A major source of revenue for the governments around the world is Tax. It is no surprise why governments are keen about the safety and productivity of their citizens, as this translates to more taxable persons. The same applies to companies and businesses, because the more the businesses, the higher the source of revenue for the government.

On the other hand, especially in a situation like Nigeria where people perceive the government is not upholding its obligations; citizens do not enjoy paying taxes. It is always hard to just give your hard earned money away to a government; well maybe you have a point.

The truth however is that paying taxes is not an issue of morality that can be done by choice, rather it is a compulsory legal obligation, failure to remit taxes attracts severe penalties.  So, whether the government is useful or not, taxes have to be paid by all taxable persons or businesses.

For you not to be found guilty in the eye of the law, below are some popular and must pay taxes that apply to almost all businesses in Nigeria, except those enjoying  tax holidays or  businesses that fall into the tax exemption category.

COMPANY INCOME TAX:

This tax, as the name suggest apply to companies, and it is calculated on the profit of the company. Now we know that profit in its most simplistic meaning is expenses subtracted from income. This is why it is said that revenue isn’t the same thing as profit, it is important for every business to know the difference.  However for the purpose of taxes, there is taxable income, because to the taxman, it is not every expense that is acceptable. The rate of a company’s income tax is fixed at 30% of taxable income (a major quality of taxes, they are always fixed at a certain rate or percentage).
This Tax is remitted to the Federal Inland Revenue Service, and it is payable on a preceding year basis. It is very important that business owners secure the help of an accountant to help prepare accounting books so as to have a clear picture of the tax liability for each year, or whatever accounting period used by the company.
Companies in the oil and gas field do not pay Company Income Tax, rather they pay Petroluem Profit Tax

EDUCATION TAX:

For those who attended Federal Universities or institutions in recent years, (no not you from the first republic). Those of this generation will be familiar with many buildings in these institutions having inscription such as ‘Education Trust Fund 2009’. This fund is made available to the Federal government by the companies, and no, it is not a voluntary contribution.  It is fixed at 2% of the assessable income; you can see this isn’t taxable income. The tax man has a way of arriving at different profits, so you should also always seek tax advice.

VALUE ADDED TAX (VAT):

arguably the most popular tax in Nigeria. This tax is paid irrespective of whether you are a company or an individual. This tax is placed on goods and services; the burden of the tax is borne by the final consumer. The way this tax works is such that, for every good sold, or service rendered, it is compulsory to add a VAT at the rate of 5% of sale price. So for example if a good is being sold for N 200, with VAT added it would be eventually sold for N 210. The VAT of N 10 cannot be calculated as a profit to the seller or its business, but would be recorded as VAT to be remitted to the FIRS. VAT is paid by the final consumer, collected by the seller, and remitted to the FIRS. A failure to include VAT, or not declare it is an offense that attracts serious fines and severe punishments.
VAT filing is monthly, and always due on the 21st day of the subsequent month.
There are however some goods that are exempt from VAT, an example is educational materials like books.
You may require an expert to guide you on how to balance VAT output and VAT input for your business, as these determine your final VAT liability.

WITHHOLDING TAX: 

A withholding Tax is not a tax you pay, it is just another type of tax you help the tax man secure. This type of tax like the name suggests is withheld by the person paying for a service to the service provider.  For example, if Mr A provides a service to Mr B, Mr B pays Mr A his money less 10% of the agreed sum. Mr B remits that 10% to the FIRS, and Mr A gets a credit note as a receipt to show that he has paid part of his tax liability for the year, and a total of the Tax withheld shall be deducted from his payable tax for that year.
It is a means of ensuring that people pay taxes, so it is an advance form of tax payment.

PAY AS YOU EARN (P.A.Y.E):

this is a scheme by the Taxman to ensure that employees pay their taxes, and puts the duty on the employer to deduct the tax liability of the employees at source, thus the employees are paid their net salary, The employer on monthly basis remits the tax to the State’s Internal Revenue Service, a tax clearance for that month covers all employees of the company.
The PAYE becomes applicable to a business or company with 4 or more employees.

CAPITAL GAIN TAX:

This is not an everyday Tax, it is payable by companies or individuals. This is a tax paid on the sale of an asset. CGT is always fixed at 10% on the profit of the sale. Emphasis on profit, not sale price, so it is important that you learn how to calculate a CGT or employ the service of a person who can guide you.

