieved capital allowances brought forward were N15,200,000.
(xi) Unabsorbed losses from previous years were:

Required:

As the company’s Tax Consultant, you are to draft a report to the Managing Director for the scheduled meeting expected to hold next week. This is expected to address the following:
a. Determination of the company’s tax liabilities for the relevant tax year. (20 Marks)
b. Comment, in line with the provisions of Companies Income Tax Act Cap C21 LFN 2004 (as amended) on:
i. The treatment of donations made by the company during the year under review (5 Marks)
ii. Exemption of dividends from taxation (5 Marks)

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  • 15 Marks

ATAX – May 2023 – L3 – Q7 – Tax Incentives and Reliefs

Explore tax incentives for mining businesses, gas utilisation operations, and companies eligible for road infrastructure tax credit schemes.

Tax incentives are special exclusions, exemptions, deductions, or credits offered by the government to encourage specified activities. These incentives have sparked debates among Nigerian lawmakers, economists, accountants, tax practitioners, and the public.

The Federal Government remains optimistic that the positive effects of tax incentives on the economy outweigh the potential revenue loss.

A prominent businessman and Chairman of High Level Group of Companies approached your firm to provide professional advice on tax incentives available for companies in specific sectors.

Required:

As the officer designated by your firm, prepare a report to the Principal Partner for review, explaining the tax incentives available to:

  1. (a) Mining businesses under the Minerals and Mining Act 2007 (6 Marks)
  2. (b) Gas utilisation (downstream operations) businesses (5 Marks)
  3. (c) Companies eligible for the Road Infrastructure Tax Credit Scheme (4 Marks)

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  • 4 Marks

ATAX – Nov 2016 – L3 – Q5a – Tax Incentives and Reliefs

Lists industries qualifying for pioneer status under the Industrial Development (Income Tax Relief) Act 1971.

One of the incentives available to industries in Nigeria is contained in the Industrial Development (Income Tax Relief) Act 1971, which grants tax holidays to companies in industries designated as “Pioneer Industries.”

You are required to:

a) State any FOUR industries that qualify to be regarded as Pioneer Industries. (4 Marks)

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  • 20 Marks

ATAX – Nov 2020 – Q4 – Taxation of Companies

Write a report on Nigerian tax incentives and their objectives for a Mexican investor planning to explore the Nigerian market.

The quest by various governments in Nigeria since the 1990s to use tax incentives to change the narrative of being a mono-product foreign exchange earner has attracted interests from both local and foreign investors to the hitherto forgotten non-oil sector. However, some of the foreign investors are not conversant with these tax incentives available to investors in the manufacturing, mining, and telecommunication industries.

You have been appointed as a tax consultant to a Mexican billionaire through his agent in Nigeria, IBK Associates, with interests in many sectors such as agriculture, aviation, manufacturing, and telecommunication in the Latin American region. He intends to explore the Nigerian business environment within the next six months.

Required:
You are to write a report to the Mexican through his agent in Nigeria highlighting the following areas:
a. Objectives of Nigerian tax incentives (4 Marks)
b. Forms of tax incentives (2 Marks)
c. Various tax incentives available to operators in the:
i. Manufacturing sector (6 Marks)
ii. Agriculture (2 Marks)
iii. Telecommunications (2 Marks)
d. Other non-tax factors foreign investors consider in determining a jurisdiction as an investment destination (4 Marks)

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  • 12 Marks

TAX – May 2021 – L1 – SB – Q4b – Tax Incentives and Reliefs

Identification of tax incentives for enterprises operating in Nigeria's free trade zones.

Mr. James Adegun has been in Japan for so many years. There is pressure from his parents in Nigeria to return to the country to take advantage of so many favourable economic policies being put in place by the government. Mr. James Adegun had a sudden meeting with you sometime in 2019 and intimated you of his desire to return to Nigeria. He was of the opinion that his business associates in Japan would be willing to invest in a free trade zone in Nigeria.

Required:
State SIX special tax incentives for enterprises operating in a free trade zone in Nigeria.

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  • 20 Marks

AT – Nov 2020 – L3 – Q1 – Tax administration in Ghana | Business Income – Corporate Income Tax

A report on tax incentives for Free Zone Enterprises, tax implications for local sales, and requirements for foreign investors to start trading in Ghana.

Esther Naah, a Ghanaian by birth, has spent most of her life in the United Kingdom. She has made a lot of savings and would want to invest in Ghana. She has heard of the Ghana Free Zone Authority and been told that the rationale behind the free trade zone is the development of disadvantaged regions. You work in a Tax Consulting firm and your Managing Partner has called on you to brief Esther, on the following issues during her next appointment to the Tax Consulting firm.

Required: Draft a report that will incorporate the following:

a) Tax incentives and benefits for Free Zone Enterprises.
(10 marks)

b) What will be the tax implication if the Free Zone Enterprise sells into the local markets?
(4 marks)

c) What are the requirements a foreigner should meet in order to start a trade in Ghana?
(6 marks)

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  • 12 Marks

AT – Mar 2024 – L3 – Q1a – Tax administration in Ghana

Explaining the concept of free zones, their policy rationale, and the benefits for investors.

The free zones enclave offers a fair business environment to all business operators irrespective of nationality, creed, or color. It has attracted both indigenes and foreigners. The benefits from the free zones appear very impressive, hence the numerous applications requesting to be granted free zone status.

