Topic: Tax Administration and Dispute Resolution

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AT – Nov 2016 – L3 – SA – Q1 – Tax Administration and Dispute Resolution

Compute adjusted profit, assessable profit, capital allowances, and tax liabilities with election advisory for Zezee Nigeria Ltd.

Question

Zezee Nigeria Limited was incorporated on September 7, 2012, but it did not commence business until July 1, 2013. Based on the Memorandum and Articles of Association, the company was incorporated to carry on the business of distributorship and general contracting.

Extracts of the Company’s Statements of Profit or Loss and Other Comprehensive Income are as given below:

Period	6 Months Ended Dec 31, 2013	Year Ended Dec 31, 2014	Year Ended Dec 31, 2015
Revenue	5,430,000	12,600,000	18,400,000
Direct Cost	(890,000)	(1,345,000)	(1,910,000)
Gross Profit	4,540,000	11,255,000	16,490,000
Other Income	45,000	458,150	201,000
Distribution Cost	(386,000)	(820,000)	(1,060,500)
Administrative Expenses	(4,810,550)	(6,510,440)	(8,240,600)
Other Expenses	(41,000)	(113,240)	(145,100)
Net (Loss)/Profit	(652,550)	4,269,470	7,244,800

Additional Information:

Other Income Comprises:

Details	6 Months Ended Dec 31, 2013	Year Ended Dec 31, 2014	Year Ended Dec 31, 2015
Sale of Scraps	–	57,000	–
Interest Received on Treasury Bills	–	325,000	120,000
Interest on Domiciliary Account	45,000	76,150	81,000
Total Other Income	45,000	458,150	201,000

Administrative Expenses Include:

Details	6 Months Ended Dec 31, 2013	Year Ended Dec 31, 2014	Year Ended Dec 31, 2015
Depreciation	160,000	320,000	440,000
Preliminary and Formation Expenses	216,000	–	–
Penalties and Fines	–	–	65,000
General Provision for Bad Debts	110,000	180,000	240,000
Staff Salaries	2,060,000	4,230,000	4,230,000
Office Rent	600,000	1,200,000	1,800,000

Details of Property, Plant, and Equipment are as follows:

Asset	Date of Purchase	Cost (N)
Furniture and Fittings	June 7, 2013	980,000
Motor Vehicles	June 30, 2013	2,400,000
Office Equipment	July 1, 2013	1,200,000

On January 2, 2015, the company bought another motor vehicle for N1,800,000.
Extracts of the Statements of Financial Position:

Period	6 Months Ended Dec 31, 2013	Year Ended Dec 31, 2014	Year Ended Dec 31, 2015
Net Assets	1,360,000	2,870,500	3,260,700
Paid-up Share Capital	5,000,000	5,000,000	5,000,000

Required:

For all the relevant years of assessment, you are required to:

a. Compute the Adjusted Profit/Loss. (9 Marks)
b. Determine the Assessable Profit/Loss and advise the Company on whether or not to exercise its right of election. (6 Marks)
c. Compute the capital allowances. (4½ Marks)
d. Compute the tax liabilities. (10½ Marks)

(Total 30 Marks)

Answer

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Tags: Adjusted Profits, Capital allowances, Tax liabilities, Tax Rights, Taxable Income
Level: Level 3

Topic: Tax Administration and Dispute Resolution
Series: NOV 2016

ATAX – May 2017 – L3 – Q4c – Tax Administration and Dispute Resolution

State three particulars required in a Notice of Appeal against a tax assessment.

Question

Where a taxpayer receives a Notice of Assessment, he either agrees or disagrees with it. Where he agrees with the assessment, the position of the law is that the tax must be remitted within the statutory time limit. Where he disagrees, he is expected to raise a Notice of Objection.

Required:
State THREE particulars to be specified in a Notice of Appeal against an assessment. (3 Marks)

Answer

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Level: Level 3

Topic: Tax Administration and Dispute Resolution

ATAX – May 2019 – L3 – Q2 – Tax Administration and Dispute Resolution

Discuss the distinction between tax evasion and avoidance, provide solutions, and evaluate Nigeria’s anti-avoidance legislation.

Question

You have been approached by the managing director of a manufacturing company, Ojieaga Integrated Limited, for professional advice on tax evasion and tax avoidance and their challenges to an equitable tax system in Nigeria. Your report is expected to guide the operation of the business, having been subjected in the last three years to various forms of fines and penalties by the Federal Inland Revenue Service on confirmed cases of sharp business practices with their attendant loss of tax revenue to the government.