PERSONAL INCOME TAX: 

This tax is payable by individuals or unincorporated businesses. Therefore this type of tax applies to employees, traders, sole proprietors, partners in a partnership, and businesses not registered as companies. It is calculated by what is regarded as direct assessment, and like the company income tax, the tax man allows for some reliefs, but not all expenses, so it is always important to approach a tax expert in computing your tax liabilities.

This is the rate of calculating personal income tax;

First N300,000 of income @7%Next N300,000 of income @ 11%Next N500,000 of income @ 15%Next N500,000 of income @19%Next N1,600,000 of income @ 21%Above N3, 200,000 of income @ 24%.

MINIMUM TAX:

This is a tax payable when a company does not make a profit in a year, or where the tax on profit when computed is lower than the minimum tax that would have been payable by the company. Where the turnover of the company is NGN 500,000 or below, minimum tax is computed as;

The highest of:

0.5% of gross profits0.5% of net assets0.25% of paid-up capital, or0.25% of turnover of the company for the year.

Where the turnover is higher than NGN 500,000, minimum tax is the highest of the calculations listed above plus 0.125% of turnover in excess of NGN 500,000.
It is evident that many start-ups will opt for the minimum tax.

LOCAL GOVERNMENT LEVY:

Now this is can be a real thorn in the flesh, as the local governments can come up with many ridiculous levies and charges like Television and Radio License fee. While the local governments usually pay attention to petty traders and small shops, they sometimes reach out to the Small and Medium –sized enterprises.

As stated earlier, these tax liabilities are mandatory, and many have a period which they must be filed, else you find yourself in default and subject to heavy fines.
There is good news for Tax defaulters; the Federal government has recently introduced the Voluntary Assets and Income Declaration Scheme as a tax amnesty for those who have been in default of many years to pay the default taxes without any liability of the fines or punishment. This scheme has however been declared as valid for a limited period.

You can always  contact us at legitng.com if you need more guidance on how to go about paying your taxes, ensuring you file at the proper time, and how to explore the lacuna and provisions of the law to reduce your tax liability.

SOURCE: https://brandspurng.com/the-must-know-taxes-for-doing-business-in-nigeria/

Brandspur - Nigeria's no. 1 online brand insight magazine

hmmn!

Tax Tax everywhere!!!

While we hustle and pay taxes, the government pay tax from our taxes

The ABC of Tax

Ok

The government looks for every available means to milk us dry via taxes. My challenge is not tied to tax paying, mine has always being on what they do with the tax I pay.
I'm busy hustling under this harsh weather condition of this my great country and someone is sitting in his well finished office to eat my monthly tax.
The thunder that will fire all this government official eating my hard earned payed tax is still boiling in hell.
God punish all of them

Make I just jeje dey do my business for Instagram. At least the only tax there is data

K

Make we see food chop first

What bigger tax do we have to pay other than being Nigerians? (Non-politicians)... Those at the top have taken everything, they should pay the tax from there... The little we get from our daily hussle, they shd leave for us to take care of ourselves and families (usually not even enough)

Tax payers are under hot Sun while tax choppers are under AC...SMH

Businesses never break even ur expecting them to pay taxes, dem never pay bank loan of 22-27% finish. U say mk dem pay tax. So dat fowler can use our hard earned to do sex parties abi. Mtcheeeew

OMG! Tax everywhere.

How do companies survive after paying all these taxes and levies

When they provide water and electricity for themselves. Mehn, no Nigerian is to pay tax because it's enriching the rich.

Brand ambassador of tax evasion....
I will invest more money in gaining knowledge about tax evasion than actually paying the tax to the federal government of Nigeria...

noted

Nice write up.
2 questions most startup always ask:
1) Can taxes be filed online in Nigeria?
2) How can one file nil returns, i.e. no revenue.
Can the OP throw some light here

Noted

Good one, Op.

nice one




Don't ever mind what people says behind you keep to your focus and keep moving:- Oladipo Boluwatife J.

I'll rather go to hell than pay income tax to the Nigerian government.

Hmm

Okay.

Quick question, Op; what will happen to someone regarding tax if a registered business name is not used in a while?

designVATExcel:
Nice write up.
2 questions most startup always ask:
1) Can taxes be filed online in Nigeria?
2) How can one file nil returns, i.e. no revenue.
Can the OP throw some light here

Hey, only VAT is currently filled online. There are plans to enable filing for other taxes in Nigeria. Especially taxes taxes paid to the federal government.

2. Yes, you can file nil returns, however, the authority will want to see your bank statements if you're consistently filing nil returns.

