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Tax Professionals Forum - Career (2) - Nairaland

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Re: Tax Professionals Forum by omogidi234(m): 4:29pm On Mar 07, 2013
Nice thread. Thanks to all.
Re: Tax Professionals Forum by Fixed: 5:56pm On Mar 07, 2013
Hi Jarus, A friend has an issue at hand as we speak. Your urgent advice will be appreciated.

My friend is into frozen foods business of which year 2012 turnover is about Eight Million naira. Though the business is registered as an enterprise (not a company), he uses his personal account for business transactions as he is yet to open an accountfor the business. Actually, the business name registration was done not too long ago.

Three weeks ago, he received a letter from FIRS to pay the sum of N75 Million being the accumulated tax covering a period that the business had not even been thought of. Mind you the letter was addressed to the actual business name which had just been registered. Now the man in charge of the tax office that sent the letter had persistently called my friend to come and 'settle the matter' with the sum of N60,000 like others did and there was no receipt issued whatsoever for the payment.

My Questions:
1. How is tax calculated for businesses that are registered as an enterprise? Please bear in mind that the books of account are largely informal where they exist at all. They had actually requested in the letter that statements of accounts and other records be brought for correct calculation of tax arrears
2. Are sales of fish and other frozen food items taxable? Don't they come nder basic food items or Agric items which are exempted according to your earlier post?

3. Is it wise to report this station manager to his superior for fraudulent conversion of remittances in the name of 'settlement'?
4. Generally, how doyou think the issue should be approached?

My friend had just received another letter stating that his business will be shutdown and the process of winding down would commence if a response is not received in 7 days!

Thanks bro.

1 Like

Re: Tax Professionals Forum by Jarus(m): 7:17pm On Mar 07, 2013
@ Fixed

We want better Nigeria, so the settlement option, first and foremost, should be discarded.

He may end up paying more than 60,000 through official channel, but it is better to be more honourable.


There are some things that are not clear here.

What type or types of tax is being assessed according to the letter? Is it income tax or VAT?

If it is income tax, is the business located in FCT? Otherwise, FIRS has no business taxing an enterprise's income. Their jurisdiction is only incorporated entities. State government of the site of the business is responsible for the collection of income tax of individuals, partnerships and enterprises.

If it is VAT, then it is FIRS' jurisdiction.

In any case, N70m is absolutely ridiculous for an entity that earns N8m as turnover. But since your friend's books are not assessible to them, they must have used deemed (guessed) turnover.

With a turnover of N8m, worst case scenario is a VAT of 5% on turnover, which comes to N400,000.

There are many issues associated with it, but obviously, someone just wanted to pull a fast one on you.

Don't report to higher authorities yet, call the guy on phone and tell him that you have handed it over to your lawyer to look into the issue. He will be scared.

Although it is highly unlikely that they come to shut down your business (in any case, no distrain can be carried out without court order), just to cover yourself you can also write to FIRS, attentioning Head of VAT (if it is VAT), seeking for more time to gather your records together and telling them the assessment covered period that pre-dated your business.

But obviously, from the situation, one hungry FIRS officer is just trying to milk you, even though you also have taxes to pay (which may even be higher than the tip he is asking for).

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Re: Tax Professionals Forum by Eazeee(m): 8:00pm On Mar 07, 2013
Death & Tax are inevitable. Stop paying bribe because they still must come 2 pas

2 Likes 1 Share

Re: Tax Professionals Forum by Nobody: 2:32am On Mar 08, 2013
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Re: Tax Professionals Forum by Nobody: 2:54am On Mar 08, 2013
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Re: Tax Professionals Forum by Malubi(m): 6:00am On Mar 08, 2013
crownboss: @Jarus and Aqva

Please I presently work for a small consulting firm and I have been with them for approx. 3 years now but the problem is although PAYE tax is deducted from my salary every month I have never received a tax clearance from the company within these years. When i querried the Accountant he said the reason why they don't apply for individual staff tax clearnace is because what is being deducted from our salary as PAYE is very little compared to the actual amount. Please i would like your assistance in knowing my actual PAYE from the detail below because i want to ask the company to start deducting the actual PAYE and get me my tax clearnce.

