• 20 Marks

TAX – Nov 2020 – L1 – SA – Q6 – Tax Administration and Enforcement

: State the contents of a tax return, conditions for TCC issuance, and transactions requiring TCC.

All limited liability companies in Nigeria shall at least once in a year without notice or demand from the Federal Inland Revenue Service (FIRS), file a return with the FIRS in a prescribed form which contains the relevant information and documents.

In Nigeria, a tax clearance certificate (TCC) is issued only upon the application by the taxpayer. Therefore, in issuing the certificate, the relevant tax authority would have satisfied itself that the tax assessed on the income of the applicant for the three years immediately preceding the current year of assessment has been fully paid, or that no tax is due on such income, or that the applicant is not liable to tax for any of the three years.

Required:
a. State FOUR contents of a tax return. (8 Marks)
b. State THREE conditions precedent for the issuance of a TCC. (6 Marks)
c. State SIX transactions for which a TCC is required. (6 Marks)

Total: 20 Marks

a. Contents of a Tax Return:

  1. Audited Financial Statements: The financial statements of the company, including income statement, balance sheet, and cash flow statement.
  2. Tax Computation: A detailed computation showing how the assessable profit and the resultant tax liability were determined.
  3. Directors’ Report: A report from the company’s directors giving insight into the operations and financial performance during the accounting period.
  4. Certificate of Payment of Provisional Tax: Evidence that the company has paid the provisional tax (if applicable).

b. Conditions Precedent for the Issuance of a Tax Clearance Certificate (TCC):

  1. Full Payment of Assessed Taxes: The applicant must have fully paid all taxes assessed on the income of the preceding three years.
  2. No Tax Due: The applicant must have no outstanding tax liability for the preceding three years, or the tax authority must be satisfied that no tax is due.
  3. Not Liable to Tax: The applicant may not be liable to tax for any of the preceding three years, and this must be verified by the relevant tax authority.

c. Transactions for which a Tax Clearance Certificate (TCC) is Required:

  1. Application for Government Loan: Obtaining a government loan for housing, business, or other purposes.
  2. Application for Contracts: Participating in a government tender or bidding for government contracts.
  3. Registration of a New Company: When registering a new limited liability company.
  4. Application for a Certificate of Occupancy: Obtaining a certificate of occupancy or any other title document for property.
  5. Renewal of Trade License: Renewing a business trade license or permit.
  6. Application for Foreign Exchange: Requesting foreign exchange for import or export purposes.
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