Now that the Nigerian oil revenue has dropped
drastically, and the government has turned toward taxation – when the economy
is still struggling to have a grip on stability: The concern of many
businesses, especially, the growing ones – is how to go about the payment of
tax, and yet – retain some meaningful profits for their various organisations.
In this article, we will try to shed light on
how to support our government to achieve the task which it as set out to do, neglecting
(deliberately) the illegal means of beating the ‘payment of tax’.
Unarguably, there are so many methods by which one can beat taxation, but such
methods play down on individual’s integrity and may be dangerous if caught in
the act.
Hence, we will focus on the taxpayer, how to pay the tax and
where to pay the tax. However, there are only two specific taxes that so
much concern an entrepreneur, namely:
·VALUE ADDED TAX (VAT).
·COMPANIES INCOME TAX (CIT).
The taxes collected by the
Federal Inland Revenue are as follow:
COMPANIES INCOME TAX (CIT)
Persons
subject to the Companies Income Tax are:
All companies incorporated in
Nigeria with the exception of companies engaged in petroleum
operations.
All non-resident (foreign)
companies that earn or derive income from Nigeria.
All organizations limited by
guarantee (institutions of public character or charitable
organizations) engaged in profit making activities other than the
promotion of their primary objects.
The liquidator, receiver, or agent
of liquidator or receiver of any taxable company or organization.
PETROLEUM PROFITS TAX
(PPT)
Persons subject to the Petroleum Profits Tax:
Companies engaged in petroleum
exploration and production operations in Nigeria (up-stream operations)
A person resident in Nigeria employed in
the management of the petroleum operations carried on by a non-resident
company
The liquidator, receiver, or agent of
liquidator or receiver of any company carrying on petroleum operations in
Nigeria.
VALUE ADDED TAX (VAT)
Persons subject to the Value Added Tax:
Any individual,
corporation sole, group, body corporate or organization that consumes, buys,
procures or imports taxable goods or services is liable to pay the tax.
How to pay the Value Added Tax
During direct sales or open market
transactions, the buyer or consumer shall pay the tax to the seller
together with the cost of the goods or services bought. The seller then
nets off the VAT paid at the time of purchase of the stocks sold from the
VAT collected on the stocks sold and credit the balance to FIRS.
Where the goods or services were
supplied to a government Ministry, Department or Agency (MDA) or a company
engaged in oil operations, the VAT payable by the MDA or oil company is
deducted or withheld at source (at the point of payment). It is then
credited directly to FIRS on behalf of the supplier
VAT payments are made on a monthly basis
not later than 21days of every subsequent month. Tax payers prepare and
submit monthly VAT returns accompanied by evidence of payment of the tax
due at designated banks
Where to pay the Value Added Tax
VAT remittances may be
made at any designated banks; an e-ticket is immediately issued as evidence of
payment. This e-ticket may be presented at the ITO and an e-receipt will be
issued the taxpayer.
PERSONAL INCOME TAX (PIT)
Persons subject to the Personal Income Tax:
Individuals resident in the Federal
Capital Territory, Abuja
Families, communities, trustees and
estates resident in the Federal Capital Territory
Persons employed in the Nigerian Army,
Nigerian Navy, Nigerian Air Force and Nigeria Police other than in
civilian capacity.
A person resident outside Nigeria who
derives income or profit from Nigeria
Officers of the Nigerian foreign service
WITHHOLDING TAX (WHT)
Applicable tax law
Withholding Tax
(WHT) is not a distinct tax type and therefore has no legislation of its own.
It is only a mechanism for the collection of other taxes. Consequently, its
application is provided for in the enabling law of other tax types i.e. Section
81 of Company Income Tax Act, Section 54 of Petroleum Profit Tax Act, Section
73 of Personal Income Tax Act and Section 13 of Value Added Tax Act.
Persons subject to the Withholding Tax:
Persons subject to
the various tax types may be subject to Withholding Tax deductions for the
purpose of offsetting their tax liabilities. WHT deductions are regarded as
advance payments (or payments on account) of the relevant tax liability that
will arise from the tax returns of the period concerned.
EDUCATION TAX (EDT)
Persons subject to the Education Tax:
All companies
liable to Companies Income Tax are also liable to Education Tax. In other
words, all companies registered or resident in Nigeria are liable to pay
Education Tax.
STAMP DUTIES (STD)
Persons subject to Stamp Duties:
The items and
persons subject to stamp duties are instruments (written documents) relating to
matters executed between a company and an individual, group or body of
individuals. Instruments which may be subject to stamp duties include financial
instruments/transactions, company memorandums and articles of association,
statements of share capital ownership, bonds, conveyances on sale, depositions,
lease agreements, mortgage bonds, debentures, etc.