Required:
Having accepted the terms of engagement, you are to write a report to management for consideration at its next meeting, dealing with the following areas of concern:

a. Distinction between tax evasion and tax avoidance, highlighting THREE examples of each case. (6 Marks)
b. Seven solutions to the problem of tax evasion and tax avoidance. (7 Marks)
c. Comment on anti-avoidance legislations in Nigeria. (7 Marks)

Answer

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Level: Level 3

Topic: Tax Administration and Dispute Resolution

AT – Nov 2014 – L3 – SA – Q1 – Tax Administration and Dispute Resolution

Explain penalties for non-compliance, compute profit and tax liabilities, and detail exemptions from minimum tax liability.

Question

The Tax Consultants, ABFR Consult, received an e-mail from Mrs. Deboh Komo, Managing Director of Deboko Nigeria Limited. Extracts of her e-mail are as follows:

The company was incorporated on 1 February 2007.
It commenced business as importers of new engines for tricycles on 1 May 2009.
The Directors chose 30 June as the year-end and made the first financial statements up to 30 June 2010.
The company did not file any tax returns to date due to a general lull in business activities.
The tax monitoring section of the Federal Inland Revenue Service (FIRS) visited the company on 2 September 2014, uncovering non-compliance.
No tax registration was done, and no returns were filed.
The Accounts Officer advised the company to register for all statutory payments, including Value Added Tax (VAT) and Companies Income Tax, but the management delayed.
The company pleaded for leniency, but the FIRS insisted on full compliance with tax laws.

Additional Information:

Statement of Profit or Loss and Other Comprehensive Income:

Period Ended	30/06/13 (₦’000)	30/06/12 (₦’000)	30/06/11 (₦’000)	30/06/10 (₦’000)
Operating Profit/(Loss)	1,060	960	720	(504)
Depreciation	380	120	120	153
Staff Loans Written Off	–	–	–	40
Stamp Duties on Incorporation	–	–	–	16
Sales Tax	120	80	44	40
Donations to Christian Association	60	–	–	10
Specific Bad Debts Written Off	28	–	–	14

Statement of Financial Position:

Item	30/06/13 (₦’000)	30/06/12 (₦’000)	30/06/11 (₦’000)	30/06/10 (₦’000)
Paid-Up Capital	30,000	15,000	15,000	15,000
Deposit for Shares	25,000	10,000	5,000	–
Net Assets	101,500	84,110	76,700	66,000
Revenue	210,500	180,400	162,000	104,000
Gross Profit	16,400	14,200	12,800	10,200

Capital Allowances Agreed:

Year of Assessment	2014	2013	2012	2011	2010	2009
Capital Allowances	140	150	150	250	200	300

Requirement:

(a) Explain the penalties for late submission of annual returns to the FIRS. (4 Marks)

(b) Compute the Total Profit and Tax Liabilities of the company for the relevant years of assessment. (24 Marks)

(c) Explain the conditions for exemption from minimum tax liability under the Companies Income Tax Act CAP C21 LFN 2004 (as amended). (2 Marks)

Answer

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Tags: Late Returns, Minimum Tax, Penalties, Profit Computation, Tax Compliance, Tax liabilities
Level: Level 3

Topic: Tax Administration and Dispute Resolution
Series: NOV 2014

ATAX – May 2021 – L3 – Q6 – Tax Administration and Dispute Resolution

Explanation of fiscal federalism, roles and tax rights of government tiers, tax administration at the state level, and remedies for multiple taxation.

Question

Nigeria is generally described as a Federation with three levels of government with varying but sometimes overlapping tax powers.

Required:

a. Explain the term “Fiscal Federalism” and give examples of other countries that may be described as a Federation. (6 Marks)

b. Discuss briefly the following:
i. Roles of the three tiers of government. (3 Marks)
ii. Structure and tax rights of different levels of government. (3 Marks)
iii. Functions of the various tax administrative organs at the State government level. (3 Marks)

c. Articulate the causes and possible remedies of multiple taxation in Nigeria. (5 Marks)

Answer

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Tags: fiscal federalism, Multiple Taxation, Roles of Government, Tax Administration
Level: Level 3

Topic: Tax Administration and Dispute Resolution

ATAX – Nov 2021 – L3 – Q7 – Tax Administration and Dispute Resolution

Discusses constraints and strategies for improving tax collection from self-employed individuals in Nigeria.

