Taxation and Fiscal Planning
What the exam tests
Taxation and Fiscal Planning requires you to compute tax liabilities, identify planning opportunities and explain compliance risk. The case may mix companies income tax, capital allowances, VAT, withholding tax and incentives.
Core rules
- Taxable profit starts from accounting profit: add back disallowable expenses and accounting depreciation, deduct capital allowances and permitted reliefs.
- Capital allowances are tax depreciation, not an accounting expense; they follow asset classes and utilisation rules.
- VAT is generally collected from customers and remitted; it is not a business expense when recoverable.
- Withholding tax is a credit against the final liability if properly documented.
- Transfer pricing: controlled transactions must be at arm's length; documentation should exist before filing.
- Incentives such as pioneer status must be claimed within the statutory window and supported by evidence.
Worked example
Accounting profit is ₦40m. It includes ₦6m depreciation and ₦5m of disallowable entertainment. Capital allowance is ₦8m. Taxable profit = ₦40m + ₦6m + ₦5m − ₦8m = ₦43m. CIT at 30% = ₦12.9m. Effective tax rate = ₦12.9m ÷ ₦40m = 32.25%, above the statutory rate because disallowables exceed the capital allowance shield. If ₦1.5m withholding tax credits are evidenced, the cash payable is ₦11.4m. Reason: reconcile accounting profit to taxable profit line by line.
Traps
Deducting both depreciation and capital allowances; ignoring WHT credits; treating VAT as an expense; missing transfer-pricing documentation; and assuming an incentive applies without checking eligibility or approval.