Basic salary: 36,000.00
Housing allowance: 30,000.00
Medical allowance: 24,000.00
Dressing allowance: 15,000.00
Training allowance: 15,000.00
Total 120,000



PAYE is charged only on your basic salary using a certain pecentage i.e. In government mostly is 2% of the basic, I dont know of private organisations. Thanks
Re: Tax Professionals Forum by Malubi(m): 6:01am On Mar 08, 2013
crownboss: @Jarus and Aqva

Please I presently work for a small consulting firm and I have been with them for approx. 3 years now but the problem is although PAYE tax is deducted from my salary every month I have never received a tax clearance from the company within these years. When i querried the Accountant he said the reason why they don't apply for individual staff tax clearnace is because what is being deducted from our salary as PAYE is very little compared to the actual amount. Please i would like your assistance in knowing my actual PAYE from the detail below because i want to ask the company to start deducting the actual PAYE and get me my tax clearnce.

Basic salary: 36,000.00
Housing allowance: 30,000.00
Medical allowance: 24,000.00
Dressing allowance: 15,000.00
Training allowance: 15,000.00
Total 120,000



Re: Tax Professionals Forum by Malubi(m): 6:31am On Mar 08, 2013
Fixed: Hi Jarus, A friend has an issue at hand as we speak. Your urgent advice will be appreciated.

My friend is into frozen foods business of which year 2012 turnover is about Eight Million naira. Though the business is registered as an enterprise (not a company), he uses his personal account for business transactions as he is yet to open an accountfor the business. Actually, the business name registration was done not too long ago.

Three weeks ago, he received a letter from FIRS to pay the sum of N75 Million being the accumulated tax covering a period that the business had not even been thought of. Mind you the letter was addressed to the actual business name which had just been registered. Now the man in charge of the tax office that sent the letter had persistently called my friend to come and 'settle the matter' with the sum of N60,000 like others did and there was no receipt issued whatsoever for the payment.

My Questions:
1. How is tax calculated for businesses that are registered as an enterprise? Please bear in mind that the books of account are largely informal where they exist at all. They had actually requested in the letter that statements of accounts and other records be brought for correct calculation of tax arrears
2. Are sales of fish and other frozen food items taxable? Don't they come nder basic food items or Agric items which are exempted according to your earlier post?

3. Is it wise to report this station manager to his superior for fraudulent conversion of remittances in the name of 'settlement'?
4. Generally, how doyou think the issue should be approached?

My friend had just received another letter stating that his business will be shutdown and the process of winding down would commence if a response is not received in 7 days!

Thanks bro.

MY OPINION :: 1. Write the firs to give you time to arrange your neccesary books and records to enable you settle them better. 2. You need to employ an Accountant who will arrange everything for you. Pls inform me if you need the services of Accountant, otherwise they want to bring problem for you and even stop your company from Operation.
Re: Tax Professionals Forum by teexzle: 7:44am On Mar 08, 2013
U missed out National housing fund relief
Jarus:
Your actual PAYE, based on new Personal Income Tax Act (PITA) which took effect June 2012, is calculated thus:

GROSS ANNUAL PAY= 120,000*12 = 1,440,000
Less Reliefs & Allowances
- Pension 7.5% of Annual Basic, Housing & Transport = 792,000*7.5% = 59,400
- Consolidated Relief Allowance = 200,000+ 20%*1,440,000 = 488,000
NB: Monetised medical allowance is not accepted as a relief

TAXABLE PAY = Gross pay - Reliefs = 1,440,000 - 59,400 - 488,000 = 892,600

TAX

First 300,000 @ 7% = 21,000
Next 300,000 @ 11% = 33,000
Remainder 292,600 @ 15% = 43,890

TOTAL ANNUAL TAX = 97,890
Monthly Tax = 8,157.50

NOTE: I converted to annual, did the calculation in annualized figures, and reconverted to monthly, because I don't have time to be dividing by 12 at every stage. The relief and tax rates are stated in annual terms. It will result in same thing, except for months you earn extra income like christmas bonus, 13th month etc.

