Alright, let's work through this problem step-by-step to determine the amount of company income tax that the business needs to pay per year.
1. Identify Monthly Profit:
The business makes a profit of ₦500,000 per month.
2. Compute Annual Profit:
To find the annual profit, we need to multiply the monthly profit by the number of months in a year (12 months).
[tex]\[
\text{Annual Profit} = \text{Monthly Profit} \times 12
\][/tex]
[tex]\[
\text{Annual Profit} = ₦500,000 \times 12 = ₦6,000,000
\][/tex]
So, the annual profit for the business is ₦6,000,000.
3. Compute Taxable Profit:
Assuming that the business pays tax only on the annual profit and not on the initial loan or the total annual sales turnover, the taxable profit remains the same as the annual profit.
[tex]\[
\text{Taxable Profit} = ₦6,000,000
\][/tex]
4. Determine the Tax Rate:
The tax rate is given as 30%.
5. Compute the Company Income Tax:
To find the tax payable to the government, we multiply the taxable profit by the tax rate.
[tex]\[
\text{Company Income Tax} = \text{Taxable Profit} \times \text{Tax Rate}
\][/tex]
[tex]\[
\text{Company Income Tax} = ₦6,000,000 \times 0.30 = ₦1,800,000
\][/tex]
Therefore, the business is required to pay ₦1,800,000 as company income tax per year to the government.