Required:
i) Explain the concept of free zones.
(2 marks)

ii) Explain TWO (2) policy rationale for the establishment of the free zone.
(2 marks)

iii) Explain FOUR (4) reasons you would advise an investor to invest in a free zone enterprise.
(8 marks)

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  • 4 Marks

AT – Dec 2023 – L3 – Q3b – Tax planning

Discussing the tax implications and benefits available to companies engaged in farming and agro-processing sectors in Ghana.

Adom Ltd intends to commence business in the following areas:

  • Farming
  • Agro-processing

The management of Adom Ltd has indicated that it wants to conduct the business in the most ethical manner possible but at the same time make the maximum possible profit with minimum tax liability.

Required:
Discuss the tax implications in these sectors of the economy.

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  • 10 Marks

AT – July 2023 – L3 – Q5a – Tax planning

Computing the tax payable for group companies and identifying applicable tax incentives.

ABG Ltd is a Free Zone Enterprise established in the year 2011. The company is part of Akafina Group of Companies with subsidiaries located in Accra, Kumasi, Ayanfuri, Tema, and Bodie. The following information is relevant to the operations of Akafina Group of Companies:

Taxable Profit for the Year Ended 31 December 2022 Location Activity GH¢ million
ABG Ltd Accra Manufacturing 28
Adooso Ltd Tema Manufacturing 13
Brefa Ltd Kumasi Manufacturing 14
Crame Ltd Bodie Manufacturing 22
Didie Ltd Ayanfuri Manufacturing 33
Frankaa Ltd Accra Manufacturing 14
Greda Ltd (established since 2010) Agriculture 20

Required:
Compute the tax payable by each company and explain the type of tax incentives they may enjoy.

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  • 4 Marks

AT – Nov 2015 – L3 – Q2a – Capital allowance

Explaining the conditions under which the Ghana Revenue Authority grants capital allowances.

Capital allowance is an incentive granted to all persons in business and investment. They are, however, granted upon fulfillment of certain conditions.

Required:
Explain fully the conditions under which GRA may grant Capital Allowance to a person.

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  • 10 Marks

AT – Nov 2017 – L3 – Q3a – Business income – Corporate income tax, Tax planning

Evaluating the tax implications of an ICT hardware manufacturing business versus a mango plantation investment.

Following the government’s commitment to build one factory in each district in Ghana, an investor from Mauritius intends to invest in an ICT-Hardware manufacturing company to be located at Nsawam in the Eastern region of Ghana or start a mango plantation company at Aburi in the Eastern region of Ghana in response to the government’s investment drive.

As part of the investment, he intends to incur the following costs and start operations in 2018 on either proposal (ICT Hardware or Mango plantation):

Item Cost (GH¢)
Building 4,000,000
Plant and Machinery 6,500,000
Furniture and Fittings 100,000
Computers 100,000

Additionally, he intends to recruit fresh graduates from the Islamic University College of Ghana. It is further projected that in the first 3 years (2018, 2019, and 2020), the business will make losses as follows:

  • Year 2018: (GH¢20,000)
  • Year 2019: (GH¢18,000)
  • Year 2020: (GH¢10,000)

The investor hopes to start making profits from 2021 and intends to borrow a loan at 20% interest from his USA associate, amounting to the equivalent of GH¢80,000,000. The equity he intends to start with is GH¢20,000,000.

Required:
As a tax adviser, evaluate the proposed investment by the Mauritius investor and the tax implication on the various activities highlighted in the scenario.

(10 marks)

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  • 10 Marks

AT – March 2023 – L3 – Q5b – Tax planning

Discuss the tax-efficient investment opportunities available to Ghanaians in the diaspora under the Income Tax Act, 2016 (Act 896).

Ghana celebrated the “Year of Return with FANFARE” in 2019. The program was said to be a huge success.

The Year of Return Committee has asked you, a tax expert, to give a talk at the Ghana UK Based Achievement (GUBA) program to be held at the Accra International Conference Centre (AICC) on tax benefits for Ghanaians in the diaspora who are interested in doing business in Ghana.

Required:
Discuss the tax-efficient investment opportunities available to Ghanaians in the diaspora under the Income Tax Act, 2016 (Act 896). (10 marks)

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  • 4 Marks

AT – March 2023 – L3 – Q3d – Business income – Corporate income tax

Discuss how tax laws treat business losses and support business growth through loss carry forward.

ou have been asked to contribute to a public forum on the topic “business losses though not good have a direct effect on business development and growth as they are deductible allowances.”

When businesses make losses, to the extent that the losses are allowable, management becomes happy from the standpoint of taxation while shareholders are not too happy about the losses as these may make it impossible for them to receive dividends.

Required:
How are tax losses treated in businesses and how do the tax laws support the growth of businesses in loss-making?

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  • 3 Marks

AT – March 2023 – L3 – Q3b – Tax administration in Ghana

Explain the steps required for a business to benefit from temporary tax concessions in Ghana.

Businesses which fall under the temporary concessions enjoy tax incentives. Failure to apply for the temporary concession will not mean the denial of the benefit by the Ghana Revenue Authority.

Required:
Explain the steps persons in temporary concession should take to benefit from this dispensation.

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