Managers of business need to factor in relevant tax provision and compliance in its planning at the beginning of every financial year. Nigeria currently have several taxes, some are specific to Federal Government while some are due to both Federal Government and State Government depending on the nature of transaction involved. Compliance could be Annually, Monthly, or per transaction.. Some are highlighted below.
1. Internal Revenue Service Annual Returns Filing
Section 81(2) of the personal Income Tax Act, Cap P8 Laws of the Federation of Nigeria (LFN) 2004, as amended, requires every employer to file returns with relevant tax authority all emoluments paid to its employees. The relevant period under consideration is January to December of the preceding year. The returns is to be filed not later than 31st January of the current year.
Section 81 (3) of the personal Income Tax Act, Cap P8, LFN 2004, as amended prescribed a penalty of N500,000 for erring corporate bodies and N50,000 for individuals, upon a conviction on the same offence
2. Individual Self-Assessment (Annual Income Declaration)
Section 41 (1) and (3) of the personal income tax act, cap P8, LFN 2004 as amended requires individual to furnish relevant tax authority with his or her annual income for immediate preceding year. This return must be filed within 90 days of current year. Non compliance attracts penalty of N500, 000.00
3. Company Self-Assessment Federal Inland Revenue Services.
Section 55 (2b) of Company Income Tax Act CAP C21 LFN 2007 as amended stipulates taxable entity to file its financial statements together with the accompanying Tax and Capital Allowance Computation. This returns must be filed within six month after the company year end. Accompanying tax includes Company Income Tax, Education Tax, and Information Technology tax
4. Value Added Tax (VAT)
Section 15 of Value Added Tax Act 2007 as amended stipulates that a taxable person shall render monthly VAT returns on or before 21st of the month following the month of transactions.
5. Pay As You Earn (PAYE)
Section 82 of personal Income Tax Act Cap P8 LFN 2004 as amended states, “An employer is required under a provision of this Act to make deductions from emoluments or amounts on account of emoluments paid by him to an employee shall account to the relevant tax authority in such manner as the relevant tax authority may prescribe for the deductions so made, and in the event of failure by the employer to make the deduction, or properly to account therefore, the amount therefore together with a penalty of ten per cent per annum of the amount plus interest at the prevailing commercial rate shall be recoverable as a debt due by the employer to the relevant tax authority.”
6. Withholding Tax
Withholding Tax is an advance payment of income tax. In principle, WHT is a payment on account of the ultimate income tax liability of the taxpayer or company. Withholding tax is not a separate tax on its own and does not confer an exemption from the filing of annual tax returns by the company which had suffered WHT. The tax is normally to be deducted at source when a payment is to be made to the beneficiary.
WT Rate WT Rates
Types of payment Companies individuals
Dividend, Interest & Rent 10% 10%
* Royalties 15% 15%
* Commissions, Consultancy, Professional,
Technical & management Fees 10% 5%
* Building, Construction & related activities 5% 5%
* Contract of Supplies & Agency arrangements 5% 5%
* Director’s Fees 10% 5%