Topic: Tax Administration and Enforcement

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TAX – Nov 2023 – L2 – Q7 – Tax Administration and Enforcement

Reasons for business cessation, computation of net terminal adjusted profit, and assessable profits

Question

Raposa Nigeria Limited, a company located in Sambisa Forest, Kutunwegi State of Nigeria, commenced operations on November 1, 2017. The accounting year-end was September 30. Due to government policy restricting rice importation, the business’s going concern was threatened, leading the Board of Directors to decide to cease operations on December 31, 2022.

The adjusted profits for the relevant periods are as follows:

Period	Adjusted Profit (N)
Period to September 30, 2019	2,100,000
Year ended September 30, 2020	2,400,000
Year ended September 30, 2021	3,640,000
Year ended September 30, 2022	6,300,000
Period to December 31, 2022	500,000

Additional Information:

A bad debt of N120,000, written off in the 2020 assessment year, was recovered in October 2021.
N20,000 was spent to recover this debt.
An expenditure of N350,000 incurred in the 2020 assessment year was accounted for in the profit or loss but was not paid until August 2022.

Upon cessation, the revenue authority planned a back-duty investigation and informed the taxpayer accordingly. As a tax consultant, you are invited to determine the assessable profits for the relevant periods from the commencement of trade to business cessation.

Required: a. State THREE reasons why a business may cease trading. (3 Marks)
b. Compute net terminal adjusted profit. (6 Marks)
c. Compute assessable profits for all the relevant years of assessment. (6 Marks)

Answer

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Tags: Assessable Profits, Back-Duty Investigation, Business Cessation, Tax adjustment, Terminal Profit
Level: Level 2

Topic: Tax Administration and Enforcement

TAX – Nov 2023 – L2 – Q6b – Tax Administration and Enforcement

Explain five key contents required in a Withholding Tax returns/payment schedule.

Question

It is expected that a schedule of Withholding Tax (WHT) payable should be prepared by applying the correct WHT rate on each transaction/payment made during the month. Thereafter, a cheque for the amount due to the Federal Inland Revenue Service is raised and forwarded together with the WHT schedule to one of the approved collecting banks for processing.

Required:
Explain FIVE contents of a WHT returns/payment schedule. (10 Marks)

Answer

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Tags: Federal Inland Revenue Service, Tax Returns, WHT Compliance, WHT Schedule, Withholding Tax
Level: Level 2

Topic: Tax Administration and Enforcement

TAX – Nov 2023 – L2 – Q6a – Tax Administration and Enforcement

Explain the functions and powers of the Nigerian Customs Service Board.

Question

The Nigeria Customs Service (NCS) is one of the major revenue-generating agencies for the Federal Government of Nigeria. The establishment of the Nigerian Customs Service Board, which is under the control of the Federal Ministry of Finance, is contained in section 1 of the Nigerian Customs Service Board Act Cap.C45 LFN 2004 (as amended). The Board is responsible for the administration of the Customs and Excise Management Act.

Required:
Explain the functions and powers of the Board. (5 Marks)

Answer

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Tags: Customs and Excise Management Act, Federal Ministry of Finance, Nigeria Customs Service, Revenue Generation
Level: Level 2

Topic: Tax Administration and Enforcement

TAX – Nov 2023 – L2 – Q3b – Tax Administration and Enforcement

Explain the roles and responsibilities of government, taxpayers, and revenue agencies in Nigeria’s National Tax Policy.

Question

In line with the provisions of the revised National Tax Policy (NTP) in 2017, explain the roles and responsibilities of the following stakeholders:

i. The government (3 Marks)
ii. The taxpayers (3 Marks)
iii. Revenue agencies (3 Marks)

Answer

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Tags: Government Roles, National Tax Policy, Revenue Agency Duties, Tax Administration, Taxpayer Responsibilities
Level: Level 2

Topic: Tax Administration and Enforcement

TAX – Nov 2023 – L2 – Q3a – Tax Administration and Enforcement

Describe the composition and functions of Nigeria’s tax administration bodies, including the Joint Tax Board and State Board of Internal Revenue.

Question

a. Tax administration in Nigeria involves the practical interpretations and application of the tax laws. The bodies charged with the administration of tax in Nigeria are the Federal, State, and Local Governments. The tax authorities of these tiers of government derive their power from Federal laws.

i. State the composition of the Joint Tax Board. (3 Marks)

ii. Outline FOUR functions of the State Board of Internal Revenue. (3 Marks)

iii. State FIVE levies and taxes collectible by the Local Government Revenue Committee. (5 Marks)

Answer

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Tags: Joint Tax Board, Local Government Taxes, Nigeria Tax Administration, State Board of Internal Revenue, Tax Collection
Level: Level 2

Topic: Tax Administration and Enforcement

TAX – Nov 2023 – L2 – Q2 – Tax Administration and Enforcement

Discuss the tax law provisions for a change in accounting year end, revenue practice, and compute assessable profits.