Meanwhile, your company is only postposing evil day. It can't escape the tax. When the authorities come and carry out audit, they will not only recover at actual rate, but also impose penalty and interest, which, together, can be up to 31%. For a small company, this can hit his P&L seriously in the year of audit, except he has been making provision.
Re: Tax Professionals Forum by Jarus(m): 8:50am On Mar 08, 2013
Malubi: PAYE is charged only on your basic salary using a certain pecentage i.e. In government mostly is 2% of the basic, I dont know of private organisations. Thanks
Bros, na wa o.
Re: Tax Professionals Forum by Nobody: 9:20am On Mar 08, 2013
@Jarus don't you think the guy should first write a letter to the board in charge of hearing tax issues to appeal against his assessment. I think there is a provision in the FIRS Act that deals with assessment appeals where the tax payer feels his assessment is incorrect or exorbitant.
Re: Tax Professionals Forum by Jarus(m): 10:55am On Mar 08, 2013
poshdiva: @Jarus don't you think the guy should first write a letter to the board in charge of hearing tax issues to appeal against his assessment. I think there is a provision in the FIRS Act that deals with assessment appeals where the tax payer feels his assessment is incorrect or exorbitant.
Yeah, but that's too far/early at this stage in my opinion. You appeal after you reach a deadlock. He hasn't even had any meeting the officers.
Re: Tax Professionals Forum by taxation: 2:37pm On Mar 08, 2013
Aqva: @ fixed
When a company is registered and operates business but refuses to register, the taxman will use what is called best of judgement, BOJ to estimate tax payable based on turnover and estimate commencement yr. As an enterprise what was calculated was VAT due.
For the FIRS guys to have said tax due was abt 75mil, they probably calculated tax due using a compounded formula, therefore its not just 5k as penalty for failing to file returns but you pay higher than 5k for every mnth the failure to file VAT returns continues. Therefore, 5k for 1st mnth, 10k for 2nd mnth, 15k for 3rd mnth etc. Using this harsh formula is at the discretion of the taxman, otherwise penalty is 5k per mnth for failing to file returns. Therefore the assessment does not just comprise of VAT due based on turnover but also comprises of accumulated interest and penalty over the period returns wasn't made that's why the figure is so high.

Selling fish is taxable since u are offering a service as d fish is processed and marketed. It's different from being a fish farmer. However an enterprise doesn't pay CIT but pays VAT.
My advice is for every business owner to register with the tax agency after registering d business , file ur tax returns as nil every mnth even if u have not started making any sales but have commenced business. It will save u d wahala of greedy and merciless taxmen.

you are right. They might have used the compounded formula.
Re: Tax Professionals Forum by demmix(m): 7:11pm On Mar 08, 2013
Jarus:
Yeah, but that's too far/early at this stage in my opinion. You appeal after you reach a deadlock. He hasn't even had any meeting the officers.

He should write to them immediately contesting the assessment as any assessment notice is deemed to be final and conclusive if it is not contested within 30 days of the receipt of such notice. After then, his appeal is baseless.

If he has just registered his coy, he needs to prove it with his certificate of incorporation or any evidence that can show that he just started operations such as rent agreement. Moreover, he needs to clarify if they're asking him for his VAT returns as the letter would clearly spell it out.
Re: Tax Professionals Forum by Jarus(m): 7:36pm On Mar 08, 2013
demmix:

