PassSpark

ICAN Advanced Taxation 2026 past questions and answers

This 2026 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 2026 set with instant marking.

Practise the full 2026 setTimed exam mode

Sample ICAN Advanced Taxation 2026 questions

1. A Nigerian manufacturer is comparing a machine purchase costing N12,000,000 with a one-year lease costing N4,500,000. For this question, assume the purchase earns a tax allowance equal to 30% of cost in year one, the lease payment is fully deductible in year one, the corporate tax rate is 30%, and all other effects including timing, VAT and financing are ignored. Which option produces the larger year-one tax saving, and by how much?
  1. Purchase, by N270,000
  2. Purchase, by N810,000
  3. Lease, by N270,000
  4. Lease, by N1,350,000

Answer: C. Lease, by N270,000

The purchase deduction is N12,000,000 x 30% = N3,600,000, saving N1,080,000 in tax. The lease deduction saves N4,500,000 x 30% = N1,350,000, so the lease saves N270,000 more; option D mistakes the lease's total saving for the difference.

2. Two incorporated Nigerian subsidiaries are assessed separately. For this question, assume there is no group loss relief, losses carry forward only in the company that incurred them, and each company's tax rate is 30%. Subsidiary L has a current-year tax loss of N4,000,000 and subsidiary P has taxable profit of N9,000,000. What is the correct current-year result?
  1. P pays N2,700,000; L pays no current tax and carries its N4,000,000 loss forward for its own future profits
  2. The group pays N1,500,000 after setting L's loss against P's profit
  3. Neither company pays tax because the group has a net profit of N5,000,000
  4. P pays N2,700,000 and L's loss expires at year end

Answer: A. P pays N2,700,000; L pays no current tax and carries its N4,000,000 loss forward for its own future profits

Separate assessment and the stated no-group-relief rule prevent L's loss from reducing P's taxable profit. P's tax is N9,000,000 x 30% = N2,700,000, while L has no current tax and retains its loss for its own future profits; option B improperly offsets across companies.

3. A parent company charges its Nigerian subsidiary a N6,000,000 management fee. The records support only N3,000,000 of services, and reliable independent comparables show an arm's-length fee of N3,000,000. Assume the companies are separately assessed and a genuine arm's-length service fee is deductible by the subsidiary. What is the defensible tax adjustment to the subsidiary's deduction?
  1. Deduct N6,000,000 because the companies belong to the same group
  2. Disallow the full fee because related parties cannot deduct service charges
  3. Deduct N3,000,000 and also claim a N3,000,000 group relief
  4. Deduct N3,000,000 and add back the unsupported N3,000,000 excess

Answer: D. Deduct N3,000,000 and add back the unsupported N3,000,000 excess

Only the documented, arm's-length amount is deductible under the assumptions, so the excess N3,000,000 is added back. Group membership does not make an unsupported charge deductible, and a second group relief deduction would double count it.

4. A parent with N4,000,000 of taxable profit lends N20,000,000 to its subsidiary at 10% for a full year. The subsidiary has N8,000,000 profit before interest. For this comparison, assume both are separately assessed at 30%, the N2,000,000 interest is deductible by the subsidiary and fully taxable to the parent in the same year, and there is no withholding tax, group relief or other adjustment. Compared with funding the subsidiary with equity and paying no interest, what is the combined current corporate tax?
  1. N3,000,000 under the loan and N3,600,000 under equity
  2. N3,600,000 under either funding method
  3. N4,200,000 under the loan and N3,600,000 under equity
  4. N3,600,000 under the loan and N2,400,000 under equity

Answer: B. N3,600,000 under either funding method

With debt, the subsidiary is taxed on N6,000,000 and the parent on N6,000,000 including interest, giving N12,000,000 x 30% = N3,600,000 combined tax. With equity, their combined N12,000,000 profit is taxed at the same rate, also N3,600,000; the matched deduction and receipt shift taxable profit but do not reduce the total.

5. A Nigerian distributor buys 1,000 units from its overseas related supplier at N10,000 each. A reliable uncontrolled comparable establishes an arm's-length price of N8,000 per unit, with no material differences requiring adjustment. Under the Nigeria Tax Act 2025 framework effective from 1 January 2026, what purchase-cost adjustment best reflects the arm's-length principle?
  1. Increase the Nigerian deduction by N2,000,000 because the supplier is overseas
  2. Make no adjustment unless the group has a consolidated tax return
  3. Reduce the Nigerian deductible purchase cost by N2,000,000
  4. Reduce the Nigerian deductible purchase cost by N8,000,000

Answer: C. Reduce the Nigerian deductible purchase cost by N2,000,000

The related-party price exceeds the comparable arm's-length price by N2,000 per unit, or N2,000,000 for 1,000 units. Reducing the deduction by that excess aligns the Nigerian buyer's expense with the controlled transaction's arm's-length value; N8,000,000 is the comparable total price, not the adjustment.

More ICAN Advanced Taxation years

2025202420232022

All ICAN Advanced Taxation years · ICAN subjects

PassSpark questions are original practice questions written to each exam's syllabus and format, in the style of past questions. They are not official past papers and are not affiliated with JAMB, WAEC, NECO, any university or any exam body.