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NATIONAL OPEN UNIVERSITY OF NIGERIA
UNIVERSITY VILLAGE, PLOT 91, CASDASTRAL ZONE, NNAMDI AZIKIWE EXPRESS WAY, JABI, ABUJA.
FACULTY OF MANAGEMENT SCIENCES
JANUARY 2021 EXAMINATION
COURSE CODE: ACC 318
CREDIT UNIT: 2
COURSE TITLE: TAXATION II
TIME ALLOWED: 2HOURS
Instructions: 1. Attempt question number ONE (1) and any other TWO (2).
2. Question number ONE is compulsory and carries 30 marks while the others carry 20 marks each.
3. Present all your points in coherent and orderly manner.
Question One
a. You have been invited by a Club of young Nigerian Business Executives to give a talk on the topic “commencing a thriving business in Nigeria and the tax implications”. Your talk is expected to address the following issues with emphasis on the tax implications of each:
i. How the profits of the business will be taxed on commencement. (5 mark)
ii. How the profits of the business will be taxed when there is a change in accounting date. (5 marks)
iii. Options of election by a Taxpayer and Revenue on commencement of business, change in accounting date and cessation of business. (6 marks)
b. List any TEN (10) transactions in respect of which Tax Clearance Certificate must be produced. (10 marks)
c. Mention FOUR (4) information that is contained in a Tax clearance certificate. (4 marks)
(Total 30 marks)
Question Two
Mr. Jason was employed by Rocket Bank Limited as Head of banking operations, effective 1 st June 2018. The details of his salary are as follows:
| N | |
| Basic salary per annum | 24,000,000 |
| Housing allowance | 6,000,000 |
| Transport allowance | 1,000,000 |
| Utility allowance | 400,000 |
| Meal allowance | 250,000 |
| Leave allowance | 2,400,000 |
| Clothing allowance | 1,000,000 |
Mr. Jason was provided with official car. The cost of the car is N3, 750,000. He was also provided with a driver and a private personal assistant and was paid N150,000 and N250,000 per annum respectively. Prior to joining Rocket Bank Ltd, Mr. Jason was on annual salary of N16,000,000 while working with Calrios Bank Plc. He resigned from the bank, effective 31 May 2018. Additional information:
(a) Mr. Jason is married with 4 children, all of school going age. He maintains his aged parent who lives with him in Abuja.
(b) He paid life insurance premium of N1,400,000 in 2017 and N1,500,000 in 2018 on his life.
(c) His employers deducted and remitted on his behalf the following mandatory deduction of N2,450,000 and N583,333.5 for NHF and pension respectively for 2018.
(d) He paid NHIS premium of N175,000 in 2018 to a health service provider to provide medical cover for himself and his family.
Required: Compute the tax liability of Mr. Jason for the relevant assessment year. (20 marks)
Question 3
a. What is Loss relief? (1 mark)
b. State the tax provision on terminal loss resulting from cessation of business. (5 mark)
c. Explain the term Current year loss relief (4 mark)
d. ChiKwe Enterprises is a company engaged in business since year 2000.
The business accounts which are made up to 31st December annually showed the following:
| Year ended 31/12/2013 | (500,000) |
| Year ended 31/12/2014 | (200,000) |
| Year ended 31/12/2015 | 220,000 |
| Year ended 31/12/2016 | 240,000 |
| Year ended 31/12/2017 | 158,000 |
| Year ended 31/12/2018 | 360,000 |
Capital allowances for the relevant tax years are as follows:
| 2014 | 48,000 |
| 2015 | 62,000 |
| 2016 | 60,000 |
| 2017 | 48,000 |
| 2918 | 88,000 |
| 2019 | 46,000 |
You are required to compute the taxable profits of the company for all the relevant years of assessments. (10 marks) (Total20 marks)
Question Four
ABURAYS Telecommunications Limited is based in Tokyo but has a representative office in Nigeria. For the year ended 30th September 2018, the following records were made available:
a.
| N | |
| Tokyo to Brazil | 8,400,000 |
| Tokyo to Nigeria | 1,428,000 |
| Nigeria to Tokyo | 1,627,500 |
| Nigeria to England | 2,100,000 |
| Tokyo to Arab through Nigeria | 1,144,500 |
| 14,700,000 |
b. The following are worldwide expenses incurred during the period:
| N | |
| Purchase of PPE | 2,600,000 |
| Other non-allowable expenses | 3,512,000 |
| Salaries and wages | 1,460,250 |
| Rent | 400,000 |
| Depreciation | 2,178,750 |
| Administrative expenses | 1,753,000 |
Required:
Compute the tax payable in Nigeria by ABURAYS Telecommunication Limited. (20 marks)