He should write to them immediately contesting the assessment as any assessment notice is deemed to be final and conclusive if it is not contested within 30 days of the receipt of such notice. After then, his appeal is baseless.
That's what I told him. He should write objection letter to FIRS. The appeal poshdiva mentioned was filing an appeal before the TAT.
Re: Tax Professionals Forum by folu500(m): 12:57pm On Mar 09, 2013
Pls house can anyone enlighten me on the process of filling and recovering losses incured in previous years. Am talking of a financial advisory firm.
Re: Tax Professionals Forum by labiola: 11:18pm On Mar 09, 2013
@ fixed,
The letter from FIRS might not really from their office, for the tax guy to be calling your friend there is more to it. My opinion is this, write a letter to then and contest that figure, pls do that through a tax expert. Pls don't give anyone bribe pls, we need to start discouraging that. Also, tell your friend to prepare a management account that will show the true position of his business, moreover fish is part of food and its excluded from VAT.
NB: we need to be careful not to give wrong information on this forum, if you don't no something pls keep mute let the people that have the knowledge speak. How could someone say you can only pay paye on your basic salary, I disagree with the person. You pay paye on all income that comes to you even income from other business apart from your salary.

3 Likes

Re: Tax Professionals Forum by kaz4sure: 8:25am On Mar 10, 2013
Fixed: Hi Jarus, A friend has an issue at hand as we speak. Your urgent advice will be appreciated.

My friend is into frozen foods business of which year 2012 turnover is about Eight Million naira. Though the business is registered as an enterprise (not a company), he uses his personal account for business transactions as he is yet to open an accountfor the business. Actually, the business name registration was done not too long ago.

Three weeks ago, he received a letter from FIRS to pay the sum of N75 Million being the accumulated tax covering a period that the business had not even been thought of. Mind you the letter was addressed to the actual business name which had just been registered. Now the man in charge of the tax office that sent the letter had persistently called my friend to come and 'settle the matter' with the sum of N60,000 like others did and there was no receipt issued whatsoever for the payment.

My Questions:
1. How is tax calculated for businesses that are registered as an enterprise? Please bear in mind that the books of account are largely informal where they exist at all. They had actually requested in the letter that statements of accounts and other records be brought for correct calculation of tax arrears
2. Are sales of fish and other frozen food items taxable? Don't they come nder basic food items or Agric items which are exempted according to your earlier post?

3. Is it wise to report this station manager to his superior for fraudulent conversion of remittances in the name of 'settlement'?
4. Generally, how doyou think the issue should be approached?

My friend had just received another letter stating that his business will be shutdown and the process of winding down would commence if a response is not received in 7 days!

Thanks bro.




I'm 90percent sure that the letter is not from FIRS, it is from dos fruadulent people in FIRS that want to milk the coy, what is the correlation between 75m and 600k, men!! Let's wake up cos dis is a clear case of fraud and forgery of letter... please kindly forward a scanned copy of the letter and phone contact of the staff involved to kaz4sure@yahoo.com for further action, we need to clean up this country

Let me now address the issue as a tax consultant, FIRS dosent ve any write to impose CIT(coy income tax) on enterprise or biz name, they are classfiy as unincorporated entites, CIT is applicable to PLC and LTD, but VAT is applicable to all.....the fish business in this case is no more a basic food item because it has been further processed and value has been added to it, my advice for the coy is to prove the actual turnover for the year and submit the same to fIRS who will charge VAT @5percent on the turnover and the same coy is also encourage to remit PAYE and other state levy to the state internal revenue service..
Re: Tax Professionals Forum by teexzle: 9:00pm On Mar 11, 2013
Hello every1,
@jarus please I need a lil help here, I undastand one has to file a statement of affairs for a newly registered company, pls can u help with how one looks like and other procedures to gettn it done, the coy has not statd biz bt it will attain 18mths of incorporation by march 14..so ths is very urgent pls
Re: Tax Professionals Forum by Jarus(m): 9:20pm On Mar 11, 2013
teexzle: Hello every1,
@jarus please I need a lil help here, I undastand one has to file a statement of affairs for a newly registered company, pls can u help with how one looks like and other procedures to gettn it done, the coy has not statd biz bt it will attain 18mths of incorporation by march 14..so ths is very urgent pls

Only a professional accountant can prepare one for you. But to cover your track before deadline, write a letter for FIRS, that you are currently preparing your statements of affairs, that you will forward to them when ready.
Re: Tax Professionals Forum by folu500(m): 7:12pm On Mar 12, 2013
folu500: Pls house can anyone enlighten me on the process of filling and recovering losses incured in previous years. Am talking of a financial advisory firm.

no one has given any opinion/answer on d above question. Am still waiting
Re: Tax Professionals Forum by nitrogen(m): 8:04pm On Mar 12, 2013
folu500: Pls house can anyone enlighten me on the process of filling and recovering losses incured in previous years. Am talking of a financial advisory firm.

