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ICAN Advanced Taxation 2024 past questions and answers

This 2024 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 2024 set with instant marking.

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Sample ICAN Advanced Taxation 2024 questions

1. Koru Manufacturing Ltd has annual turnover of N80 million. Under CITA as amended for this paper, the CIT rate is 0% where turnover is N25 million or less, 20% where turnover is above N25 million and not above N100 million, and 30% where turnover is above N100 million. Which CIT rate applies to Koru?
  1. 20%
  2. 0%
  3. 30%
  4. 10%

Answer: A. 20%

Turnover of N80 million falls in the above-N25-million-to-N100-million band, so the rate is 20%. The 30% rate applies only when turnover exceeds N100 million.

2. A Nigerian company pays a related consultancy N5 million. The consultant actually performs documented work wholly and exclusively for the company's business, and the fee is commercially supportable. Which treatment is the most defensible in the company's tax computation?
  1. Deduct it automatically because any invoice is deductible.
  2. Claim it as a business expense, retaining evidence of the work and applying the relevant transfer-pricing rules.
  3. Deduct it even if no services were provided, provided the recipient is related.
  4. Treat it as a capital allowance without checking its nature.

Answer: B. Claim it as a business expense, retaining evidence of the work and applying the relevant transfer-pricing rules.

A genuine expense incurred wholly and exclusively for the business may be deductible, subject to the applicable rules and supporting evidence. An invoice alone does not make a sham or private expense deductible.

3. A parent company owns all the shares in two Nigerian subsidiaries. For this question, assume Nigerian CITA does not provide a consolidated group income-tax return. How should the companies report their CIT liabilities?
  1. The parent files one return for the entire group and pays tax on consolidated profit.
  2. The subsidiaries file only if the parent has no taxable profit.
  3. Each company computes and files its own company tax return as a separate taxpayer.
  4. The group files one return only when both subsidiaries are profitable.

Answer: C. Each company computes and files its own company tax return as a separate taxpayer.

The group relationship does not by itself create a consolidated Nigerian CIT taxpayer under the stated rule. Each company remains responsible for its own computation and return.

4. A Nigerian group has Parent Ltd with taxable profit of N12 million and Subsidiary Ltd with a tax loss of N4 million. Under the separate-company approach to Nigerian CIT, and absent a specific statutory relief, what is the correct treatment?
  1. Offset the subsidiary's loss against the parent's profit because the parent owns it.
  2. Transfer the loss to any other group company by board resolution.
  3. Combine both results and report group profit of N8 million.
  4. Keep the tax computations separate; ownership alone does not transfer the subsidiary's loss to the parent.

Answer: D. Keep the tax computations separate; ownership alone does not transfer the subsidiary's loss to the parent.

Under separate-company taxation, the subsidiary's loss is not automatically available to reduce the parent's taxable profit. A group relationship or board resolution does not itself create group loss relief.

5. A Nigerian distributor buys goods from its foreign associated company. Reliable prices for comparable purchases by independent distributors are available, with similar functions and market conditions. Under the arm's-length principle in Nigeria's transfer-pricing rules, which approach is most appropriate?
  1. Use the comparable uncontrolled price as a potential method, after testing comparability and making reliable adjustments where needed.
  2. Accept the price chosen by the foreign parent without analysis.
  3. Set the transfer price at cost in every case, regardless of comparable transactions.
  4. Use the Nigerian distributor's year-end cash balance as the transfer price.

Answer: A. Use the comparable uncontrolled price as a potential method, after testing comparability and making reliable adjustments where needed.

A reliable comparable uncontrolled price can be an appropriate arm's-length method when comparability is established and material differences are addressed. A parent's unilateral price is not proof that the result is arm's length.

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