Question

The inability of the Federal government revenue-generating agencies to meet set revenue targets was the subject of a discussion between the Minister of Finance and Chief Executives of these agencies in October 2021.

The Minister emphasized that the Federal government has provided ample incentives and support to these agencies, yet performance has been below expectations. Consequently, the government has decided to take strict measures against any chief executive who fails to meet revenue targets for the financial year ending December 31, 2021.

The Federal government’s decision inspired the state government. As a result, the chairman of “MATS” State Board of Internal Revenue announced incentives for staff members who meet revenue targets set for tax collection, particularly from the self-employed category.

You have been engaged as the tax consultant to the chairman of “MATS” State Board of Internal Revenue.

Required:

Advise the chairman of “MATS” State Board of Internal Revenue on:

a. Identifying constraints facing tax authorities in assessing and collecting taxes from self-employed taxpayers. (8 Marks)
b. Developing strategies to expand the Nigerian tax net to improve tax collection from the self-employed category. (7 Marks)

Answer

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Tags: Collection Strategies, Incentives, Nigerian Tax System, Revenue Targets, Self-Employed Tax Collection
Level: Level 3

Topic: Tax Administration and Dispute Resolution

ATAX – Nov 2020 – Q6 – Tax Administration and Dispute Resolution

Discuss the tax administration structure in Nigeria and address concerns regarding multiple taxation.

Question

a. Ms. Lilian Abu is a Nigerian born with a British mother. She grew up and schooled in the UK after which she took up a job with Her Majesty Revenue and Customs (HMRC) as a revenue officer. She has been selected to join a team of international reviewers visiting Nigeria in the coming months under a project funded by the World Bank.

Lilian has contacted you as part of her initial research to understand the tax system in Nigeria ahead of her visit.

Required:
i. Discuss the structure of the tax administration system in Nigeria. (4 Marks)
ii. Discuss the functions of any TWO organs of tax administration in Nigeria. (8 Marks)

b. Lilian informed you that based on her Google searches, she had seen a lot of concerns being expressed by Nigerian taxpayers over multiple taxation.

Required:
Explain the concerns by Nigerian taxpayers over multiple taxation and outline the causes and possible solutions of multiple taxation in Nigeria. (8 Marks)

Answer

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Tags: Multiple Taxation, Nigerian Tax System, x Administration
Level: Level 3

Topic: Tax Administration and Dispute Resolution

AT – May 2024 – L3 – SC – Q5 – Tax Administration and Dispute Resolution

Discuss NEITI's vision, mission, and objectives, and explain the responsibilities of stakeholders in Nigeria's tax policy.

Question

The Nigeria Extractive Industries Transparency Initiative (NEITI) was established through the NEITI Act, 2007. The body has the responsibility for the development of a framework for transparency and accountability in the reporting and disclosure of revenue due to or paid to the Federal Government by companies in the extractive industry.

In the same vein, the National Tax Policy, 2017, expressly stipulates the responsibilities of the various stakeholders towards the achievement of efficient tax administration in Nigeria.

Required:

a. Discuss the vision, mission and FOUR primary objectives of NEITI as provided for in the enabling Act. (6 Marks)

b. Explain THREE responsibilities of each of the underlisted stakeholders as provided for in the National Tax Policy, 2017:
(i) The government (3 Marks)
(ii) The taxpayer (3 Marks)
(iii) Revenue agencies (3 Marks)

(Total 15 Marks)

Answer

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Tags: Accountability, Government, NEITI, Nigeria, Revenue Agencies, Taxpayer, Transparency
Level: Level 3

Topic: Tax Administration and Dispute Resolution
Series: MAY 2024

AT – May 2024 – L3 – SA – Q1 – Tax Administration and Dispute Resolution

Provide professional tax advice for the management of Soft Farm and Agro-Allied Ltd, focusing on deductible interest, adjusted profit, and tax liabilities.

Question

Soft Farm and Agro-Allied Limited, a subsidiary of Emperor Agro Incorporated, Italy, was incorporated in Nigeria in January 2018. Soft Farm and Agro-Allied Limited produces palm kernel for domestic use and export to the European market. The Managing Director of the company has just received a letter from the head office (parent company) about an impending visit due to poor business performance (below the group’s return on investment benchmark of 25%) since the business commenced, despite financial and technical support from the parent company.

In January 2022, the parent company granted a loan of N100 million to Soft Farm and Agro-Allied Limited for business expansion.

