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Hi Guys.
Through all my waka waka in the business section of nairaland, I have yet to see enough threads/info dedicated to tax issues faced by small businesses.
I am starting this thread because I have questions and so that other entrepreneurs can have access to relevant info, hopefully interact with tax experts and learn from other people's experience.

My first question;

I have a company incorporated for some years with the CAC without actually doing any business with it due to some hitches back then. Now I'm gearing up to "finish" what I started. It just occurred to me that the FIRS will have been expecting taxes for all these years that I haven't actually been doing business.
Can anyone tell me the process to sort this out?

Other people pls feel free to ask your own questions, importantly tax experts in the house pls, pls and please come in and lend your voice (you fit do tutorial sef on tax issues facing small businesses, we no mind. This thread is all yours.)

Cc Lalasticlala Ishilove Semid4lyfe Obinoscopy Seun

Please I have the same issue too. I registered a company years ago and have not done any business but want to start now. What would FIRS require of me.

Op..pls help move to front page

shupy:
Op..pls help move to front page

If only I had the power...

OK, so no takers!
I'll be putting in information here for others to learn as I learn from other sources.

To answer my 1st question;

When a biz is formed, you are supposed to submit a statement of affairs to the firs after the 18th month or 6 months after the 1st accounting date (whichever comes 1st) this is done even if you hav not commenced business.
So now that I have obviously failed to do this (ignorance/laziness is bad oo) I need to get a tax officer to raise a "late return penalty" for the period of non-compliance.

Right now I don't have details of the penalty cost, will let it across when I do.

Business tax rate in Nigeria is 30% of your profit. Some companies: agro allied and companies making less than 1m, rate is 20% for the 1st 5 years after formation.

Also new businesses can apply for a "right to elect" that is, the taxpayer can ask to be assessed on actual year or preceding year basis, and he chooses the lower to pay...to enjoy this, one must first apply for it.

Sole traders pay personal income tax to state revenue boards in contrast to companies which pay business tax to the FIRS.
See image attached; it shows the different rates at which different income levels are taxed. This is based on your taxable income per year, you then have to divide by 12 to knw hw much you will pay in a month.

Pls other contributors and more questions are welcome.

Thanks for sharing

This is educative. Keep it up. Some of us are into business and we really dont understand the dynamics of taxation.

Please teach us some tax avoidance methods.

mrsage:

Please teach us some tax avoidance methods.

Hahahaha

Hello Op,

Very good and informative thread. I would like to mention that it been a very long time since I practice tax so I am rusty.

First, you said you are about to become operational, I think you may be charged pre-operational levy for every accessment year your company stays dormant (it should be #50,000). This is assuming that you filed your taxes, where you failed to do this, you will be charged late return penalty. It's gets worse as the FIRS may actually charge you interest on this late return penalty (your tax professional can attempt arguing this part)

As for individuals and partisanship, you pay taxes to your state of residence. The key term here is your state of residence, comes with plenty confusion eg I live at Muye and work in Lagos, or live after Nanya and work in Abuja, so who will I pay my taxes to? Ie I derive income from one state and live in another, it becomes more interesting when your employer remit it for you in a state where you don't work.

Also, I believe military and Abuja residence pay their taxes to the FIRS.

As for tax avoidance, you have to structure your business to take full advantage of the tax law. Eg I know there are some tax incentives if you are into exporting or investing in gas and etc. Also you have to wonder why some organizations collect loans even though they have the money to fund a project (it's because most loans are tax deductible. To determine tax deductibility you have to apply the WREN principles: which says that for any expense to be tax deductible, it has to be "wholly, reasonable, exclusively and necessarily" incurred in the process of doing business (or something of that nature)

Another thing is applying for tax holiday, but you must check the rules to apply for that.

Tax is quite easy if you have the time to study, but as a business owner there is no excuse, you need to know and understand tax.

Goodluck

PS - I am neither an accountant nor lawyer. So feel free to correct me where I may have strayed. I may comment as the thread grows.
Apologies for typos

mrsage:
This is educative. Keep it up. Some of us are into business and we really dont understand the dynamics of taxation.

Please teach us some tax avoidance methods.

! The only way to bend the rules it to know them 1st

Lnxxxxx:
Hello Op,

Very good and informative thread. I would like to mention that it been a very long time since I practice tax so I am rusty.

First, you said you are about to become operational, I think you may be charged pre-operational levy for every accessment year your company stays dormant (it should be #50,000). This is assuming that you filed your taxes, where you failed to do this, you will be charged late return penalty. It's gets worse as the FIRS may actually charge you interest on this late return penalty (your tax professional can attempt arguing this part)

As for individuals and partisanship, you pay taxes to your state of residence. The key term here is your state of residence, comes with plenty confusion eg I live at Muye and work in Lagos, or live after Nanya and work in Abuja, so who will I pay my taxes to? Ie I derive income from one state and live in another, it becomes more interesting when your employer remit it for you in a state where you don't work.

Also, I believe military and Abuja residence pay their taxes to the FIRS.

As for tax avoidance, you have to structure your business to take full advantage of the tax law. Eg I know there are some tax incentives if you are into exporting or investing in gas and etc. Also you have to wonder why some organizations collect loans even though they have the money to fund a project (it's because most loans are tax deductible. To determine tax deductibility you have to apply the WREN principles: which says that for any expense to be tax deductible, it has to be "wholly, reasonable, exclusively and necessarily" incurred in the process of doing business (or something of that nature)

Another thing is applying for tax holiday, but you must check the rules to apply for that.

Tax is quite easy if you have the time to study, but as a business owner there is no excuse, you need to know and understand tax.

Goodluck

PS - I am neither an accountant nor lawyer. So feel free to correct me where I may have strayed. I may comment as the thread grows.
Apologies for typos

Thanks a lot Lynxxxxx! Your post is really very helpful.
So I will be charged pre-operational levy as well as the penalty plus/minus interest! I may as well register a new business, it would be less stressful and cost less too.
I heard Abj resident soletraders pay to FIRS for now but will switch soon to the local revenue board....
This brings me to the issue of state revenue boards, from what I hear, they appear to be aggressive in their demands n mode of operation...
Is the FIRS as aggressive? I am wondering what you think about registering as a company in order to deal with the FIRS directly. I'm assuming that the state revenue boards hv no business disturbing a company that has FIRS tax clearance...

Cc Irevac3

Hello mizGene

How did you resolve this issue?

Did FIRS penalize you or just delist your business? How many years was it dormant for?

mizGene:
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Hi Guys.
Through all my waka waka in the business section of nairaland, I have yet to see enough threads/info dedicated to tax issues faced by small businesses.
I am starting this thread because I have questions and so that other entrepreneurs can have access to relevant info, hopefully interact with tax experts and learn from other people's experience.

My first question;

I have a company incorporated for some years with the CAC without actually doing any business with it due to some hitches back then. Now I'm gearing up to "finish" what I started. It just occurred to me that the FIRS will have been expecting taxes for all these years that I haven't actually been doing business.
Can anyone tell me the process to sort this out?

Other people pls feel free to ask your own questions, importantly tax experts in the house pls, pls and please come in and lend your voice (you fit do tutorial sef on tax issues facing small businesses, we no mind. This thread is all yours.)

Hi do u still have naira , I want to exchange like 25£