Series: NOV 2021

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  • 16 Marks

TAX – Nov 2021 – L2 – Q7 – Tax Administration

Explanation of five different aspects of tax administration that TAXPRO MAX can handle.

Tago Nigeria Limited was incorporated in 2009 as a trading company. It supplies
office furniture, equipment and other office materials to end users.

Due to the favourable business climate in recent years, the company achieved a
gross turnover of N120,000,000 in 2020. The directors were impressed by the profits
posted by the company, hence the decision to computerise the accounting system of
the company.
You were appointed the tax consultant to the company in 2018. You are aware that
in 2006, the Federal Inland Revenue Service (FIRS) deployed the first tax portal
(Webportal) to automate and streamline taxpayer‟s registration and other tax
administration system (ITAS) known as SIGTAS. This was implemented though its
deployment was stalled.

Following the enactment of the Finance Act, 2020, the Federal Inland Revenue
Service is empowered to automate filing of tax returns and payment processes.
You attended a seminar organised by the Federal Inland Revenue Service in June
2021, to inform tax consultants of the adoption of a locally developed tax
management solution known as TAXPRO MAX. The FIRS insisted that manual filings
of tax returns would no longer be allowed.
At a meeting held with the Managing Director of Tago Nigeria Limited, you intimated
him of the tax development. He was worried that there could be a delay in filing of
tax returns for the year ended December 31, 2020, more so when taxpayers are yet to
be fully aware of this new development.

Required

Explain to the management FIVE different aspects of tax administration that the tax management solution known as TAXPRO MAX can handle.

 

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  • 15 Marks

TAX – Nov 2021 – L2 – Q6 – Value Added Tax (VAT)

Explanation of when goods and services are deemed to be supplied in Nigeria according to section 2 of the VAT Act.

Taxable supplies of goods and services are those listed under the First Schedule of
the Value Added Tax Act Cap VI for 2004 (as amended). Essentially, these are goods
and services liable to value added tax at the prescribed rate.
Required:
Explain when goods and services shall be deemed to be supplied in Nigeria in
accordance with section 2 of VAT Act (as amended).

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  • 15 Marks

TAX – Nov 2021 – L2 – Q5 – Companies Income Tax (CIT)

Explanation of documents required for tax registration, time lag for filing tax returns, and penalties for late filing of returns.

QUESTION 5
The Companies Income Tax Act Cap C21 LFN 2004 (as amended) empowers the
Federal Inland Revenue Service to assess the income of corporate organisations.
Corporate organisations are required to file tax returns within a specified period of
time to the relevant tax authority.
Required:
a. Explain the documents/information required to be forwarded to the relevant tax
authority when registering with the nearest integrated tax office. (5 Marks)
b. State the time lag for filing the first set of returns and subsequent ones.
(5 Marks)
c. State the penalty for late filing of tax returns on the due dates. (5 Marks)
(Total 15 Marks)

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  • 5 Marks

TAX – Nov 2021 – L2 – Q4b – Tax Incentives and Reliefs

Explanation of the rules governing loss relief for companies, including carry forward, loss limitation, and cessation rules.

Explain FIVE rules governing loss relief for companies.

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  • 15 Marks

TAX – Nov 2021 – L2 – Q4a – Companies Income Tax (CIT)

Computation of income tax payable for Ajani-Ogun Ventures Limited from 2018 to 2021 years of assessment.

Ajani-Ogun Ventures Limited was incorporated on February 1, 2012, and commenced business on September 1, 2013. The company makes up accounts to August 31, every year. The following additional information is provided:

  1. Adjusted (loss)/profit:
    • Year ended August 31, 2017: (N95,000)
    • Year ended August 31, 2018: N55,000
    • Year ended August 31, 2019: N35,000
    • Year ended August 31, 2020: N65,000
  2. Capital Allowances for each year of assessment:
    • Year ended August 31, 2018: N6,500
    • Year ended August 31, 2019: N5,000
    • Year ended August 31, 2020: N4,200
    • Year ended August 31, 2021: N4,000

The Finance Director was worried that the tax officials would soon conduct a tax
audit of their financial transactions and he wanted to know the tax liabilities
payable to the Federal Inland Revenue Service for the relevant assessment years.
During the year ended August 31, 2020, the company achieved a revenue of
N20,000,000.

Required:
a. Compute the income tax for 2018 to 2021 years of assessment, taking into consideration the provisions of the Finance Act, 2019. Ignore minimum tax computation. (15 Marks)

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  • 5 Marks

TAX – Nov 2021 – L2 – Q3c – Value Added Tax (VAT)

Explanation of the merits and demerits of Value Added Tax (VAT) as a consumption tax.

Explain the merits and demerits of VAT

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  • 6 Marks

TAX – Nov 2021 – L2 – Q3b – Value Added Tax (VAT)

Explanation of penalties associated with VAT non-compliance including failure to register, failure to notify of address changes, and failure to submit returns.