The Board has scheduled a special meeting for next month to consider the financial report of Soft Farm and Agro-Allied Limited for the year ended December 31, 2022, and to review past financial reports and tax assessments. As the newly engaged Tax Consultant to the company, you have been invited to participate in the meeting to provide a professional opinion on tax-related issues.

The Financial Accountant has been directed by the Managing Director to provide you with financial statements for all periods under review, books of accounts, returns filed with tax authorities, and other supporting documents.

From your preliminary review of the financial report for the year ended December 31, 2022, you noted an item that requires further discussion with management. This issue relates to interest paid on a loan obtained from the parent company.

Extract from Financial Statements for the Year Ended December 31, 2022

Item	N’000
Gross turnover:
– Domestic sales	147,500
– Export sales	200,100
– Other operating income	3,300
Total Gross Turnover	350,900
Deduct:
– Staff salary	122,600
– Ground rent paid to State government	3,200
– Motor running expenses	1,750
– Audit and accountancy fees	1,000
– Repairs and maintenance	5,800
– Depreciation of assets	38,240
– Rent paid	1,850
– Power and lighting	5,400
– Legal cost	5,000
– Rates (water)	2,100
– Allowance for doubtful debts	10,500
– Donations	4,000
– Interest and other finance costs paid	15,600
– Income tax provision	23,400
– General expenses	5,900
Total Deductions	246,340
Net Profit	104,560

Additional Information:

Export Sales:
20% of export sales were made to the parent company at the prevailing international market price.
Other Operating Income:

Description N’000

Dividend received (net) 2,700

Profit from disposal of non-current asset 600

Total 3,300
Repairs and Maintenance:

Description N’000

Repairs of plantation equipment 1,200

Repairs to premises (non-industrial building) 900

Expansion to warehouse (industrial building) 3,700

Total 5,800
Rent Paid:
This amount is for accommodation for the newly employed General Manager, whose basic salary is N4,800,000.
Legal Cost:

Description N’000

Cost of income tax appeal 850

Cost of debt collection 1,300

Cost of acquiring new lease 1,700

Renewal of old lease 1,150

Total 5,000
Allowance for Doubtful Debts:

Description N’000

Specific provisions 5,230

General provisions 7,870

Bad debts recovered (2,600)

Total 10,500
Donations:

Recipient N’000

Palm Oil Research Institute 1,400

National Library 600

Cocoa Research Institute of Nigeria 1,000

Women Society of the host community 1,000

Total 4,000
Interest and Other Finance Costs Paid:
In January 2022, the company obtained a loan facility of N100 million from the parent company for business expansion at a competitive interest rate of 12% per annum. The loan duration is 10 years, with interest payable for the first three years, and principal and interest repayments due from the fourth year onward. The balance in the financial statements includes other finance costs and bank charges paid to domestic banks on various accounts.
General Expenses:

Description N’000

Wedding gift to staff 350

Fine imposed on company driver for traffic offense 150

Haulage expenses 3,200

Transport and travelling 2,200

Total 5,900
Schedule of Prior Years’ Turnover and Assessable Profits:

Year Ended December 31 Turnover (N’000) Assessable Profit (N’000)

2018 154,400 78,750

2019 198,600 95,120

2020 310,300 142,800

2021 314,900 166,900

Description	N’000
Dividend received (net)	2,700
Profit from disposal of non-current asset	600
Total	3,300

Description	N’000
Repairs of plantation equipment	1,200
Repairs to premises (non-industrial building)	900
Expansion to warehouse (industrial building)	3,700
Total	5,800

Description	N’000
Cost of income tax appeal	850
Cost of debt collection	1,300
Cost of acquiring new lease	1,700
Renewal of old lease	1,150
Total	5,000

Description	N’000
Specific provisions	5,230
General provisions	7,870
Bad debts recovered	(2,600)
Total	10,500

Recipient	N’000
Palm Oil Research Institute	1,400
National Library	600
Cocoa Research Institute of Nigeria	1,000
Women Society of the host community	1,000
Total	4,000

Description	N’000
Wedding gift to staff	350
Fine imposed on company driver for traffic offense	150
Haulage expenses	3,200
Transport and travelling	2,200
Total	5,900

Year Ended December 31	Turnover (N’000)	Assessable Profit (N’000)
2018	154,400	78,750
2019	198,600	95,120
2020	310,300	142,800
2021	314,900	166,900

Schedule of Qualifying Capital Expenditure Incurred:

