as a way of supporting my dear country and diverse businesses therein as well as providing correct tax advise rather than a lot of errors bandied on nairaland, I have decided to create this thread and profile to lend a voice on various tax issues affecting our dear country.

now the one which I have seen discussed on other social media is taxation on our BBN winner's prize money. see below my view on the issue.

Taxation of Efe's BBN winnings
In Nigeria and South Africa, taxation is primarily based on residency therefore bringing a taxable person’s worldwide income to tax in the relevant jurisdiction. This also means the prize money earned by Efe in South Africa should suffer tax in Nigeria. In addition, Sections 5 and 7 of the South African Income Tax Act of 1962 provides that income received by or accrued to or in favour of a non-resident (subject to definition of a resident as prescribed in the South African Act) in South Africa- regardless of whether such income has not been paid- shall be taxable in South Africa.

This clearly adduces to the potential for the income earned “based on logistics” to be subject to tax in Nigeria and South Africa.

However, looking at Schedule 3 of the Personal Income Tax Act 2011, as Amended 2, one of the exemptions granted is income earned from abroad by a sportsman, provided such income is brought in foreign currency and also paid into a domiciliary account in an authorized bank in Nigeria.

While the argument of if reality shows qualify as a sport and the casts as sportsmen is open for debate, the understanding provided from BBN is that the prize money is in Naira (25 million naira to be specific), which therefore casts doubts to its tax exemption status in Nigeria.

Fortunately, Nigeria has an existing double tax agreement (DTA) with South Africa which should alleviate the potential exposure of double tax on the entire sum. Article 14 (Independent Personal Services) of the DTA provides that “income derived by an individual who is a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State unless he has a fixed base regularly available to him in the other Contracting State for the purposes of performing his activities”. If he has such as fixed base, income may be taxed in the other State…” This therefore means that South Africa may exercise taxing rights on our winner’s prize money.

Regardless, the good news from the DTA is that any tax suffered by Efe in South Africa shall be allowed as a credit against his Nigerian tax obligations. That’s hoping he is even registered for tax in Nigeria.

More to come.

This Is a very wrong advice. Read the DTA btw South Africa and Nigeria well. You argument is wrong. When there is a DTA, it supersedes any other tax act.

Decent write up though

Great to have people reading up and commenting so soon.

regarding your comment you'll observe I made references to Article 14 of the DTA between Nigeria and South Africa which truly supercedes the laws of both countries.
you might want to look up the DTA again incase. I have a copy which I will be happy to send to you. cheers

tempex88:
This Is a very wrong advice. Read the DTA btw South Africa and Nigeria well. You argument is wrong. When there is a DTA, it supersedes any other tax act.

Decent write up though

Tax implication of registering a business

Nigerians are known to be hardworking and entrepreneurial, this is noticeable as many people (even employees) have hopes of having their own business and making the Nigerian dream, if there is anything like that.

But unfortunately, many do not pay attention to tax obligations that are required of anyone who sets up a company where such enterprise is yet to commence its trade or business.

As many should rightly be familiar with, once a business enterprise is registered with the Corporate Affairs Commission (CAC), such business should also be registered for tax at the nearest tax office. Where it is a limited liability company (LLC), such would be registered with the Federal Inland Revenue Service (FIRS). However, where it is a sole-proprietorship or a partnership business, such would be registered under the individual’s name and accounted for as part of employee/employer’s taxes with the relevant State Board of Internal Revenue Service.

Where a LLC has been incorporated but yet to commence business, it still has the following tax obligations:

• Submission of completed and signed income tax returns annually with the FIRS. To achieve this, the LLC would be required to prepare a “Statement of Affairs” document.
• Submission of completed and signed Value Added Tax returns monthly with the FIRS

Where the above obligations are not satisfied, the following penalties would accrue:

1. For lack of submission of income tax returns, NGN25,000 for the first month and NGN20,000 for subsequent months till when the filing of the returns is done
2. For not submitting VAT returns, a penalty of NGN5,000 for every month in which the failure continues

So it is wise to know that regardless of not commencing trade or business, once a enterprise is registered, tax obligations follow it.