We are Virtualaccountant, cheap affordable accounting services.

OP, I thought income=profit and both equals to revenue - expenses..

By the way, which sensible fellow pays tax to a docile, directionless, tactless, visionless, wicked, heartless, bigoted, deceitful, incompetent, clueless, corrupt FG such as this one?

Hmm, Very Informative... I Once Read In Robert Kiyosaki's Book- Rich Dad Poor Dad That The Lower And Middle Class Suffer The Brunt Of Paying Taxes Which They Instigated Themselves, While The Rich And Big Industries Hide Under The Auspices Of Cooperations And Pay Peanuts As Tax.

VocalWalls:
I'll rather go to hell than pay income tax to the Nigerian government.

You will sir if you run a business in Nigeria. Also, if you want to expand your business.

Virtualaccounts:


You will sir if you run a business in Nigeria. Also, if you want to expand your business.

I run several businesses. Fortunately.

Thanks so much. This is very educative.

BlueBrothers:
A major source of revenue for the governments around the world is Tax. It is no surprise why governments are keen about the safety and productivity of their citizens, as this translates to more taxable persons. The same applies to companies and businesses, because the more the businesses, the higher the source of revenue for the government.

On the other hand, especially in a situation like Nigeria where people perceive the government is not upholding its obligations; citizens do not enjoy paying taxes. It is always hard to just give your hard earned money away to a government; well maybe you have a point.

The truth however is that paying taxes is not an issue of morality that can be done by choice, rather it is a compulsory legal obligation, failure to remit taxes attracts severe penalties.  So, whether the government is useful or not, taxes have to be paid by all taxable persons or businesses.

For you not to be found guilty in the eye of the law, below are some popular and must pay taxes that apply to almost all businesses in Nigeria, except those enjoying  tax holidays or  businesses that fall into the tax exemption category.

COMPANY INCOME TAX:

This tax, as the name suggest apply to companies, and it is calculated on the profit of the company. Now we know that profit in its most simplistic meaning is expenses subtracted from income. This is why it is said that revenue isn’t the same thing as profit, it is important for every business to know the difference.  However for the purpose of taxes, there is taxable income, because to the taxman, it is not every expense that is acceptable. The rate of a company’s income tax is fixed at 30% of taxable income (a major quality of taxes, they are always fixed at a certain rate or percentage).
This Tax is remitted to the Federal Inland Revenue Service, and it is payable on a preceding year basis. It is very important that business owners secure the help of an accountant to help prepare accounting books so as to have a clear picture of the tax liability for each year, or whatever accounting period used by the company.
Companies in the oil and gas field do not pay Company Income Tax, rather they pay Petroluem Profit Tax

EDUCATION TAX:

For those who attended Federal Universities or institutions in recent years, (no not you from the first republic). Those of this generation will be familiar with many buildings in these institutions having inscription such as ‘Education Trust Fund 2009’. This fund is made available to the Federal government by the companies, and no, it is not a voluntary contribution.  It is fixed at 2% of the assessable income; you can see this isn’t taxable income. The tax man has a way of arriving at different profits, so you should also always seek tax advice.

VALUE ADDED TAX (VAT):

arguably the most popular tax in Nigeria. This tax is paid irrespective of whether you are a company or an individual. This tax is placed on goods and services; the burden of the tax is borne by the final consumer. The way this tax works is such that, for every good sold, or service rendered, it is compulsory to add a VAT at the rate of 5% of sale price. So for example if a good is being sold for N 200, with VAT added it would be eventually sold for N 210. The VAT of N 10 cannot be calculated as a profit to the seller or its business, but would be recorded as VAT to be remitted to the FIRS. VAT is paid by the final consumer, collected by the seller, and remitted to the FIRS. A failure to include VAT, or not declare it is an offense that attracts serious fines and severe punishments.
VAT filing is monthly, and always due on the 21st day of the subsequent month.
There are however some goods that are exempt from VAT, an example is educational materials like books.
You may require an expert to guide you on how to balance VAT output and VAT input for your business, as these determine your final VAT liability.

WITHHOLDING TAX: 

A withholding Tax is not a tax you pay, it is just another type of tax you help the tax man secure. This type of tax like the name suggests is withheld by the person paying for a service to the service provider.  For example, if Mr A provides a service to Mr B, Mr B pays Mr A his money less 10% of the agreed sum. Mr B remits that 10% to the FIRS, and Mr A gets a credit note as a receipt to show that he has paid part of his tax liability for the year, and a total of the Tax withheld shall be deducted from his payable tax for that year.
It is a means of ensuring that people pay taxes, so it is an advance form of tax payment.