Explain the penalties associated with the following:

i. Failure to register for VAT return (2 Marks)
ii. Failure to notify the FIRS of change of address or cessation of trade or business (2 Marks)
iii. Failure to submit VAT returns (2 Marks)

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  • 9 Marks

TAX – Nov 2021 – L2 – Q3a – Value Added Tax (VAT)

Calculation of total VAT payable by Adegboyega Enterprises to the Federal Inland Revenue Service (FIRS) for product sales.

Adegboyega Enterprise is a manufacturing outfit based in Jankara, Lagos State. In 2020, the company sold its vatable product to a wholesaler, Ikeja Venture, for N3,500,000. The wholesaler sold the products to a retailer, Mrs. Adeosun, for N4,900,000, who finally sold it to consumers for N6,300,000 (VAT inclusive). Assume there was no closing inventory at each stage of the transaction.

Required:
a. Compute the total VAT payable to the Federal Inland Revenue Service by Adegboyega Enterprises on the transactions stated above.

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  • 20 Marks

TAX – Nov 2021 – L2 – Q2 – Companies Income Tax (CIT)

Computation of interest deductible under section 24 of CITA 2004 and treatment of excess interest for XYZ Limited.

XYZ Limited was incorporated on August 31, 2012, and it commenced business on May 31, 2013. Diki (Malaysia) Limited is its subsidiary in Malaysia. An extract of the financial statements of XYZ Limited for the year ended December 31, 2020, revealed the following:

Assessable profit: N2,000,000

Interests and depreciation deducted before arriving at the assessable profit are:

  • Interest on loan paid to Diki (Malaysia) Limited: N1,050,000
  • Interest on loan paid to other creditors: N1,000,000
  • Depreciation: N400,000

It was discovered that N450,000 of the loan paid to other creditors was in respect of a loan obtained to generate tax-exempt profits.

The Managing Director of XYZ Limited has asked you as a tax consultant to explain the provisions of section 24 of CITA 2004 (as amended) and the Seventh Schedule in respect of the interest deductible by a Nigerian company.

Required:
a. Compute the interest deductible in the relevant assessment year. (16 Marks)
b. Explain how the excess interest not deducted in the relevant assessment year would be treated. (4 Marks)

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  • 30 Marks

AX – Nov 2021 – L2 – Q1 – Personal Income Tax (PIT)

Calculation of personal income tax liability for two job offers and providing advice on the offer that yields a higher income after tax.

Miss Opeyemi Olunba is a young engineer who has been working in an oil sector for
over 5 years. She currently earns a gross salary of N10,000,000 per annum. She
recently attended two interviews for a new job at Joke Oil & Gas in Rivers State and
Dabiri Hotels & Suite in Lagos State.
She has been called by the two companies to assume office on April 1, 2021. The
following salaries and allowances were offered by the two companies:

Additional information:

  1. If Miss Opeyemi accepts the offer from Joke Oil & Gas, she will rent out her Lagos apartment for N20,000,000 per annum but will need a loan of N12,000,000 at 20% interest to modify the apartment.
  2. She will pay rent of N5,000,000 in Port Harcourt if she relocates.
  3. She maintains her child, a student at St. John University,
  4. She also supports her parents.
  5. She pays a life assurance premium of N5,000,000 annually.
  6. Her employers will deduct contributions for the National Housing Fund (N5,000,000) and Pension Fund (N3,000,000).
  7. She also pays National Health Insurance Premium (N1,000,000).

Required:

a. Compute Miss Opeyemi’s personal income tax liability for the relevant year of assessment for both offers.
b. Advise her on which employment will give her a higher income after tax.

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  • 20 Marks

PT – Nov 2021 – L2 – Q3 – Income Tax Liabilities

Calculate Agyeiwaa Grace’s taxable income for the 2020 year of assessment and explain gains and profits from employment.

Agyeiwaa Grace (Agyeiwaa), aged 56, is a foreign languages teacher at Mountaintop School, a private boarding school in Koforidua. Agyeiwaa has been in the teaching profession for the past 30 years. On 1 January 2020, the school promoted Agyeiwaa to head the languages department, which is a management position. She could also be subcontracted to other schools, institutions, and foreign language associations to assist their teachers and candidates during her free time. Agyeiwaa also holds a contract with the Ministry of Foreign Affairs and Regional Integration as an interpreter on a consultancy services basis.
On 5 January 2020, Agyeiwaa entered into a consultancy agreement with the Ministry of Education to translate some local textbooks. The project is for three years ending on 31 December 2022. Payment is only effected on completion of the translation of the textbooks, and the agreed amount is GH¢30,000 per translated textbook.