Next time we would look at how FIRS determines when a company has commenced business or not and the various tax implications.

Please can you point out to me what section of the Tax law that states that where a LLC has been incorporated but yet to commence business must submit income tax returns annually with the FIRS. Thanks

phemmy26:
Please can you point out to me what section of the Tax law that states that where a LLC has been incorporated but yet to commence business must submit income tax returns annually with the FIRS. Thanks

U want free tax advice

lols. that's why i created this thread. My noble contribution to our country after practicing local and international taxation for several years in a Big 4 firm.

tempex88:


U want free tax advice

Great question you asked there.

Section 55 of the Companies Income Tax Act, as Amended, states that “Every Company including a company granted exemption from incorporation shall whether or not the company is liable to pay tax under this Act for a year of assessment, with or without notice from the service (FIRS), file a self assessment returns with the service in the prescribed form at least once a year…”

Unfortunately, there is no section in the tax laws that exempts companies which are yet to commence business from filing tax returns.

phemmy26:
Please can you point out to me what section of the Tax law that states that where a LLC has been incorporated but yet to commence business must submit income tax returns annually with the FIRS. Thanks

Another interesting section of the Companies Income Tax Act also (Section 51) states that "where a company is being wound up, the liquidator of the company shall not distribute any of the assets of the company to the shareholders thereof unless he has made provision for the payment in full of any tax which may be found payable by the company..."

This applies also to those who have opened up a company but as they are yet to commence business, have left tax issues unattended to for many years thereby accruing significant amount of tax liabilities. So once you decide to wind up the company for any reason, the tax man shows up!

Pls can u be of help to me to sort out tax liability issues of LLC since 2012. Its has Tin no but no vat reg and no tcc. I want to regularize it.

No problem. Send me an email on realnigeriatax@gmail.com

fredrickz03:
Pls can u be of help to me to sort out tax liability issues of LLC since 2012. Its has Tin no but no vat reg and no tcc. I want to regularize it.

NigeriaTax:
Great question you asked there.

Section 55 of the Companies Income Tax Act, as Amended, states that “Every Company including a company granted exemption from incorporation shall whether or not the company is liable to pay tax under this Act for a year of assessment, with or without notice from the service (FIRS), file a self assessment returns with the service in the prescribed form at least once a year…”

Unfortunately, there is no section in the tax laws that exempts companies which are yet to commence business from filing tax returns.

When you look at Section 55(3)a to c of the Companies Income Tax Act, as Amended, it expressly shows the stages or position when the companies are expected to file its returns. Let me now break it down for you by its part

Section 55(3)a is straight forward as it concerns those already in business hence no issues

Section 55(3)b is for newly incorporated company and it also defined the type of companies that are required to file returns as defined in section 29(3). Now if you go to that section, it laid emphasis on and i quote " assessable profits of any company from any "trade or business". Which simply means that company has commenced business operations.

Section 55(3)c still boils down to filing self assessment at the end of its accounting period.

The summary of it all is that a company who has not commenced business is not expected to file tax returns and the only time he is expected to file a tax return is when he wants to apply for Tax Clearance certificate and thats when he files a statement of affairs and also pays a POL levy of 20k

I’m very happy that you have been following the conversation on this thread. I’m also glad that its’ essence has started to bear fruits, which is to both simplify Nigerian tax matters and also address concerns.

Now back to your comments, I appreciate that you agreed on the relevance of Section 55 of CITA, and as you would also agree, this section includes NO provision for exemption to file returns for companies incorporated but yet to commence business. However, let me provide some clarity regarding Section 29(3) which you alluded to.

The full section 29(3) states that “The assessable profits of any company from any trade or business for the year of assessment in which it commenced to carry on such trade or business (or in case of a company other than a Nigerian company, for the year of assessment in which he commenced to carry on such trade or business in Nigeria) and for the two following years of assessment (which years are in this subsection respectively referred to as “the first year”, “the second year” and “the third year”) shall be ascertained in accordance with the following provisions…”

This section does not talk about who is supposed to or when you should file your corporate tax returns but describes the “Basis for computing assessable profits” for a business which just newly COMMENCED trade or business. This is generally referred to as the COMMENCEMENT RULE in the tax parlance and it relates to how you calculate the assessable profits of a new trade or business (not of incorporation) for its’ first 3 years of assessments.

