Q.1. WHAT IS VALUE ADDED TAX (VAT)?
Answer - This was introduced by the VAT decree No. 2 of 1993, to replace the old sales tax. It is a consumption tax levied at each stage of the consumption chain, and is borne by the final consumer. It requires a taxable person upon registering with the Federal Inland Revenue Service to charge and collect VAT at a flat rate of 10% of all invoiced amounts of taxable goods and services.

VAT paid by a business on purchases is known as input tax, which is recovered from VAT charged on company sales, known as output tax. If output exceeds input in any particular month the excess is remitted to the Federal Inland Revenue Service (FIRS) but where input exceeds output the taxpayer is entitled to a refund of the excess from FIRS though in practice this hardly ever happens in Nigeria.

Q. 2. WHAT IS CAPITAL GAINS TAX?
Answer - This accrues on an actual year basis and it pertains to all gains accruing to a taxpayer from the sale or lease or other transfers of proprietary rights in a chargeable interest which are subject to a capital gains tax of 10%, such chargeable assets may be corporeal or incorporeal and it does not matter that such asset is not situated in Nigeria. Where however the taxpayer is a non-resident company or individual the tax will only be levied on the amount received or brought into Nigeria.

Q.3. WHAT IS EDUCATION TAX?
ANSWER - An education tax of 2% of assessable profits is imposed on all companies incorporated in Nigeria. This tax is viewed as a social obligation placed on all companies in ensuring that they contribute their own quota in developing educational facilities in the country.

Q.4. WHAT IS COMPANIES INCOME TAX?
ANSWER - This is tax that is payable to the Federal Inland Revenue Service for each year of assessment of the profits of any company at a rate of 30%. These include profits accruing in, derived or received from a trade, business or investment. Also companies paying dividends to their shareholders are first obliged to pay tax on profits at the companies tax rate. Generally in Nigeria, company dividends or other company distribution whether or not of a capital nature made by a Nigerian company is liable to tax at source of 10%, however dividends paid in the form of bonus share or scrip shares to individual share holders are not subject to tax, where also a company is a shareholder in another company then such dividends are excluded from the profits of the company for the purposes of computation of the tax.
Q.5. WHAT IS THE NIGERIAN SOCIAL INVESTMENT TRUST FUND (NSITF)?
ANSWER - This is governed by the NSITF Decree, and requires everybody employed in a Nigerian incorporated company to contribute a certain percentage of their salary to the fund. Expatriates are excluded from this requirement where they can show proof of a similar contribution in their home country.
Q.6. WHAT IS WITHHOLDING TAX?
ANSWER - Nigerian law subjects certain activities and services to Withholding Tax. This means that where during transactions in any of the specified activities or services, a payment is due from one person to another, the person making the payment is expected to deduct tax at the applicable rate and remit it to the relevant tax authority. This should be done not later than 30 days after the deduction.

Q.7. WHAT ARE TAX TREATIES?
ANSWER - Nigeria has a number tax treaties referred to as double taxation agreements with a number of countries, these are designed to ensure that the tax payable in Nigeria on the profits of a Nigerian company being remitted into the country are reduced by the amount of foreign Tax paid abroad and vice versa where an overseas company receives profits from Nigeria that have already been taxed in Nigeria.

Q.8. WHAT IS PERSONAL INCOME TAX?
ANSWER - Every taxpayer in Nigeria is liable to pay tax on the aggregate amount of his income whether derived from within or outside Nigeria, the salaries, wages, fees, allowances, and other gains or benefits, given or granted to an employee are chargeable to tax. The employers of labor are deemed to be agents of the tax authority for the purposes of remitting taxes deducted from salaries due to employees.

Q.9. ARE THERE EXEMPTIONS FROM PERSONAL INCOME TAXES AND WHAT ARE THEY?
ANSWER – Yes there are exemptions, which include: Medical or Dental expenses incurred by the employee; Retirement gratuities and compensation for loss of office; The cost of passage to or from Nigeria incurred by the employee; Interest on loans for developing an owner-occupied residential house; Leave allowance, which is computed as 10% of annual basic salary.

Q.10. WHAT ARE THE PERSONAL INCOME TAX RELIEFS?
ANWER - The following reliefs are available to a taxpayer under the PAYE system and are deducted from his emoluments subject to per annum maximums before arriving at the taxable income. They include; Personal Allowance, Child Allowance, Allowance for Dependent relatives, Housing, Transport, Meal, Utility, Entertainment, and Leave allowance . The reliefs are claimable only upon application to the relevant Revenue authority by completing the required forms.

Q.11. HOW DOES THE SELF-EMPLOYED PERSON PAY HIS TAX?
ANSWER - Such an individual either calculates his tax based on all his sources of income or having been assessed by the relevant tax authority makes payment as may be prescribed by the tax authority.