PAY AS YOU EARN (P.A.Y.E):

this is a scheme by the Taxman to ensure that employees pay their taxes, and puts the duty on the employer to deduct the tax liability of the employees at source, thus the employees are paid their net salary, The employer on monthly basis remits the tax to the State’s Internal Revenue Service, a tax clearance for that month covers all employees of the company.
The PAYE becomes applicable to a business or company with 4 or more employees.

CAPITAL GAIN TAX:

This is not an everyday Tax, it is payable by companies or individuals. This is a tax paid on the sale of an asset. CGT is always fixed at 10% on the profit of the sale. Emphasis on profit, not sale price, so it is important that you learn how to calculate a CGT or employ the service of a person who can guide you.

PERSONAL INCOME TAX: 

This tax is payable by individuals or unincorporated businesses. Therefore this type of tax applies to employees, traders, sole proprietors, partners in a partnership, and businesses not registered as companies. It is calculated by what is regarded as direct assessment, and like the company income tax, the tax man allows for some reliefs, but not all expenses, so it is always important to approach a tax expert in computing your tax liabilities.

This is the rate of calculating personal income tax;

First N300,000 of income @7%Next N300,000 of income @ 11%Next N500,000 of income @ 15%Next N500,000 of income @19%Next N1,600,000 of income @ 21%Above N3, 200,000 of income @ 24%.

MINIMUM TAX:

This is a tax payable when a company does not make a profit in a year, or where the tax on profit when computed is lower than the minimum tax that would have been payable by the company. Where the turnover of the company is NGN 500,000 or below, minimum tax is computed as;

The highest of:

0.5% of gross profits0.5% of net assets0.25% of paid-up capital, or0.25% of turnover of the company for the year.

Where the turnover is higher than NGN 500,000, minimum tax is the highest of the calculations listed above plus 0.125% of turnover in excess of NGN 500,000.
It is evident that many start-ups will opt for the minimum tax.

LOCAL GOVERNMENT LEVY:

Now this is can be a real thorn in the flesh, as the local governments can come up with many ridiculous levies and charges like Television and Radio License fee. While the local governments usually pay attention to petty traders and small shops, they sometimes reach out to the Small and Medium –sized enterprises.

As stated earlier, these tax liabilities are mandatory, and many have a period which they must be filed, else you find yourself in default and subject to heavy fines.
There is good news for Tax defaulters; the Federal government has recently introduced the Voluntary Assets and Income Declaration Scheme as a tax amnesty for those who have been in default of many years to pay the default taxes without any liability of the fines or punishment. This scheme has however been declared as valid for a limited period.

You can always  contact us at legitng.com if you need more guidance on how to go about paying your taxes, ensuring you file at the proper time, and how to explore the lacuna and provisions of the law to reduce your tax liability.

SOURCE: https://brandspurng.com/the-must-know-taxes-for-doing-business-in-nigeria/

Brandspur - Nigeria's no. 1 online brand insight magazine

I think government need to do something tangible to its citizenry, something that will motivates someone to pay tax, it is not easy for someone to sit down and brainstorm on the kind of business to embark on, later someone will come from no where to threatened you, telling you what to pay else they will shut down your place, it is not done that way! And the most annoying thing is that there will be coming in different angles!

We are not encourage with how our government are using our public funds very sad

Thanks we have to contact you guys legitng.com

So as a manufacturer if I supply my distributor my products, do I charge the VAT or is only the retailer that charge VAT.

BlueBrothers:


WITHHOLDING TAX: 

A withholding Tax is not a tax you pay, it is just another type of tax you help the tax man secure. This type of tax like the name suggests is withheld by the person paying for a service to the service provider.  For example, if Mr A provides a service to Mr B, Mr B pays Mr A his money less 10% of the agreed sum. Mr B remits that 10% to the FIRS, and Mr A gets a credit note as a receipt to show that he has paid part of his tax liability for the year, and a total of the Tax withheld shall be deducted from his payable tax for that year.
It is a means of ensuring that people pay taxes, so it is an advance form of tax payment.

Let me make some corrigenda: Withholding tax rate is both 5% and 10% and not just the 10% quoted. Secondly, it is payable to both FIRS(Federal Inland Revenue Service) & SBIRS(State Board of Internal Revenue Service) of each state. Individual WHT is payable to SBIRS while corporate WHT is payable to FIRS.