Hello,
I will like to ask some questions about the payment of tax for a sole proprietorship business.

1) Do sole proprietors (One man business) pay tax?
2) If business is not carried out for a year do the sole proprietor pay tax?
3) If business is carried out how do the sole proprietor calculate the tax rate?
4) Is payment of tax same thing as VAT?
5) How do one get his or her TIN and what are the documents needed?


Thanks.

princeuk21:
Hello,
I will like to ask some questions about the payment of tax for a sole proprietorship business.

1) Do sole proprietors (One man business) pay tax?
2) If business is not carried out for a year do the sole proprietor pay tax?
3) If business is carried out how do the sole proprietor calculate the tax rate?
4) Is payment of tax same thing as VAT?
5) How do one get his or her TIN and what are the documents needed?


Thanks.

Yes to the first two. For the third question, apart from the VAT on your purchases or services as may be demanded by your clients or service providers, your company is taxed on its net income. I think 4 has been answered in the answers provided for question 3 above. For question 5, get to the Board of internal revenue of the state you are; you will be directed accordingly.

You may want to know more about VAT and company tax from google.

Etfash:


Yes to the first two. For the third question, apart from the VAT on your purchases or services as may be demanded by your clients or service providers, your company is taxed on its net income. I think 4 has been answered in the answers provided for question 3 above. For question 5, get to the Board of internal revenue of the state you are; you will be directed accordingly.

You may want to know more about VAT and company tax from google.

please what are the implications if a sole proprietor fails to carry out this task and what is the fine like?

princeuk21:
please what are the implications if a sole proprietor fails to carry out this task and what is the fine like?

The Sole proprietor would be limited; he wouldn't be able to bid for 'real' projects. Trust me, if you have not done business with the government, you are just coming up.

There are also many other things you will apply for and your Tax Clearance Certificate (TCC) for specified period would be required.

Tax evasion is also punishable by law..

Having said the above,
We can help you reduce your payable tax to the barest minimum. Just call or whatSapp us.

Etfash:


Yes to the first two. For the third question, apart from the VAT on your purchases or services as may be demanded by your clients or service providers, your company is taxed on its net income. I think 4 has been answered in the answers provided for question 3 above. For question 5, get to the Board of internal revenue of the state you are; you will be directed accordingly.

You may want to know more about VAT and company tax from google.

Why would a sole proprietor pay tax for the year which he did not operate

Tax are subject to VAT,PAYE,CIT, and noon is payable when you don't operate except arrears .

osasboy:


Why would a sole proprietor pay tax for the year which he did not operate

Tax are subject to VAT,PAYE,CIT, and noon is payable when you don't operate except arrears .

If you read the comment well enough, you would see 'income'. If there is no income, there is no 'tax' as you read it in the books. You however pay certain fixed charges to a few revenue generating agencies of the FG.

1) Have you tried to get your TCC, even for years you didn't operate your business?

2) Have you visited CAC for any advise in recent time?

The point is, those charges are taxes because they take money out of your business, to allow you remain in the good books of the government and be able to bid for projects, not into it. The only difference is they are fixed.

Cheers!

Etfash:


If you read the comment well enough, you would see 'income'. If there is no income, there is no 'tax' as you read it in the books. You however pay certain fixed charges to a few revenue generating agencies of the FG.

1) Have you tried to get your TCC, even for years you didn't operate your business?

2) Have you visited CAC for any advise in recent time?

The point is, those charges are taxes because they take money out of your business, to allow you remain in the good books of the government and be able to bid for projects, not into it. The only difference is they are fixed.
Cheers!

pls what are those fixed charges and the revenue generating Agencies?

princeuk21:
pls what are those fixed charges and the revenue generating Agencies?

FIRS/ SBIR and CAC.
CAC charges depend on when your company was registered and where. For example, mine was registered in Abuja sometimes in 2012. I was told to pay N7,500.00 per annum or so, while a colleague who registered in Kwara state said he was charged N5,000.00 per annum thereabout.

FIRS/SBIR stratify companies and charge them as such.

Send me a pm for all tax related matters

some of the earlier responses to op are simply hilarious or incomplete.

jaz:
some of the earlier responses to op are simply hilarious or incomplete.

That's the purpose of the thread, kindly shed more light on the subject matter if you can.
It'd be appreciated

jaz:
some of the earlier responses to op are simply hilarious or incomplete.

please shed more light your contribution will be appreciated

artisticallyart:
Send me a pm for all tax related matters

your contribution will be appreciated

osasboy:


Why would a sole proprietor pay tax for the year which he did not operate

Tax are subject to VAT,PAYE,CIT, and noon is payable when you don't operate except arrears .

How is tax subject to VAT,PAYE,CIT?

Etfash:


The Sole proprietor would be limited; he wouldn't be able to bid for 'real' projects. Trust me, if you have not done business with the government, you are just coming up.

There are also many other things you will apply for and your Tax Clearance Certificate (TCC) for specified period would be required.

Tax evasion is also punishable by law..

Having said the above,
We can help you reduce your payable tax to the barest minimum. Just call or whatSapp us.

