- 15 Marks
Question
Fountain Hotels Limited is a group of hotels located in many parts of North Central Nigeria, providing accommodation and other hospitality services. It renders its returns at the end of each month in accordance with the Value Added Tax Act 2004 (as amended).
The following are the details of the transactions for the month of July 2022:
- VAT on outdoor catering services: N600,000
- VAT on food: N360,000
- VAT on drinks: N240,000
- VAT on other vatable hotel services: N270,000
- VAT on drinks purchased: N150,000
- VAT on foodstuff purchased: N210,000
- VAT on kitchen equipment: N480,000
- VAT on professional services: N240,000
Additional Information:
- 30% of outdoor catering services were on credit.
- 20% of food and drinks were on credit.
- Other vatable hotel services were paid in full.
- 25% of VAT on drinks and foodstuff purchased were on credit.
- VAT on kitchen equipment and professional services were paid in full.
Required:
a. Compute the VAT remittable to the Federal Inland Revenue Service in respect of July 2022 transactions. (9 Marks)
b. Write short notes on the following:
i. Revenue VAT (2 Marks)
ii. Zero-rated supplies and services (2 Marks)
iii. VAT on exports (2 Marks)
Answer
b) Explanation of VAT Concepts
i. Revenue VAT
Revenue VAT is the tax collected on taxable goods or services sold, which is ultimately paid by the consumer. It is calculated as a percentage of the selling price and remitted to the Federal Inland Revenue Service (FIRS).
ii. Zero-rated Supplies and Services
Zero-rated supplies are goods and services that fall under VAT law but carry a VAT rate of 0%. These include non-oil exports, goods/services purchased by diplomats, and humanitarian donor-funded projects undertaken by non-profits, religious entities, or social clubs recognized by law.
iii. VAT on Exports
Exported goods and services are exempt from VAT to align with the destination principle. This ensures that VAT is retained by the country where the product is ultimately consumed.
- Tags: Compliance, Hospitality Services, VAT Calculation, VAT on Exports, Zero-rated supplies
- Level: Level 2
- Topic: Value-Added Tax (VAT)
- Series: MAY 2023
- Uploader: Theophilus