Date of Acquisition	Asset Type	Amount (N’000)
August 31, 2017	Plantation equipment	4,600
August 31, 2017	Industrial building	12,000
August 31, 2017	Non-industrial building	9,000
January 1, 2018	Motor vehicles (3)	8,400
January 1, 2018	Furniture and fittings (10)	1,500
February 14, 2021	Motor vehicles (2)	5,600
June 12, 2022	Furniture and fittings (10)	2,000
July 8, 2022	Research and development	7,000

Required:

As the Tax Consultant to the company, draft a report to the Managing Director of Soft Farm and Agro-Allied Limited, in line with the provisions of the Companies Income Tax Act Cap C21 LFN 2004 (as amended). The report should provide professional advice on the following:

Treatment of Excess Amount of Deductible Interest Paid (6 Marks)
Adjusted Profit of the Company for the Year Ended December 31, 2022 (7 Marks)
Tax Liabilities for All Relevant Assessment Years (17 Marks)

Answer

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Tags: Corporate Tax, Donations, Excess Interest Deduction, Export Sales, Legal Cost, Profit Adjustment, Qualifying Capital Expenditure
Level: Level 3

Topic: Tax Administration and Dispute Resolution
Series: MAY 2018

AT – May 2018 – L3 – SC – Q5a – Tax Administration and Dispute Resolution

Advisory on the limits of the Petroleum Profits Tax Act regarding information disclosure to foreign entities and Auditor-General duties.

Question

Section 5 of the Petroleum Profits Tax Act Cap P.13 LFN 2004, specifies that:

“Every person having possession of or control over any documents, information, returns or assessment, lists or copies of such lists relating to tax or petroleum operations or the amount and value of chargeable oil won by any company who at any time communicates or attempts to communicate such information or anything contained in such documents, returns, lists, or copies to any person, shall be guilty of an offense.”

Required:

Advise on the extent to which the provision of the Act can be relied upon on issues relating to:

Disclosure of information to authorised officers of foreign countries who have a double taxation agreement with Nigeria.
(2 Marks)
The performance of the duties of the Auditor-General for the Federation or any officer authorised by him.
(2 Marks)

Answer

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Tags: Auditor-General’s Authority, Disclosure of Information, Double Taxation, Petroleum Profits Tax
Level: Level 3

Topic: Tax Administration and Dispute Resolution
Series: MAY 2018

AT – Nov 2016 – L3 – SA – Q1 – Tax Administration and Dispute Resolution

Compute adjusted profit, assessable profit, capital allowances, and tax liabilities with election advisory for Zezee Nigeria Ltd.

Question

Extracts of the Company’s Statements of Profit or Loss and Other Comprehensive Income are as given below:

Period	6 Months Ended Dec 31, 2013	Year Ended Dec 31, 2014	Year Ended Dec 31, 2015
Revenue	5,430,000	12,600,000	18,400,000
Direct Cost	(890,000)	(1,345,000)	(1,910,000)
Gross Profit	4,540,000	11,255,000	16,490,000
Other Income	45,000	458,150	201,000
Distribution Cost	(386,000)	(820,000)	(1,060,500)
Administrative Expenses	(4,810,550)	(6,510,440)	(8,240,600)
Other Expenses	(41,000)	(113,240)	(145,100)
Net (Loss)/Profit	(652,550)	4,269,470	7,244,800

Additional Information:

Other Income Comprises:

Details	6 Months Ended Dec 31, 2013	Year Ended Dec 31, 2014	Year Ended Dec 31, 2015
Sale of Scraps	–	57,000	–
Interest Received on Treasury Bills	–	325,000	120,000
Interest on Domiciliary Account	45,000	76,150	81,000
Total Other Income	45,000	458,150	201,000

Administrative Expenses Include:

Details	6 Months Ended Dec 31, 2013	Year Ended Dec 31, 2014	Year Ended Dec 31, 2015
Depreciation	160,000	320,000	440,000
Preliminary and Formation Expenses	216,000	–	–
Penalties and Fines	–	–	65,000
General Provision for Bad Debts	110,000	180,000	240,000
Staff Salaries	2,060,000	4,230,000	4,230,000
Office Rent	600,000	1,200,000	1,800,000

Details of Property, Plant, and Equipment are as follows:

Asset	Date of Purchase	Cost (N)
Furniture and Fittings	June 7, 2013	980,000
Motor Vehicles	June 30, 2013	2,400,000
Office Equipment	July 1, 2013	1,200,000

