ICAN ADVANCE TAXATION WEEK 5 QUESTIONS TOPIC: PERSONAL INCOME TAX

Transcription

1 ICAN ADVANCE TAXATION WEEK 5 QUESTIONS TOPIC: PERSONAL INCOME TAX REVIEW QUESTIONS QUESTION 1 In line with the Personal Income Tax (Amendment) Act 2011, you are required to: a. Define Gross emoluments. b. State FOUR conditions for exemption from Personal Income Tax. c. List FIVE tax exempt incomes. QUESTION 2: a. Briefly explain each of the following and their tax implications: i. Pension ii. Gratuities iii. Redundancy Benefits or compensation for loss of office b. Write short notes on the following: (i) Benefits in kind (ii) Non-taxable benefits in kind QUESTION3 An individual who is engaged by another under a contract of employment and self employed persons are subject to taxation under Personal Income Tax (Amendment) Act STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 1

2 Required: a. Distinguish between employment and self employment. b. Ojo Ajulo is an employee of Tinko Plc with gross emoluments of N2,400,000 per annum. Required: (i) Assuming that the year of assessment is 2012, compute his consolidated relief allowance and his tax liability in accordance with section 33(i) of PITA. QUESTION 4: (a) Relevant Tax Authority is the Revenue Board that has the mandate to assess and collect tax. Required: State the relevant tax authority for the following i. Individuals and sole proprietors ii. executor iii. village or indigenous community iv. partnership v. companies non-resident shareholders. (b) In line with the Personal Income Tax Act Cap P8 LFN 2011, write briefly on the following: a. i. Earned Income b. ii. Unearned Income QUESTION 5 During the year ended 30 th June, 2010 the partnership of TAIWO, KEHINDE and IDOWU reported an adjusted profit of N951,000 before charging partners salaries, interest on capital and cost of passage. Taiwo Kehinde Idowu Profit/loss sharing ratio N N N Salaries 48,000 72,000 96,000 STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 2

3 Interest on Capital 30,000 20,000 10,000 Cost of passage for leave 20,000 30,000 25,000 98, , ,000 c. You are required to compute the assessable income for each partner. QUESTION6: Kemi Hamza is an employee of a company in Lagos, Nigeria. The following is the income that accrued to him in 2012 Tax year. N Salary 1,200,000 Housing Allowance 900,000 Transport Allowance 300,000 Leave Allowance 200,000 Meal Subsidy 120,000 Additional Information; (1) He has one wife and 3 children aged 15, 13 and 10 years old. (2) He pays N120, 000 annual premium on his life assurance policy. (3) He collects N540, 000 per annum (net of withholding Tax) rent on his property. (4) During the year, he collected a total of N200, 000 dividend net of withholding tax. Required: i. Compute the chargeable income of kemi Hamza for 2012 year of assessment. ii. Compute the tax payable for 2012 Year of Assessment. QUESTION7: The Personal Income Tax (Amendment) Act 2011 is quite explicit on where a person is deemed to be resident in a particular year of assessment. You are required to: a. State the principal place of residence of: i. A pensioner ii. An individual who has a source of earned income other than a pension STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 3

4 (b) iii. Persons on leave from Employment at 1 January iv. Armed Forces Personnel i. Explain Place of Residence ii. State what Place of Residence EXCLUDES? QUESTION 8 According to the Act, PITA 2011, there are certain provisions for various offences and prescribed penalties. Highlight, the various offences and Penalties Question 9 Mrs. Aminat Ajani is an employee of Kosemani Limited with the following salary structure: (a) Basic salary N14,400,000 per annum (b) Rent allowance 40% of annual basic salary (c) Transport allowance N1,200,000 per annum (d) Meal Allowance N2,500 per working days (assuming 260 working days in a year) (e) Entertainment allowance N520,000 per annum (f) Utility allowance N480,000 per annum (g) Leave allowance 15% of annual basic salary (h) Christmas bonus One month s basic salary Additional information: a. She has an insurance policy on her life for which she pays an annual premium of N96,000. b. She contributes 7.5% of her basic salary, rent allowance and transport allowance annually to an approved pension scheme and 2.5% of her basic salary to the National Housing Fund c. She has an aged father and mother on whom she spends N120,000 annually towards their maintenance. d. Mrs. Aminat Ajani is a widow and has six children, all under the age of 18years and still attending school. Required: Compute the tax payable by Mrs. Aminat Ajani for 2012 year of assessment QUESTION 10: You have been approached by Mr. Sola Abijah, a political science graduate who did his compulsory National Youth Service in a media organisation in On completion of National Youth Service in January 2010, he was offered a part-time job as a freelance STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 4