Question

Forward Nigeria Limited, a Nigerian manufacturing company, has been operating for several years with an accounting year-end on June 30. The company recently decided to change its year-end to September 30. The adjusted profits for the relevant periods are as follows:

Period	Adjusted Profit (N)
Year ended June 30, 2014	2,700,000
Year ended June 30, 2015	3,300,000
Period ended September 30, 2015	1,500,000
Year ended September 30, 2016	4,200,000
Year ended September 30, 2017	3,600,000

Additional Information:

Income overstated:
- June 30, 2015: N250,000
- September 30, 2016: N280,000
Expenditure understated:
- June 30, 2014: N160,000
- September 30, 2017: N150,000

Required: a. Explain the tax law provisions for a business changing its accounting year-end. (5 Marks)

b. Describe the Revenue practice related to these provisions. (3 Marks)

c. Compute the assessable profits for all affected years of assessment, considering the tax law and Revenue practice. (12 Marks)

Answer

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Tags: Accounting Year-End, Adjusted Profits, Assessable Profits, Revenue Practice, Tax law
Level: Level 2

Topic: Tax Administration and Enforcement

TAX – Nov 2014 – L2 – Q7 – Value Added Tax (VAT)

Calculate the VAT payable for Zuba Construction Company and advise on the timing and contents of a VAT appeal notice.

Question

Zuba Construction Company Limited is an irrigation and building construction company. The company has been in the business for many years.

The company appointed you as the tax representative to provide tax advisory services and deal with the VAT office on its behalf.

On commencement of your assignment, you discovered that there was a dispute on the determination of the amount of VAT payable to the Revenue by the Company. To assist you in the assignment, the following information was made available to you:

Date	Details	Amount (N)
1/8/13	Bought a concrete mixer	700,000
2/8/13	Bought sand	40,000
3/8/13	Bought gravel	40,000
5/8/13	Bought scaffolding	1,800,000
5/8/13	Bought photocopier machine	50,000
7/8/13	Bought tables	15,000
14/8/13	Bought poker vibrator	300,000
14/8/13	Bought chairs	20,000
14/8/13	Progress payment received	2,000,000
24/8/13	Progress payment received	1,500,000

Additional Note: VAT was paid on all the company’s purchases.

You are required to:

a. Compute VAT payable (if any) for the month of August 2013.
(8 Marks)

b. Advise your client on when and how VAT payment should be made.
(4 Marks)

c. Itemize the contents of a Notice of Appeal against VAT Assessments.
(3 Marks)

Answer

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Tags: construction industry, Progress Payments, VAT Appeal Process, VAT Payable, VAT Payment Timing
Level: Level 2

Topic: Tax Administration and Enforcement, Value-Added Tax (VAT)

TAX – Nov 2014 – L2 – Q6 – Tax Administration and Enforcement

Draft an objection letter addressing a Best of Judgment assessment and provide relevant tax liability calculations for Osondu Bako Company Ltd.

Question

Osondu Bako Company Limited has been in business for many years as a general business entrepreneur.

The Company prepares its accounts to 31 December of every year. The Company, however, submitted its audited Financial Statements for the year ended 31 December 2012 on 27 May 2013.

The Company applied for a Tax Clearance Certificate on 26 August 2014, but the issuance of the certificate was delayed by the Revenue. Instead of issuing the Tax Clearance Certificate, a Best of Judgment assessment of N3,450,000 was raised on the company.

The date on the Notice of Assessment was 30 May 2014, but it was served on the company on 31 August 2014.

Stated below is information relating to the financial statements of the company for the year ended 31 December 2012:

Financial Statement Item	Naira (N’000)
Profit per Accounts	3,400
Depreciation	380
Capital Allowances agreed with Revenue	590
Revenue	12,050
Net Assets	8,400
Gross Profit	960
Share Capital	10,000

The company paid all the tax liabilities. Despite this, the Chief Executive Officer was surprised and concerned upon receiving the Notice of Best of Judgment Assessment from the tax authority. Consequently, you have been engaged by the company as a Tax Consultant.

You are required to:

Write a Letter of Objection to the Tax office in respect of the Best of Judgment Assessment along with relevant workings.
(15 Marks)

Answer

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Tags: Best of Judgment Assessment, Tax Administration, Tax Clearance Certificate, Tax Objection
Level: Level 2

Topic: Tax Administration and Enforcement

TAX – May 2017 – L2 – SB – Q2 – Tax Administration and Enforcement

Explanation of transactions requiring a Tax Clearance Certificate and the procedures for hearing an appeal before the Tax Appeal Tribunal.

