TAX – Nov 2018 – L1 – SA – Q12 – Value Added Tax (VAT)

Calculate the output VAT for a vatable product sold to a final consumer.

Question

In 2018, a vatable product was sold to a final consumer for N210,000 (VAT inclusive). The output VAT was:
A. N10,500
B. N10,000
C. N7,500
D. N5,000
E. N2,500

Answer

A. N10,500

Explanation:
The product was sold for N210,000, which includes VAT. To determine the output VAT, the formula is:

Output VAT = (VAT-inclusive price * VAT rate) / (1 + VAT rate)

Assuming the VAT rate is 5%, the calculation would be:

Output VAT = (N210,000 * 5%) / (1 + 5%)
Output VAT = N10,500

Thus, the correct answer is N10,500.

Tags: Nigerian Tax System, Output VAT, VAT Calculation, Vatable Product
Level: Level 1

Topic: Value-Added Tax (VAT), Customs, and Excise Duties
Series: NOV 2020

Uploader: Dotse