Dear Folu500,

Your question is not that clear, is it that you want to recover or relief your previous years losses so your tax liability is reduced? If it is the latter, then it is set off against your adjusted profit, (before deducting capital allowance- which is limited to two-third of the assessable profit),meanwhile, your loss can only be carried forward for four years.

NB: Losses brought forward can only be set-off against income from the same source from which the loss was incurred originally.

I hope this settles it, if not, then you need to be more elaborate.

Thanks.
Re: Tax Professionals Forum by teexzle: 8:38pm On Mar 12, 2013
Ok thanks,can u do this for me, I undastand preparn a statement of affairs doesn't take time.
Jarus:

Only a professional accountant can prepare one for you. But to cover your track before deadline, write a letter for FIRS, that you are currently preparing your statements of affairs, that you will forward to them when ready.
Re: Tax Professionals Forum by Jarus(m): 8:48pm On Mar 12, 2013
teexzle: Ok thanks,can u do this for me, I undastand preparn a statement of affairs doesn't take time.
Hit me an sms
Re: Tax Professionals Forum by folu500(m): 10:14pm On Mar 12, 2013
nitrogen:

Dear Folu500,

Your question is not that clear, is it that you want to recover or relief your previous years losses so your tax liability is reduced? If it is the latter, then it is set off against your adjusted profit, (before deducting capital allowance- which is limited to two-third of the assessable profit),meanwhile, your loss can only be carried forward for four years.

NB: Losses brought forward can only be set-off against income from the same source from which the loss was incurred originally.

I hope this settles it, if not, then you need to be more elaborate.

Thanks.

its loss relief. Thanks for your response i very much appreciate it.
Re: Tax Professionals Forum by labiola: 12:57pm On Mar 13, 2013
@Teexzle, I can help you to prepare one, you can send me a mail on labiola@yahoo.com. It will cost you token.
Re: Tax Professionals Forum by Melahou(m): 1:35pm On Mar 20, 2013
Jarus: I work as Tax Accountant in a company in Lagos.


Let's share ideas and knowledge and discuss issues taxation here - from students to professionals.

Other tax professionals are also invited to give people advices and answer questions.
please whats the simple format or a template for calculating VAT and WITHHOLDING TAX
Re: Tax Professionals Forum by teexzle: 1:22pm On Mar 23, 2013
Hi every1, I decided to prepare an account that suites d coy in ?, bt I will b needing an auditors stamp and report so as to submit to firs..send me a pm if u can assist pls
Re: Tax Professionals Forum by thirty(m): 3:23pm On Mar 24, 2013
Aqva: Tax is a complex profession, it's difficult to knw it all with all the CIT, VAT, WHT laws which are complex. For the records, accounting is not taxation, I disagree that having ACA means u have knwn Abt taxation, an accountant knws very little indeed.
To become a taxman u need yrs of on the job practice of taxation. Tax accounting is just one area. Other.complex areas include returns processing, payment processing, debt and arrears recovery, enforcement etc. All these areas have their laws too that needs mastering.

Tax profession is not complex. Its as simple as the way students pass it in professional exam. If you can follow the procedure, policies and principles (rules) you will scale thruogh. But the tax authorities are making things difficult. That is why companies go for tax consultant like We. Not that we know all but we bargain for the best of judgement with the authority, like the lawyers.
Re: Tax Professionals Forum by Jarus(m): 6:37pm On Mar 24, 2013
Melahou:
please whats the simple format or a template for calculating VAT and WITHHOLDING TAX

It is about knowing the principle, not the format.

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