Question

a. Mr. Bull Dozer has just submitted his application for an export license to the Nigerian Export Promotion Council. The Council demanded a Tax Clearance Certificate before granting him the export license.

Mr. Bull Dozer was concerned and approached you to explain whether the presentation of this document is required for all government transactions in Nigeria.

Required:
State TEN transactions in respect of which a Tax Clearance Certificate may be demanded by a government agency. (10 Marks)

b. The Tax Appeal Tribunal has the authority to adjudicate on tax disputes and controversies when the appellant does not discontinue the appeal.

Required:
List TEN procedures for hearing the appeal before the Tax Appeal Tribunal. (10 Marks)

Answer

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Tags: Government Transactions, Nigeria, Tax Appeal Tribunal, Tax Clearance Certificate, Tax Dispute Resolution
Level: Level 2

Topic: Tax Administration and Enforcement
Series: MAY 2017

TAX – Nov 2014 – L2 – Q3 – Companies Income Tax (CIT)

Determine basis periods, tax liabilities, and conditions for loss reliefs and capital allowances for Gab Pal Limited.

Question

Gab Pal Limited commenced business on 1 May 2008. The company makes up its accounts to 31 August each year. Below is the data for the company’s trading activities:

Year	Adjusted Profit/Loss (₦’000)
Period ended 31 August 2009 (16 months)	(390,000)
Year ended 31 August 2010	170,000
Year ended 31 August 2011	150,000

The capital allowances for the relevant assessment years are as follows:

Assessment Year	Capital Allowance (₦’000)
2008	20,000
2009	18,000
2010	12,000
2011	8,000
2012	5,000

Requirements:

a. Determine the basis periods and the tax liabilities for the relevant years. (Ignore the Taxpayer’s right of election) (10 Marks)

b. State the TWO types of Loss reliefs acceptable to the tax authority. (2 Marks)

c. State the conditions that must be satisfied by a taxpayer to enjoy the loss reliefs stated in (b). (5 Marks)

d. State the conditions for the grant of Capital Allowances to taxpayers

Answer

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Tags: Basis Period, Capital Allowance, Loss relief, Tax liabilities
Level: Level 2

Topic: Companies Income Tax (CIT), Tax Administration and Enforcement
Series: NOV 2014

TAX – May 2021 – L1 – SB – Q5b – Tax Administration and Enforcement

Calculate the land use charge payable by Mr. James Ado based on given parameters.

Question

Mr. James Ado who is a successful businessman built a house for commercial purposes at Surulere, Lagos, in 2018.
You are given the following information:
(i) The area of the land parcel is 3,600 square metres.
(ii) The average market value of a land parcel in the neighbourhood, on a per square metre basis is N17,000 as determined by the professional valuers appointed by the Commissioner.
(iii) The total developed floor area of the building on the plot of land is 2,000 square metres.
(iv) The average construction value of medium quality buildings and improvements in the neighbourhood, on a square metre basis, is put at N200, based on the market value of the property as determined by professional valuers.
(v) The depreciation rate for the buildings and improvements of land based on the age of the building is put at 1%.
(vi) The annual relief rate is 40%.
(vii) The annual charge rate expressed as a percentage of the assessed market value of the property is 0.76% of the assessed value.
Required:
Compute the land use charge payable by Mr. James Ado.

Answer

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Tags: Commercial Property, Lagos State, Land Use Charge, Property Valuation, Tax computation
Level: Level 1

Topic: Tax Administration and Enforcement
Series: MAY 2021

TAX – May 2021 – L1 – SB – Q2b – Tax Administration and Enforcement

Discussion of the tax complexities arising from e-commerce and e-business.

Question

“E-commerce” and e-business present a major challenge for tax administrators given the often multi-jurisdictional nature of the transactions and the potential anonymity of the parties. Based on the above, it is, therefore, crucial to give the subject a critical examination through the lenses of relevant statutes.

Required:
State the tax complexities of “e-commerce” and “e-business”. (4 Marks)

Answer

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Tags: E-Business, E-commerce, Multijurisdictional Transactions, Taxation
Level: Level 1

Topic: Tax Administration and Enforcement
Series: MAY 2021

TAX – May 2021 – L1 – SB – Q2a – Tax Administration and Enforcement

Calculation of taxes payable in Nigeria by Atlat Airline Limited for the relevant assessment year.