Q.12. HOW ARE TRADERS TAXED?
ANSWER - Traders are taxed by calculating their total income from all sources, less all allowable deductions and allowances. Then, the balance is taxed in accordance with the graduated tax table.

Q.13. WHO COLLECTS PERSONAL INCOME TAX AND FROM WHOM?
ANSWER -The States boards of Internal Revenue and the Federal Inland Revenue Service are the two relevant tax authorities that collect personal income tax in Nigeria. The State Boards of Internal Revenue e.g. LIRS, collect taxes from: Individuals resident in the State; Body of individuals such as communities, families that run a business; Business names and partnerships; Executors of estates of deceased persons and trustees of trusts.
While Federal Inland Revenue Service also collects Personal Income Taxes from: Residents of Federal Capital Territory; persons employed in the Nigerian Army, Nigerian Navy, Nigerian Air Force; Nigerian Police other than in a civilian capacity; Officers of the Nigerian Foreign Service; Non-residents who derive income from Nigeria; Local employees of diplomatic missions and International organizations.

Q.14. WHEN DO I PAY MY PERSONAL INCOME TAX?
ANSWER - Every taxable person shall file their returns within 90 days from the beginning of every year. This should include the amount of tax payable.
Monthly payments of Pay As You Earn (PAYE) tax liabilities are to be made on or before the 10th day of the month following the applicable month (e.g. January tax to be remitted by 10th of February). The employer has the duty to deduct PAYE and remit to the tax authorities on a monthly basis. The tax rate for PAYE is applied on a graduated scale.

Q.15. IF I FILE AND MAKE PAYMENTS ON TIME, IS THERE ANY REWARD OR BENEFIT?
ANSWER - A taxpayer who files and makes payment within the time specified is entitled to 1% bonus of the tax payable

Q.16. WHAT ARE BENEFITS-IN-KIND?
ANSWER - BIK provided to the employee by the employer are deemed to be part of such employee’s gross emoluments and include: - where the employee uses an asset, such as an official car, owned by the employer, the employee is treated as being in receipt of a taxable emolument of 5% of the original cost of the asset; - where the asset is hired or rented for the employee by the employer, the employee is treated as being in receipt of the amount paid to the landlord or the hirer; and in the case of provision of accommodation for an employee, the annual rate or rate-able value of the accommodation is taken as part of the employee's emoluments.

Q.17. DO I HAVE TO PAY PERSONAL INCOME TAX IN EACH STATE WHERE I CARRY OUT BUSINESS ACTIVITIES?
ANSWER - No, a taxpayer is required to pay personal income tax to only one relevant tax authority where he/she is deemed to be resident except in the case of itinerant worker. Therefore a genuine tax clearance certificate issued by one tax authority (SBIR or FIRS) to a tax payer is tenable anywhere in Nigeria.

Q.18. WHO IS AN ITINERANT WORKER, AND WHERE CAN HE PAY HIS TAX?
ANSWER - An itinerant worker is an individual who works in more than one state for a minimum of 20days in at least 3 months of every assessment year; he can pay his tax to the tax authority where in any year of assessment he works for a minimum of 20 days in at least 3 months.

Q.19. WHAT HAPPENED TO THE PRINCIPAL ACT ON PERSONAL INCOME AND WHY THE RECENT AMENDMENT? DO THE RESEARCH AND INSERT
The principal Act has not been reviewed since the early 1990s. This has rendered some provisions of the Act obsolete with economic realities of today. Some of the reasons for amending the Act are as follows: to reduce the tax burden and make more money available in the hands of low and middle income earners; to remove old and outdated provisions; to make it user friendly; to bring about equity; to make the administration of the Act simpler to the taxpayer and the tax authority; to encourage voluntary compliance on the part of the taxpaying public; to widen the tax base and to grow revenue for sustainable development.

20. IS IT TRUE THAT THE TAX RATE HAS INCREASED FROM 3% TO 10% AS A RESULT OF THE AMENDMENT?
No. The amendment did not increase the tax rate as being speculated. Rather it has reduced the tax burdens on low and middle income earners


21. WHAT ARE THE PENALTIES FOR NON-COMPLIANCE

Failure by the employer to deduct tax from the employee attracts penalty of 10% and Interest at commercial rate (currently 21%) along with the principal amount payable.
Rendering of incorrect/false returns attracts, on conviction, a fine, and double the amount of tax undercharged.


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Nice but still contains legal jargons. The reason Nigerians don't pay tax is because they don't understand it. It is the same reason people hate the fuel unsubsidization, they just don't understand it.

I hate having to pay taxes, Lagos State is particularly interested in IGR mobilization, Taxation is something business ppl can't take for granted nowadays,nicE once poster I wld contact u to clarify some tax issues confronting me.

cashcpt: I hate having to pay taxes, Lagos State is particularly interested in IGR mobilization, Taxation is something business ppl can't take for granted nowadays,nicE once poster I wld contact u to clarify some tax issues confronting me.

Please call 07081903503

VAT 10%??