CAPITAL GAINS TAX (CGT)
Persons and properties subject to the Capital
Gains Tax:
All companies
incorporated in Nigeria which earns any capital gains or gains on the disposal
of all forms of assets. All forms of property (whether situated in Nigeria or
not) that are liable to capital gains tax include:
Options, debts and incorporeal property
generally;
Any currency other than Nigerian
currency; and
Any form of property created by the
person disposing of it, or otherwise coming to be owned without being
created
NATIONAL INFORMATION
TECHNOLOGY DEVELOPMENT FUND (NITDF) LEVY
Persons subject to the NITDF Levy:
Companies and
enterprises with an annual turnover of N100, 000, 000.00 and above operating
as:
GSM Service Providers or
telecommunications companies;
Cyber companies and internet providers;
Pensions managers and pension related
companies;
Banks and other financial institutions;
Insurance companies.
There are two categories of tax payers in
Nigeria: Individuals and Corporations.
INDIVIDUAL TAXPAYERS: this category of taxpayer is
further sub-categorised for ease of administration into-
Resident individuals- taxpayers who
reside in Nigeria for a period or periods amounting to 183 days or more
in any 12 month period commencing in a calendar year and ending either
within that same year or the following year.
Non-resident individuals- this category
include immigrants and any individual who is in Nigeria for some
temporary purpose only and not with intent to establish residence.
Corporations: any company incorporated under
the Companies and Allied Matters Act.
It is noteworthy at this
junction – that all entrepreneurs understood the categories of taxes that apply
to them. All entrepreneurs would pay or collect VAT where applicable, and they
must pay their companies income taxes, when due.
Tax Payment Guidelines – listed below:
Taxpayers must be registered with
relevant Tax Office nearest to them and obtain a Taxpayer Identification
Number (TIN).
Taxpayers should render appropriate tax
returns.
Taxpayers should obtain Assessment and
Demand Notices where applicable.
Taxpayers should remit all taxes to the
approved collecting Banks in the various forms designed for such purposes
and obtain an Electronic Ticket (e-ticket).
Taxpayers should present the e-ticket
for the issuance of FIRS official receipts.
Taxpayers can now process their Tax
Clearance Certificate accordingly.
How would you calculate your individual taxes?
According to Dr. Alaba
Olusemoore, the CEO of Nesbet Consulting, the following method could be used in
determining the amount of your tax – payable to the government.
ITEMSN
NET SALESXX
LESS COST OF GOODS
SOLD-XX
GROSS PROFIT=XX
LESS EXPENSES:
TRANSPORT
ENTERTAINMENT
LIGHT & POWER
SALARIES
ETC-XX
NET PROFIT BEFORE TAX=XX
LESS TAX-30%
PROFIT AFTER TAX=XX
In view of this method, your payable tax would
be 30% of your income, after deducting some of your expenses and other cost of
production (charges). You might need to consult an auditor for proper book
record of your expenditures.
There are few benefits of paying your tax as
a business owner, and these benefits are enumerated below
Nigeria as a country and indeed all socially
responsible and law abiding individuals, groups, organisations and corporate
citizens will derive valuable benefits from imbibing a culture of tax
compliance. The benefits derivable include but are not limited to:
Providing
sustainable finance and funding for governance, public and social services
and economic development.
Promoting civic
responsibility, patriotism by citizens and social responsibility by
corporate citizens.
Stimulating
priority social and economic activities and sectors while discouraging
less preferred ones.
Bringing about the
redistribution of wealth and bridging sharp disparities in living
standards.
Giving taxpayers
the moral and legal right to demand for (thereby engendering) a culture of
accountability.
Serving as a gauge
for measuring the level, growth and health of economic units and economic
activities.
Individuals and
corporate organisations are conferred with definite benefits, rights and
privileges in the system based on their tax compliance status.
Tax compliance
enables law abiding citizens to avoid the consequences, penalties and
sanctions of non-compliance.
Even,
the scripture mandated that we should give what belongs to the government – to
the government: “When they had come to
Capernaum, those who received the temple tax came to Peter and said, "Does
your Teacher not pay the temple tax?" He said, "Yes." And when
he had come into the house, Jesus anticipated him, saying, "What do you
think, Simon? From whom do the kings of the earth take customs or taxes, from
their sons or from strangers?"Peter said to Him, "From strangers." Jesus said to him,
"Then the sons are free. Nevertheless, lest we offend them, go to the sea,
cast in a hook, and take the fish that comes up first. And when you have opened
its mouth, you will find a piece of money; take that and give it to them for Me
and you." (Matt 17:24-27, NKJV).
Now
that you understood how to go about the payment of your taxes – it is left to
your opinion if you will support the government partially or fully in your tax
payment, but know that if you are caught cheating the government – it might not
be an easy ride.
Therefore,
remember that you are informed not to be deformed, because you deserve the
best.
Now that the Nigerian oil revenue has dropped
drastically, and the government has turned toward taxation – when the economy
is still struggling to have a grip on stability: The concern of many
businesses, especially, the growing ones – is how to go about the payment of
tax, and yet – retain some meaningful profits for their various organisations.