On January 2, 2015, the company bought another motor vehicle for N1,800,000.
Extracts of the Statements of Financial Position:

Period	6 Months Ended Dec 31, 2013	Year Ended Dec 31, 2014	Year Ended Dec 31, 2015
Net Assets	1,360,000	2,870,500	3,260,700
Paid-up Share Capital	5,000,000	5,000,000	5,000,000

Required:

For all the relevant years of assessment, you are required to:

(Total 30 Marks)

Answer

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Tags: Adjusted Profits, Capital allowances, Tax liabilities, Tax Rights, Taxable Income
Level: Level 3

Topic: Tax Administration and Dispute Resolution
Series: NOV 2016

ATAX – May 2017 – L3 – Q4c – Tax Administration and Dispute Resolution

State three particulars required in a Notice of Appeal against a tax assessment.

Question

Required:
State THREE particulars to be specified in a Notice of Appeal against an assessment. (3 Marks)

Answer

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Level: Level 3

Topic: Tax Administration and Dispute Resolution

ATAX – May 2019 – L3 – Q2 – Tax Administration and Dispute Resolution

Discuss the distinction between tax evasion and avoidance, provide solutions, and evaluate Nigeria’s anti-avoidance legislation.

Question

Required:
Having accepted the terms of engagement, you are to write a report to management for consideration at its next meeting, dealing with the following areas of concern:

Answer

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Tags: Anti-Avoidance Laws, FIRS, Nigeria Taxation, Tax avoidance, Tax Compliance, Tax Evasion, Tax Planning
Level: Level 3

Topic: Tax Administration and Dispute Resolution

AT – Nov 2014 – L3 – SA – Q1 – Tax Administration and Dispute Resolution

Explain penalties for non-compliance, compute profit and tax liabilities, and detail exemptions from minimum tax liability.

Question

The Tax Consultants, ABFR Consult, received an e-mail from Mrs. Deboh Komo, Managing Director of Deboko Nigeria Limited. Extracts of her e-mail are as follows:

The company was incorporated on 1 February 2007.
It commenced business as importers of new engines for tricycles on 1 May 2009.
The Directors chose 30 June as the year-end and made the first financial statements up to 30 June 2010.
The company did not file any tax returns to date due to a general lull in business activities.
The tax monitoring section of the Federal Inland Revenue Service (FIRS) visited the company on 2 September 2014, uncovering non-compliance.
No tax registration was done, and no returns were filed.
The Accounts Officer advised the company to register for all statutory payments, including Value Added Tax (VAT) and Companies Income Tax, but the management delayed.
The company pleaded for leniency, but the FIRS insisted on full compliance with tax laws.

Additional Information:

Statement of Profit or Loss and Other Comprehensive Income:

Period Ended	30/06/13 (₦’000)	30/06/12 (₦’000)	30/06/11 (₦’000)	30/06/10 (₦’000)
Operating Profit/(Loss)	1,060	960	720	(504)
Depreciation	380	120	120	153
Staff Loans Written Off	–	–	–	40
Stamp Duties on Incorporation	–	–	–	16
Sales Tax	120	80	44	40
Donations to Christian Association	60	–	–	10
Specific Bad Debts Written Off	28	–	–	14

Statement of Financial Position:

Item	30/06/13 (₦’000)	30/06/12 (₦’000)	30/06/11 (₦’000)	30/06/10 (₦’000)
Paid-Up Capital	30,000	15,000	15,000	15,000
Deposit for Shares	25,000	10,000	5,000	–
Net Assets	101,500	84,110	76,700	66,000
Revenue	210,500	180,400	162,000	104,000
Gross Profit	16,400	14,200	12,800	10,200

Capital Allowances Agreed:

Year of Assessment	2014	2013	2012	2011	2010	2009
Capital Allowances	140	150	150	250	200	300

Requirement:

(a) Explain the penalties for late submission of annual returns to the FIRS. (4 Marks)

(b) Compute the Total Profit and Tax Liabilities of the company for the relevant years of assessment. (24 Marks)

(c) Explain the conditions for exemption from minimum tax liability under the Companies Income Tax Act CAP C21 LFN 2004 (as amended). (2 Marks)

Answer

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Tags: Late Returns, Minimum Tax, Penalties, Profit Computation, Tax Compliance, Tax liabilities
Level: Level 3

Topic: Tax Administration and Dispute Resolution
Series: NOV 2014

ATAX – May 2021 – L3 – Q6 – Tax Administration and Dispute Resolution

Explanation of fiscal federalism, roles and tax rights of government tiers, tax administration at the state level, and remedies for multiple taxation.