Therefore, you would observe that this section does not ascribe any exemption to a newly formed company from its obligations to file tax returns.

Regardless, I would be much pleased to have you correct us on this thread by stating specific sections of any of the tax laws which prohibits or exempts newly formed companies which are yet to commence business from filing tax returns.

Thanks again.

phemmy26:


When you look at Section 55(3)a to c of the Companies Income Tax Act, as Amended, it expressly shows the stages or position when the companies are expected to file its returns. Let me now break it down for you by its part

Section 55(3)a is straight forward as it concerns those already in business hence no issues

Section 55(3)b is for newly incorporated company and it also defined the type of companies that are required to file returns as defined in section 29(3). Now if you go to that section, it laid emphasis on and i quote " assessable profits of any company from any "trade or business". Which simply means that company has commenced business operations.

Section 55(3)c still boils down to filing self assessment at the end of its accounting period.

The summary of it all is that a company who has not commenced business is not expected to file tax returns and the only time he is expected to file a tax return is when he wants to apply for Tax Clearance certificate and thats when he files a statement of affairs and also pays a POL levy of 20k

NigeriaTax:
No problem. Send me an email on realnigeriatax@gmail.com

I have sent you email. Thanks

NigeriaTax:
I’m very happy that you have been following the conversation on this thread. I’m also glad that its’ essence has started to bear fruits, which is to both simplify Nigerian tax matters and also address concerns.

Now back to your comments, I appreciate that you agreed on the relevance of Section 55 of CITA, and as you would also agree, this section includes NO provision for exemption to file returns for companies incorporated but yet to commence business. However, let me provide some clarity regarding Section 29(3) which you alluded to.

The full section 29(3) states that “The assessable profits of any company from any trade or business for the year of assessment in which it commenced to carry on such trade or business (or in case of a company other than a Nigerian company, for the year of assessment in which he commenced to carry on such trade or business in Nigeria) and for the two following years of assessment (which years are in this subsection respectively referred to as “the first year”, “the second year” and “the third year”) shall be ascertained in accordance with the following provisions…”

This section does not talk about who is supposed to or when you should file your corporate tax returns but describes the “Basis for computing assessable profits” for a business which just newly COMMENCED trade or business. This is generally referred to as the COMMENCEMENT RULE in the tax parlance and it relates to how you calculate the assessable profits of a new trade or business (not of incorporation) for its’ first 3 years of assessments.

Therefore, you would observe that this section does not ascribe any exemption to a newly formed company from its obligations to file tax returns.

Regardless, I would be much pleased to have you correct us on this thread by stating specific sections of any of the tax laws which prohibits or exempts newly formed companies which are yet to commence business from filing tax returns.

Thanks again.

your write up is quite informative but i still maintain my ground. Let me butress it further

Every company is required by law to file a self assessment return every year and a return consist of the audited accounts, tax computation and capital allowance computation, self assessment forms etc. Now this is the case of a company who has commenced business operations.

I referred you to section 29 because Section 55 clearly defined and shows at what stages or position when the companies are expected to file returns and made reference to section 29 to buttress the points and in doing that,there explainations there points to company already in business because the terms like assessable profits, year of assessment, assessable profits of any company from any "trade or business it all relates to company already in business

The only time in the Tax law that relates to the preparation of statement of affairs which is relevant is where a taxpayer has the need of a Tax Clearance certificate most especially when it is more than 6month after incorporation and not yet commenced business.

