- 30 Marks
Question
Mr. Danko Chinyere, who has worked in a neighboring African country for many years, returned to Nigeria in August 2018. He incorporated a private limited liability company known as ChiDan Limited located in Lagos on October 30, 2018. The company deals in processing and packaging of plantain chips for local consumption.
The directors of the company opened a business bank account with one of the leading commercial banks in November 2018. The company commenced full operations on January 2, 2019.
Your firm, Adama & Co., was appointed as the tax consultant to ChiDan Limited in January 2021. At the first engagement meeting with the company, you discovered that the company was yet to register with the Federal Inland Revenue Service (FIRS). Relevant taxes, including value-added tax (VAT), were not remitted to FIRS.
An extract of the company’s first set of financial statements made up to December 31, 2020, is as follows:
Required:
Advise management of the company on the following:
a. Due date for submission of audited financial statements to the tax office. (2 Marks)
b. Requirements for filing of VAT returns and remittance of VAT liabilities – Section 16 of VAT Act (as amended). (4 Marks)
c. Basis of assessment on commencement of business – Section 29 (3) of CITA
(as amended) (6 Marks)
d. The income tax liabilities payable for the relevant year of assessment
(18 Marks)
Answer
a. The due date for submitting audited financial statements to the tax office is six months after the accounting year-end, which would be June 30, 2021, for ChiDan Limited.
b. VAT returns should be filed monthly on or before the 21st of the following month. ChiDan Limited is liable to penalties for late registration and non-remittance of VAT.
c. The basis of assessment for the commencement of business, according to Section 29 (3) of CITA, will be on actual profits from the date of commencement (January 2, 2019). For the second year, either the preceding year basis or actual profits for the year may be applied, whichever is more favorable to the taxpayer.
d. The income tax liabilities payable for the relevant assessment year
Whist thanking you for the confidence reposed in us, it is hoped that our comments adequately captured your requests.
Yours faithfully,
For: XZB & Co.
J. A. Yusuf
Managing Consultant
- Tags: Commencement Rules, Corporate Tax, Nigerian Tax Law, Tax Filing, VAT Compliance
- Level: Level 2
- Topic: The Nigerian Tax System
- Series: MAY 2022
- Uploader: Theophilus