Question

Nigeria is generally described as a Federation with three levels of government with varying but sometimes overlapping tax powers.

Required:

a. Explain the term “Fiscal Federalism” and give examples of other countries that may be described as a Federation. (6 Marks)

c. Articulate the causes and possible remedies of multiple taxation in Nigeria. (5 Marks)

Answer

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Tags: fiscal federalism, Multiple Taxation, Roles of Government, Tax Administration
Level: Level 3

Topic: Tax Administration and Dispute Resolution

ATAX – Nov 2021 – L3 – Q7 – Tax Administration and Dispute Resolution

Discusses constraints and strategies for improving tax collection from self-employed individuals in Nigeria.

Question

You have been engaged as the tax consultant to the chairman of “MATS” State Board of Internal Revenue.

Required:

Advise the chairman of “MATS” State Board of Internal Revenue on:

Answer

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Tags: Collection Strategies, Incentives, Nigerian Tax System, Revenue Targets, Self-Employed Tax Collection
Level: Level 3

Topic: Tax Administration and Dispute Resolution

ATAX – Nov 2020 – Q6 – Tax Administration and Dispute Resolution

Discuss the tax administration structure in Nigeria and address concerns regarding multiple taxation.

Question

Lilian has contacted you as part of her initial research to understand the tax system in Nigeria ahead of her visit.

Required:
i. Discuss the structure of the tax administration system in Nigeria. (4 Marks)
ii. Discuss the functions of any TWO organs of tax administration in Nigeria. (8 Marks)

b. Lilian informed you that based on her Google searches, she had seen a lot of concerns being expressed by Nigerian taxpayers over multiple taxation.

Required:
Explain the concerns by Nigerian taxpayers over multiple taxation and outline the causes and possible solutions of multiple taxation in Nigeria. (8 Marks)

Answer

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Tags: Multiple Taxation, Nigerian Tax System, x Administration
Level: Level 3

Topic: Tax Administration and Dispute Resolution

AT – May 2024 – L3 – SC – Q5 – Tax Administration and Dispute Resolution

Discuss NEITI's vision, mission, and objectives, and explain the responsibilities of stakeholders in Nigeria's tax policy.

Question

In the same vein, the National Tax Policy, 2017, expressly stipulates the responsibilities of the various stakeholders towards the achievement of efficient tax administration in Nigeria.

Required:

a. Discuss the vision, mission and FOUR primary objectives of NEITI as provided for in the enabling Act. (6 Marks)

(Total 15 Marks)

Answer

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Tags: Accountability, Government, NEITI, Nigeria, Revenue Agencies, Taxpayer, Transparency
Level: Level 3

Topic: Tax Administration and Dispute Resolution
Series: MAY 2024

AT – May 2024 – L3 – SA – Q1 – Tax Administration and Dispute Resolution

Provide professional tax advice for the management of Soft Farm and Agro-Allied Ltd, focusing on deductible interest, adjusted profit, and tax liabilities.

Question

In January 2022, the parent company granted a loan of N100 million to Soft Farm and Agro-Allied Limited for business expansion.

Extract from Financial Statements for the Year Ended December 31, 2022

Item	N’000
Gross turnover:
– Domestic sales	147,500
– Export sales	200,100
– Other operating income	3,300
Total Gross Turnover	350,900
Deduct:
– Staff salary	122,600
– Ground rent paid to State government	3,200
– Motor running expenses	1,750
– Audit and accountancy fees	1,000
– Repairs and maintenance	5,800
– Depreciation of assets	38,240
– Rent paid	1,850
– Power and lighting	5,400
– Legal cost	5,000
– Rates (water)	2,100
– Allowance for doubtful debts	10,500
– Donations	4,000
– Interest and other finance costs paid	15,600
– Income tax provision	23,400
– General expenses	5,900
Total Deductions	246,340
Net Profit	104,560

Additional Information:

Export Sales:
20% of export sales were made to the parent company at the prevailing international market price.
Other Operating Income:

Description N’000

Dividend received (net) 2,700

Profit from disposal of non-current asset 600

Total 3,300
Repairs and Maintenance:

Description N’000

Repairs of plantation equipment 1,200

Repairs to premises (non-industrial building) 900

Expansion to warehouse (industrial building) 3,700

Total 5,800
Rent Paid:
This amount is for accommodation for the newly employed General Manager, whose basic salary is N4,800,000.
Legal Cost:

Description N’000

Cost of income tax appeal 850

Cost of debt collection 1,300

Cost of acquiring new lease 1,700

Renewal of old lease 1,150

Total 5,000
Allowance for Doubtful Debts:

Description N’000

Specific provisions 5,230

General provisions 7,870

Bad debts recovered (2,600)

Total 10,500
Donations:

Recipient N’000

Palm Oil Research Institute 1,400

National Library 600

Cocoa Research Institute of Nigeria 1,000

Women Society of the host community 1,000

Total 4,000
Interest and Other Finance Costs Paid:
In January 2022, the company obtained a loan facility of N100 million from the parent company for business expansion at a competitive interest rate of 12% per annum. The loan duration is 10 years, with interest payable for the first three years, and principal and interest repayments due from the fourth year onward. The balance in the financial statements includes other finance costs and bank charges paid to domestic banks on various accounts.
General Expenses:

Description N’000

Wedding gift to staff 350

Fine imposed on company driver for traffic offense 150

Haulage expenses 3,200

Transport and travelling 2,200

Total 5,900
Schedule of Prior Years’ Turnover and Assessable Profits:

Year Ended December 31 Turnover (N’000) Assessable Profit (N’000)

2018 154,400 78,750

2019 198,600 95,120

2020 310,300 142,800

2021 314,900 166,900

Description	N’000
Dividend received (net)	2,700
Profit from disposal of non-current asset	600
Total	3,300

Description	N’000
Repairs of plantation equipment	1,200
Repairs to premises (non-industrial building)	900
Expansion to warehouse (industrial building)	3,700
Total	5,800

Description	N’000
Cost of income tax appeal	850
Cost of debt collection	1,300
Cost of acquiring new lease	1,700
Renewal of old lease	1,150
Total	5,000

Description	N’000
Specific provisions	5,230
General provisions	7,870
Bad debts recovered	(2,600)
Total	10,500

Recipient	N’000
Palm Oil Research Institute	1,400
National Library	600
Cocoa Research Institute of Nigeria	1,000
Women Society of the host community	1,000
Total	4,000

Description	N’000
Wedding gift to staff	350
Fine imposed on company driver for traffic offense	150
Haulage expenses	3,200
Transport and travelling	2,200
Total	5,900

Year Ended December 31	Turnover (N’000)	Assessable Profit (N’000)
2018	154,400	78,750
2019	198,600	95,120
2020	310,300	142,800
2021	314,900	166,900

Schedule of Qualifying Capital Expenditure Incurred:

Date of Acquisition	Asset Type	Amount (N’000)
August 31, 2017	Plantation equipment	4,600
August 31, 2017	Industrial building	12,000
August 31, 2017	Non-industrial building	9,000
January 1, 2018	Motor vehicles (3)	8,400
January 1, 2018	Furniture and fittings (10)	1,500
February 14, 2021	Motor vehicles (2)	5,600
June 12, 2022	Furniture and fittings (10)	2,000
July 8, 2022	Research and development	7,000

Required:

Treatment of Excess Amount of Deductible Interest Paid (6 Marks)
Adjusted Profit of the Company for the Year Ended December 31, 2022 (7 Marks)
Tax Liabilities for All Relevant Assessment Years (17 Marks)

Answer

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Tags: Corporate Tax, Donations, Excess Interest Deduction, Export Sales, Legal Cost, Profit Adjustment, Qualifying Capital Expenditure
Level: Level 3

Topic: Tax Administration and Dispute Resolution
Series: MAY 2018

AT – May 2018 – L3 – SC – Q5a – Tax Administration and Dispute Resolution

Advisory on the limits of the Petroleum Profits Tax Act regarding information disclosure to foreign entities and Auditor-General duties.

Question

Section 5 of the Petroleum Profits Tax Act Cap P.13 LFN 2004, specifies that:

Required:

Advise on the extent to which the provision of the Act can be relied upon on issues relating to:

Disclosure of information to authorised officers of foreign countries who have a double taxation agreement with Nigeria.
(2 Marks)
The performance of the duties of the Auditor-General for the Federation or any officer authorised by him.
(2 Marks)

Answer

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Tags: Auditor-General’s Authority, Disclosure of Information, Double Taxation, Petroleum Profits Tax
Level: Level 3