Again let me break it down further with the section you quoted earlier on below

Section 55 of the Companies Income Tax Act, as Amended, states that “Every Company including a company granted exemption from incorporation shall whether or not the company is liable to pay tax under this Act for a year of assessment, with or without notice from the service (FIRS), file a self assessment returns with the service in the prescribed form at least once a year…


Looking at the above, look at the term file a "self assessment". Now self assessment comes from filing of returns which i also explained earlier on as to what makes up a return. It all just refers to company already in business operations. Can i ask you another question. Is statement of affairs considered as a Return?


cc Jarus Your input is needed. Thanks

Hello ,
I have been working for 8 years now with different companies and tax had always been deducted but I don't have a Tax Identification Number. Am told if I go through the office it will take like six months, but I can get it personally by paying 5k for 3 years and it would be ready in a week.
Please kindly advise as I need my TIN urgently.

phemmy26:


your write up is quite informative but i still maintain my ground. Let me butress it further

Every company is required by law to file a self assessment return every year and a return consist of the audited accounts, tax computation and capital allowance computation, self assessment forms etc. Now this is the case of a company who has commenced business operations.

I referred you to section 29 because Section 55 clearly defined and shows at what stages or position when the companies are expected to file returns and made reference to section 29 to buttress the points and in doing that,there explainations there points to company already in business because the terms like assessable profits, year of assessment, assessable profits of any company from any "trade or business it all relates to company already in business

The only time in the Tax law that relates to the preparation of statement of affairs which is relevant is where a taxpayer has the need of a Tax Clearance certificate most especially when it is more than 6month after incorporation and not yet commenced business.

Again let me break it down further with the section you quoted earlier on below

Section 55 of the Companies Income Tax Act, as Amended, states that “Every Company including a company granted exemption from incorporation shall whether or not the company is liable to pay tax under this Act for a year of assessment, with or without notice from the service (FIRS), file a self assessment returns with the service in the prescribed form at least once a year…


Looking at the above, look at the term file a "self assessment". Now self assessment comes from filing of returns which i also explained earlier on as to what makes up a return. It all just refers to company already in business operations. Can i ask you another question. Is statement of affairs considered as a Return?


cc Jarus Your input is needed. Thanks

Hmmmmn.....Supporting the above though.

Unfortunately, there is no section in the tax laws that exempts companies which are yet to commence business from filing tax returns.

There is also no section in the law that explicitly states that companies yet to commence business should also file tax returns! Sections 29 and 55 of the CIT can be argued both ways with depending on what arm of the law you are on, since the law is not exactly clear on this. Are you looking at the law from a consultant perspective or from the government perspective.

What makes up a self assessment returns infact? Statement of affairs of a registered company that has not even commenced business? What is the basis for the profits that is assessed? What am I even filing as a company registered with the CAC and not yet with FIRS. It is until I register with the FIRS that I fall under their purview, even if that takes me donkey years to achieve. ( I will have to pay penalties for late registration anyway).

Sometimes we need to leave tax laws with its ambiguity and focus on what is obtainable in practice. How has the Revenue service in practice been treating newly registered companies. Have you ever come across a newly registered company being assessed for tax on assessable profit?

The law can be an ass sometimes though. LOL!

deturla:


Hmmmmn.....Supporting the above though.

Unfortunately, there is no section in the tax laws that exempts companies which are yet to commence business from filing tax returns.

There is also no section in the law that explicitly states that companies yet to commence business should also file tax returns! Sections 29 and 55 of the CIT can be argued both ways with depending on what arm of the law you are on, since the law is not exactly clear on this. Are you looking at the law from a consultant perspective or from the government perspective.

What makes up a self assessment returns infact? Statement of affairs of a registered company that has not even commenced business? What is the basis for the profits that is assessed? What am I even filing as a company registered with the CAC and not yet with FIRS. It is until I register with the FIRS that I fall under their purview, even if that takes me donkey years to achieve. ( I will have to pay penalties for late registration anyway).

Sometimes we need to leave tax laws with its ambiguity and focus on what is obtainable in practice. How has the Revenue service in practice been treating newly registered companies. Have you ever come across a newly registered company being assessed for tax on assessable profit?

The law can be an ass sometimes though. LOL!

@ the quoted

I know that for newly registered company who is yet to commence business operations, you are required to submit a statment of affairs and also pay what is called a POL levy

phemmy26:


@ the quoted

I know that for newly registered company who is yet to commence business operations, you are required to submit a statment of affairs and also pay what is called a POL levy

Pre-operational levy right?