Question

Atlat Airline Limited was incorporated in New York, USA, on June 6, 1993. It is engaged in the carriage of mails, passengers, and livestock into and out of Nigeria. The company’s worldwide statement of profit or loss as at December 31, 2018, has revealed the following:

Description	Amount (N)
Income from passengers flown from New York to Nigeria	510,720,000
Income from passengers loaded and flown out of Nigeria	241,305,000
Income from cargo loaded into aircraft to Nigeria from other routes	181,300,100
Income from cargo freight from Nigeria to New York	102,960,000
Total Income	1,036,285,100

Additional information:
(i) The Federal Inland Revenue Service is satisfied that the tax authority in New York computes and assesses a company which operates an aircraft on a basis not materially different from that prescribed by Companies and Allied Matters Act Cap C21 LFN 2004 (as amended).
(ii) The tax authority in New York has certified the adjusted profit and depreciation allowance ratios.
(iii) Out of the overhead expenses, N2,194,500 relates to disallowable expenses.

Required:
Compute the taxes payable in Nigeria by Atlat Airline Limited for the relevant assessment year. (16 Marks)

Answer

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Tags: Airline Taxation, Income Tax, Operating Expenses, Tax computation
Level: Level 1

Topic: Tax Administration and Enforcement
Series: MAY 2021

TAX – May 2021 – L1 – SA – Q20 – Tax Administration and Enforcement

Objective question on the minimum tax payable by air or sea transport businesses in Nigeria.

Question

The minimum tax payable by a company engaged in air or sea transport business shall not be less than……………… of the full sum receivable in respect of carriage of passengers, mails, livestock, or goods shipped or loaded into an aircraft in Nigeria.
A. 20%
B. 10%
C. 5%
D. 2%
E. 1%

Answer

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Tags: Air Transport, Minimum Tax, Sea Transport, Tax Rates
Level: Level 1

Topic: Tax Administration and Enforcement
Series: MAY 2021

TAX – May 2021 – L1 – SA – Q19 – Tax Administration and Enforcement

Objective question on the basis of assessment for an existing business.

Question

For an existing business, the basis of assessment is:
A. Continuity basis
B. Accrual basis
C. Preceding year basis
D. Actual basis
E. Succeeding year basis

Answer

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Tags: Basis of Assessment, Existing Business, Preceding Year, Taxation
Level: Level 1

Topic: Tax Administration and Enforcement
Series: MAY 2021

TAX – May 2021 – L1 – SA – Q17 – Tax Administration and Enforcement

Objective question on the percentage contribution by employees under the National Health Insurance Act.

Question

Under the National Health Insurance Act, Cap N42 LFN 2004, an employer who has a minimum of ten employees in the private sector is expected to pay 10%, while the employee pays…………….. of his basic salary.
A. 10%
B. 8%
C. 5%
D. 4%
E. 2%

Answer

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Tags: Employee Contributions, Employer Contributions, National Health Insurance
Level: Level 1

Topic: Tax Administration and Enforcement
Series: MAY 2021

TAX – May 2021 – L1 – SA – Q16 – Tax Administration and Enforcement

Objective question on the time allowed for appealing Lagos State Land Use Charge demand notices.

Question

Section 24(2) of Lagos State Land Use Charge Law 2018, states that the time allowed for an appeal to the tribunal shall be……………….after the date of delivery of the demand notices.
A. 90 days
B. 60 days
C. 45 days
D. 30 days
E. 14 days

Answer

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Tags: Appeals, Deadlines, Lagos State, Land Use Charge, Tax Tribunal
Level: Level 1

Topic: Tax Administration and Enforcement
Series: MAY 2021

TAX – May 2021 – L1 – SA – Q15 – Tax Administration and Enforcement

Objective question on the type of tax imposed on non-essential goods and services.

Question

ax imposed on goods and services that are considered to be non-essentials is:
A. Excise duty
B. Value added tax
C. Non-essential tax
D. Luxury tax
E. Essential tax

Answer

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Tags: Excise Duty, Luxury Tax, Non-Essential Goods, Taxation, VAT
Level: Level 1

Topic: Tax Administration and Enforcement
Series: MAY 2021

TAX – May 2021 – L1 – SA – Q14 – Tax Administration and Enforcement

Objective question about the import duty rate for live reptiles.

Question

The rate of import duty on live reptiles, including snakes and turtles is:
A. 25%
B. 20%
C. 15%
D. 10%
E. 5%

Answer

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Tags: Customs, Import duty, Reptiles, Tax Rates
Level: Level 1

Topic: Tax Administration and Enforcement
Series: MAY 2021

TAX – May 2021 – L1 – SA – Q11 – Tax Administration and Enforcement

Objective question about the penalty for failure to notify FIRS of change of address within a specified time frame.

Question

In respect of VAT, a person who fails to notify the FIRS of any change of address within one month of such change is liable to pay a penalty of:
A. N25,000
B. N20,000
C. N15,000
D. N10,000
E. N5,000

Answer

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Tags: Change of Address, FIRS, Penalties, Taxpayer obligations, VAT
Level: Level 1