Details of Agyeiwaa’s income for the year ended 31 December 2020 are as follows:

Employment income and benefits
i) Agyeiwaa receives a gross monthly salary of GH¢4,000 and an annual bonus of GH¢12,000, payable in December.
ii) Responsibility allowance of GH¢6,960 per annum.
iii) Agyeiwaa makes use of a fully furnished house in the school’s staff residential area. The school deducts a monthly rent of GH¢100 from Agyeiwaa’s salary.
iv) Upon Agyeiwaa’s appointment as the languages department head, the school provided her with a new motor vehicle with fuel for her official use.
v) Agyeiwaa contributes 2.5% of her monthly salary to a registered pension fund. The school contributes 2.5% to a provident fund on behalf of Agyeiwaa.
vi) The school deducts her statutory social security contributions at source.
vii) Agyeiwaa received a total of GH¢12,000 inconvenience allowances from the Mountaintop School during the year.
viii) The school deducts the following amounts monthly from Agyeiwaa’s salary upon her instruction and pays the appropriate amounts to the institutions concerned:

  • Subscriptions to the Ghana National Association of Teachers: GH¢15
  • Life insurance policy to Royal Life Insurance Services: GH¢50

Other non-employment income
i) Agyeiwaa successfully translated four textbooks under the terms of her contract with the Ministry of Education during 2020.
ii) Agyeiwaa’s bank account was credited with a total of GH¢15,000, representing rental income collected by an estate agent regarding residential property owned by Agyeiwaa in Kumasi.
iii) Agyeiwaa services amounted to a gross of GH¢30,000 for her subcontract work with other schools and foreign language associations. Agyeiwaa paid Mountaintop School 10% of this amount under the terms of a standing arrangement for the use of the school’s resources.
iv) The Ministry of Foreign Affairs and Regional Integration paid Agyeiwaa GH¢9,250 net for her services as an interpreter during the year.

Required:
a) Calculate Agyeiwaa’s taxable income for the 2020 year of assessment. (14 marks)
b) Explain FOUR (4) possible individual gains and profits from an employment for a year of assessment. (6 marks

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  • 5 Marks

PT – Nov 2021 – L2 – Q2e – Tax Administration

Distinguish between defined benefit schemes and defined contribution schemes.

Distinguish between defined benefit schemes and defined contribution schemes.

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  • 3 Marks

PT – Nov 2021 – L2 – Q2d – Value-Added Tax (VAT), Customs, and Excise Duties

Explain what constitutes exempt supplies under the VAT Act.

What constitutes exempt supplies?

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  • 2 Marks

PT – Nov 2021 – L2 – Q2c – Value-Added Tax (VAT), Customs, and Excise Duties

Explain under what condition goods applied for own consumption are treated as supply of goods.

Under what condition are goods applied for own consumption treated as supply of goods?

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  • 4 Marks

PT – Nov 2021 – L2 – Q2b – Withholding Tax Administration

Explain the objectives of the Withholding VAT Scheme introduced by the Ghana Revenue Authority.

One of the innovations by the Ghana Revenue Authority is the introduction of the Withholding VAT Scheme. The scheme is aimed at promoting tax compliance.

Required:
Explain FOUR (4) objectives of the scheme.

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  • 6 Marks

PT – Nov 2021 – L2 – Q2a – Value-Added Tax (VAT), Customs, and Excise Duties

Explain the circumstances under which a taxable supply requires an adjustment in taxable value.

There are circumstances where a taxable supply by a taxable person will require adjustment so that the trader pays the required taxes to the Ghana Revenue Authority.

Required:
Explain THREE (3) of such circumstances.

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  • 5 Marks

PT – Nov 2021 – L2 – Q1d – Tax Administration

Explain the advantages of self-assessment for both the government and the taxpayer.

State TWO (2) advantages each of self-assessment to the government and the taxpayer. (5 marks)

 

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  • 5 Marks

PT – Nov 2021 – L2 – Q1c – Tax Administration

Describe the circumstances under which the Commissioner-General may issue a pre-emptive tax assessment.

In the circumstances specified in section 28 (3) of the Revenue Administration Act, 2016 (Act 915), the Commissioner-General may make a pre-emptive assessment of tax payable or to become payable by a person under a tax law, whether or not the person is required to file tax returns.

Required:
Under what circumstances would the Commissioner-General make a pre-emptive assessment?

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  • 5 Marks

PT – Nov 2021 – L2 – Q1b – Overview of the Ghanaian Tax System and Fiscal Policy

Explain the types of fiscal policies and their effects on economic fluctuations and government revenue.

Countries worldwide experience fluctuations in economic activity, which affects the consistency in government revenue generation. For example, when income levels are high, all other things being equal, tax revenue rises. Conversely, when income levels fall, tax revenue drops, requiring government policies to address the fluctuations. Governments, therefore, employ expansionary and contractionary fiscal policies to moderate the effects of such fluctuations.

Required:
Explain the following forms of fiscal policy:
i) Automatic Stabilisers
ii) Discretionary Fiscal Policy

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  • 5 Marks

PT – Nov 2021 – L2 – Q1a – Income Tax Liabilities

Assess the tax payable on a capital transfer from retained earnings to stated capital based on the details provided.

Kawukudi Ltd intends to increase its capital requirement. Therefore, it applied to the Registrar General with the following:

Retained Earnings Account (GHȼ)

  • Balance b/fwd: 100,000
  • Transfer from income statement: 1,200,000
  • Transfer to stated capital: (600,000)
  • Balance c/fwd: 700,000

Required:
Assess with explanation the tax payable under this circumstance.

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