For an aspiring entrepreneur in Nigeria, the fear of taxation is the beginning of wisdom. Tax is a compulsory levy you must pay once you decide to start a business. There are different taxes in Nigeria, and they are handled by different bodies. Of course, employees also pay income tax but the burden of tax is most times felt by business owners.
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Having said that, you must know that paying of tax is a civic duty. Also, the money you pay as tax, goes to many places. Apart from paying the salaries of government workers, you are also helping the economy to grow.
In a nutshell, all taxable individual or company is expected to pay tax in due time. Failure to do so attracts penalties like fine, or jail term.
Tax Administration In Nigeria
Depending on the type of tax you want to pay, you can pay to the three tiers of government:
- Federal Government through Federal Inland Revenue Service (FIRS)
- State Government through State Inland Revenue Service (for all the thirty six states of Nigeria)
- Local Government through local government councils.
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Taxes And Levies Collected By The Federal Government
- Petroleum Profits Tax (PPT)
- Companies Income Tax (CIT)
- Value Added Tax (VAT)
- Personal Income Tax (PIT): for non-residents, members of Armed Forces, Police and Officers of Nigerian Foreign Service
- Withholding Tax (WHT)
- Tertiary Education Tax (EDT)
- Capital Gains Tax (CGT)
- National Information Technology Development Levy (NITDL)
- Stamp Duties(SD)
- Pre-operation Levy(POL)
Taxes And Levies Collected By The State Government
- Personal Income Taxes from all residents of the State
- Withholding Taxes on all business/economic activities involving a second party who is not a corporate entity
- Business Premises levy from all businesses and companies operating within the state (N10, 000 registration and N5, 000 renewal annually)
- Development Levy from all individuals (N100 per head/yearly)
- Sales Tax
- Consumption Tax.
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Taxes And Levies Collected By The Local Government
- Shops and kiosks rates.
- Tenement rate.
- On and off liquor licence fees.
- Slaughter slab fees.
- Marriage, birth and death registration fees.
- Naming of street registration fee, excluding any street in the state capital.
- Right of occupancy fees on lands in rural areas, excluding those collectible by the federal and state governments.
- Motor park levies.
- Domestic animal license fees.
- Bicycle, track, canoe, wheelbarrow and cart fees
- Cattle tax payable by cattle farmers only.
- Merriment and road closure levy.
- Radio and television licence fees (other than radio and television transmitter).
- Vehicle radio licence fees
- Wrong parking charges.
- Public convenience, sewage and refuse disposal fees.
- Customary burial ground permit fees.
- Religious places establishment permit fees.
- Signboard and advertisement permit fees.
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Steps In Paying Your Taxes In Nigeria
Step One: Register With A Tax Office And Obtain Tax Identification Number (TIN)
The first line of action is to register with a nearby tax office and get your Tax Identification Number (TIN). TIN is the unique number given to an individual or company for the purpose of tax remittance.
Alternatively, you can get your TIN on FIRS online portal for free. Meanwhile, before you can have a tax identification number, you must have a source of income in Nigeria.
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As an individual, some of the required information to get your TIN is your full name, a copy of your birth certificate, valid ID card, passport photograph, email address, residential address, proof of citizenship and phone number.
As a company, you have to provide the memorandum and articles of association of your business, CAC 2 and CAC 7, Company Seal, Utility bill, application letter on your company letterhead paper and a correctly-filled tax identification number application form.
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Step Two: Filing Of Appropriate Taxes Under Tax Returns
Tax Returns is an official form that you fill in with details about your income and personal situation, so that the tax you owe can be calculated. According to tax law, all employers are required to file a return with the relevant tax authority of all salaries paid to its employees, not later than 31st January of every year in respect of all employees in its employment in the preceding year.
Step Three: Obtain Necessary Assessment And Demand Notices
Tax can be assessed in two ways:
1. Self Assessment: It is the ‘do it yourself’, easier and convenient approach which enable a new tax payer to assess him/herself, make payment through any of the designated banks and obtain his/her e-TCC without visiting any tax office or officer. However, not everyone can do self-assessment.
2. Through the Tax Office: Taxpayers who have tax records with tax office should approach the same tax office for proper assessment on a yearly basis.
If you are issued a demand notice, it means that your business has gone against the tax law. Therefore, you will be required to settle the fine given to you.
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Step Four: Payment Of Tax To Approved Banks
The taxpayer should pay all taxes to the specified banks and obtain an electronic-ticket (e-ticket) from the bank.
Step Five: Get An Official Receipt From FIRS
At this level, taxpayer will present the e-ticket to FIRS to receive an official receipt from FIRS.
Step Six: Processing of Tax Payer Certificate (TCC)
A tax clearance certificate is a written confirmation from the state inland revenue service showing that a person or company has made payment for tax. The taxpayer gets their certificate after 72hours of payment. In addition, taxpayers are entitled to one tax clearance certificate which will be renewed annually.
For local government tax and levies, you can visit the local government council close to you to make all payments due to you or your business.
To avoid the hassles of doing it yourself, you can equally hire a tax consultant to help you in the assessment and payment of your tax.
It is worthy to note that FIRS has introduced an e-filing system that helps you pay your taxes online.
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To register, follow the following steps:
Step 1. Go to www.firs.gov.ng
Step 2. Click on e-services, then click on e-filing
Step 3: Download the e-filing access application form
Step 4: Scan the correctly filled document and then send to your preferred tax office.
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