5 writer in two international newspapers. He receives an income (net of Withholding tax) based on the articles he writes that are published by the newspapers. In March 2010, he joined a popular political party and served as the party s temporary Public Relations Officer, also on part-time income basis. On 2 January 2012, he secured employment on full-time basis as Senior Manager, Corporate Affairs, in Jola Investment Enterprises on a salary of N12,000,000 per annum. He was ignorant of the requirements for filing Tax Returns and paying tax to Government. He has been served a warning by the State Board of Internal Revenue (SBIR) to desist from nondisclosure of his other incomes, failing which, a Best of Judgement assessment may be raised on him by the tax inspector. Mr. Abijah has approached you to provide tax advisory services in respect of his income tax compliance requirements and the likely tax liability that may be imposed on him by the SBIR. The following additional information has been presented to you: Notes N N N Emolument 8,250, Benefits-in-kind 1 3,750, Other Incomes: 2 Part -time writing 3,875, ,293, ,140, Public relations 2,575, ,189, ,641, Other Deductions Withholding tax suffered at source: Part -time writing 193, , , Public relations 128, , , Other Deductions Pension contribution 660, National Housing Fund Contribution 206, In January 2012, Mr. Abijah took a Life Assurance Policy on his life with a capital sum assured of N5million and paid an annual premium of N375,000. Note 1: Benefits-in-kind N N N Official Car cost 2,500, Drivers allowances 1,250, Note 2: Other Incomes: Freelance Income (Gross) 4,068, ,458, ,247, STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 5

6 Public Relations Income (Gross) 2,704, ,298, ,723, You are required to: a. State the difference between employment income and part-time income. b. Explain why, when and to whom tax payers are expected to file income tax returns. c. Explain the circumstances that may arise to cause a tax authority to raise a Best of Judgment Assessment. d. Compute the tax liability on Mr. Abijah s Total income. QUESTION 11 In accordance with the Personal Income Tax Act CAP P8 LFN 2004 (as amended), write short notes on the following: a. National Housing Fund Contribution (NHF); b. National Health Insurance Scheme Contribution (NHIS); c. Life Assurance Premium; d. National Pension Scheme Contribution; and e. Gratuity. QUESTION 12 Mr. Olasumbo Adejumo retired from the Public Sector of Lagos State Government on 31 March He subsequently secured employment with First Bank Nigeria Plc as a Marketing Manager, effective 1 July The following information has been provided by Mr. Adejumo: (a) Salary - 1 January to 31 March 2013: N360,000 per month (b) New employment: N2,640,000 per annum. (c) Pension income, effectively 1 April 2013: N720,000 per annum. (d) Transport allowance new employment: N80,000 per annum. (e) Rent allowance new employment: N240,000 per annum. (f) Contribution to National Housing Fund and National Pension Scheme: 21/2 % and 71/2% of Consolidated gross income respectively. (g) Rental income received (Gross) N 3/3/ ,000 9/8/ ,000 20/7/ ,000 STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 6

7 2/12/ ,000 (h) Mr. Adejumo is married and has four children, aged between 2 and 19 years. All except one named Olawole aged 19 are still in school. (i) Mr. Adejumo has a life assurance policy on his life with a sum assured of N5,000,000 and annual premium of N350,000. (j) His aged parents live with him. They have no income of their own. Required: Compute the Personal income tax payable by Mr. Adejumo for the relevant year of assessment. QUESTION 13 Mrs. Amara Onyemachi retired as a Director in the Federal Ministry of Justice on 31 December On retirement, she was paid a gratuity of N30,000,000. On 1 January 2012, she was employed by Septraco Limited as the Company Secretary, on a salary of N60,000,000 per annum. Mrs. Amara Onyemachi is married and has five children. The following information was also provided at the end of his first year in his new employment: (i) The eldest son, Onyebuchi, is gainfully employed with Golf Bank Limited. (ii) The company provides Mrs. Amara Onyemachi with an official car Toyota Prado- with a market value of N15,000,000. (iii) The company pays N7,500,000 per annum on her official accommodation. (iv) Mrs. Onyemachi has a life assurance policy with Mutual Assurance Plc. The sum assured is N50,000,000, while premium paid is N6,000,000 in (v) She contributed N400,000 monthly to an approved Pension Scheme. (vi) She spent N150,000 during the year for the upkeep of his two aged parents who have no source of income. Required: Compute Mrs. Amara Onyemachi s monthly and annual tax liabilities for the relevant year of assessment. STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 7