Are you a tax consultant? My apologies if my comments offend you, but your explanations do not sound like that of a pro. You might end up confusing the op more.

you guys can ask me your tax questions. i've been a tax senior consultant with a Big 4 firm for about 5 years. would be happy to help the house.

VAT or Value Added Tax is a form of sales tax on consumption and it is 5% of the value of the taxable goods or service. it is computed by deducting Input VAT from Output VAT where the net is subjected to 5% consumption tax. in this regard, this form of tax is passed to the final consumer as the manufacturer or seller passes on his 5% tax to the next level of consumer by claiming Input VAT. there are also other technical aspects such as Zero rated goods/services and exempt goods or services and issues on exported services. hope VAT is not confusing will come back to the other questions soon. got to work

CHANCEMAN:



How is tax subject to VAT,PAYE,CIT?

jaz:
you guys can ask me your tax questions. i've been a tax senior consultant with a Big 4 firm for about 5 years. would be happy to help the house.

1)what are the tax for sole proprietor (one man business) in Nigeria.

2) how do a sole proprietor go about in getting those tax document.

3) how do a sole proprietor pay those tax

Expecting your reply

Thanks

jaz:
VAT or Value Added Tax is a form of sales tax on consumption and it is 5% of the value of the taxable goods or service. it is computed by deducting Input VAT from Output VAT where the net is subjected to 5% consumption tax. in this regard, this form of tax is passed to the final consumer as the manufacturer or seller passes on his 5% tax to the next level of consumer by claiming Input VAT. there are also other technical aspects such as Zero rated goods/services and exempt goods or services and issues on exported services. hope VAT is not confusing will come back to the other questions soon. got to work

good job expecting more from you.. Expect small recharge card from me as we progress

lols. almost forgot about this thread

princeuk21:
good job expecting more from you.. Expect small recharge card from me as we progress

jaz:
lols. almost forgot about this thread

welcome back. You are our teacher please let's continue

happy new year to everyone out there. hope we are all having a nice time with friends and family. this holiday gives me some time to post on nairaland and its nice.

let me broach on the subject of CIT which is the same as Company income Tax, governed by Companies income tax Act amended 2011 and administered by FIRS.

this is a form of taxation of companies and it has 2 components- Tertiary Education Tax (from Tertiary education Trust Fund Act) which is 2% of assessable profits and companies income tax which is 30% of taxable profit.

before we go on, we should know that CIT is expected to be 30% of the profit before tax reported by a company but due to the differences in tax and accounting methods of treating some expense or income items it may not be so and this gives rise to deferred tax. a topic for another day.

Now let's say you have a newly incorporated company and are wiling to compute your taxes both for payment to FIRS, for provisioning in the statement of comprehensive income to determine what your retained earnings/reserves are and for preparation of your cash flow statement, these are the steps (Caveat- this topic is not exhaustible in a single post but would try to break them down in bits over time):

- for a newly formed company you compute your income taxes based on the COMMENCEMENT RULE which is as follows

:determine the first 3 tax years FIRST TAX YEAR is from the date of COMMENCEMENT OF BUSINESS (not necessarily incorporation) till 31 December of the same year, SECOND TAX YEAR is from date of commencement of business till 12 months ended while THIRD TAX YEAR is the PRECEEDING YEAR basis period. an example is a company with year ended of 1 May 2009 to 30 April 2010.

basis period for 1st tax year is 30 April 2010 till 31 Dec. 2010 which is 2010 year of assessment
basis period for 2nd tax year is 30 April 2010 till 31 March 2011 which is 2011 year of assessment
basis period for 3rd tax year is 1 May 2010 to 30 April 2011

You would observe that there some overlapping periods during these dates. where a company reports profits over an overlapping period it pays the tax twice but where it records losses it claims the loss once. there is some tax planning around this .
there is also the option to apply for RIGHT OF ELECTION where the company thinks it is suffering too much exposure to overlapping profits and taxes.

now I will give a very brief explanation of how to compute your income taxes (please note that there is a lot of adjustment to be made when computing companies income tax and this is just a sketch).

Net profit for the year XXXXX
Add Unallowed expenses (i.e. Depreciation, penalties, unrealized exchange loss Generic provisions etc) XXXXX
Deduct non-taxable income (i.e. unrealized exchange profits, profits on sale of fixed assets etc.) (XXXXX)
Assessable profit (being the difference) XXXXX
Add Balancing charge XXXXX
Deduct Capital allowance and Balancing allowance and lossess (XXXXX)
Taxable profit (being the difference and there is a lot of tax planning that goes into these items) XXXXX

The above is done for the first 3 years based on commencement rule and the taxes are disclosed in the appropriate financial statements and paid to FIRS.

all these must be done on or before the end of 6 months from the company's year end or there are penalties and interest charges.

we'll continue again some time

to the numerous people that have either called or corresponded with me via whatsapp messages i hope tax is becoming simpler and more manageable. Don't allow tax burden unnecessarily eat into your profits. Seek professional advice always when in doubt. cheers all.

hi guys, please I need your help with VAt