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ICAN Advanced Taxation 2022 past questions and answers

This 2022 ICAN Advanced Taxation set has 20 practice questions. Try these 5 free sample questions, tap a question to reveal the answer and explanation. Then practise the whole 2022 set with instant marking.

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Sample ICAN Advanced Taxation 2022 questions

1. A Nigerian trading company that is not a professional-services company has annual turnover of ₦80,000,000. For 2022, CITA as amended applies a 0% company income tax exemption to a small company with turnover not exceeding ₦25,000,000, a 20% rate to a medium company with turnover above ₦25,000,000 but not above ₦100,000,000, and a 30% rate to a large company with turnover above ₦100,000,000. Which CIT rate applies to this company?
  1. 0%
  2. 20%
  3. 25%
  4. 30%

Answer: B. 20%

₦80,000,000 is above ₦25,000,000 and not above ₦100,000,000, so the company is medium-sized and the applicable CIT rate is 20%. The 30% rate applies only when turnover exceeds ₦100,000,000.

2. In 2022, Nigerian companies P and S are wholly owned members of the same group. P has a tax loss and S has taxable profits. Under the Nigerian CITA system, which treatment is correct for ordinary company income tax?
  1. P's loss automatically reduces S's taxable profit because they share an owner.
  2. Each company is assessed separately; P cannot surrender its loss to S merely because they are in one group.
  3. The parent may file one CITA return for the entire group and offset the loss.
  4. The group must allocate S's profit between the companies in proportion to ownership.

Answer: B. Each company is assessed separately; P cannot surrender its loss to S merely because they are in one group.

Nigerian group membership does not create ordinary consolidated company income tax or group loss surrender: each legal company computes and pays its own tax. A subsidiary's profit is not reduced by another member's loss solely because of common ownership.

3. A Nigerian parent and its subsidiary prepare consolidated financial statements for 2022. The subsidiary is profitable while the parent's own tax computation shows a loss. Under CITA, company income tax is assessed on each legal company separately and consolidated financial statements do not create a single group tax return. What should the tax manager do?
  1. File one return using the consolidated accounting profit.
  2. Transfer the parent's loss to the subsidiary because the parent controls it.
  3. Prepare a separate tax computation and return for each company.
  4. Report only the subsidiary because it has positive taxable profit.

Answer: C. Prepare a separate tax computation and return for each company.

The separate legal entities must each make their own CITA computation and filing. Consolidation for financial reporting does not replace the individual companies' tax returns.

4. A Nigerian company buys management services from its overseas related party in 2022. Under Nigeria's Income Tax (Transfer Pricing) Regulations 2018, which standard should govern the price for the controlled transaction?
  1. The price that produces the lowest combined tax for the group, regardless of market evidence.
  2. The amount stated on the invoice, which is conclusive once paid.
  3. A price selected by the directors without reference to the transaction's commercial circumstances.
  4. An arm's-length price consistent with the conditions independent parties would have agreed.

Answer: D. An arm's-length price consistent with the conditions independent parties would have agreed.

The transfer-pricing standard is the arm's-length principle, assessed using the transaction's facts and reliable comparables. An invoice or tax-minimising outcome alone does not establish that the price is arm's length.

5. A consultant proposes transferring Nigerian rental income to a discretionary family trust and treating the income as tax-free. The trust deed contains no tax exemption, and the facts provide no statutory exemption merely for settling income on trust. What is the soundest 2022 tax-planning conclusion?
  1. The rental income is exempt as soon as it is received by trustees.
  2. The income becomes exempt unless the trustees distribute cash in the same year.
  3. A trust does not itself create an exemption; the income's treatment and taxpayer must be established under the applicable rules and records maintained.
  4. The income is automatically chargeable only to capital gains tax at 10%.

Answer: C. A trust does not itself create an exemption; the income's treatment and taxpayer must be established under the applicable rules and records maintained.

Transferring income to a trust does not, by itself, make it exempt. A compliant plan identifies the applicable trust-tax treatment and keeps records rather than assuming the trust removes the tax charge.

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