- 30 Marks
Question
HUSNA Nigeria Limited was incorporated on May 13, 2015, to manufacture adhesives using gum arabic. The company, led by Mr. Onyeocha Ben, sought to benefit from the Industrial Development (Income Tax Relief) Act. They applied and were granted a Pioneer Certificate, with the production day certified as July 1, 2015.
The company’s financial records provide the following data:
(i) Accumulated profit as of June 30, 2016 – ₦41,250,000
(ii) Capital expenditure during the Pioneer period (certified by FIRS):
- Building – ₦20,000,000
- Property, Plant & Equipment – ₦18,750,000
- Motor vehicles – ₦12,500,000
- Furniture & Fittings – ₦6,250,000
(iii) Adjusted profits from the new trade after the pioneer period:
- For 6 months to December 31, 2016 – ₦15,000,000
- For the year to December 31, 2017 – ₦22,500,000
Required:
a. Explain briefly the conditions for granting a Pioneer Status to a company.
b. Compute the tax liabilities of the company for the relevant assessment years.
c. Differentiate between Tax Audit and Tax Investigation.
Answer
a. Conditions for Granting Pioneer Status:
Pioneer Status is granted if the company operates in a sector identified by the government as essential for economic development, shows substantial new investments in the industry, and applies formally with detailed business plans and expected benefits.
c. Tax Audit vs. Tax Investigation:
- Tax Audit: A routine process reviewing taxpayer compliance, examining financial records to ensure accuracy.
- Tax Investigation: An in-depth, detailed review, often triggered by suspicion of fraud or tax evasion, aiming to uncover discrepancies or hidden income sources.
- Tags: Pioneer Status, Tax Audit, Tax computation, Tax Investigation, Tax liabilities
- Level: Level 3
- Topic: Taxation of Companies
- Series: NOV 2017
- Uploader: Dotse