12 Types Of Taxes In Nigeria And How they are Administered.
Types Of Taxes In Nigeria.
VAT Value Added Tax
VAT (Value Added Tax) is a consumption tax levied on goods and services purchased. In reality, the final consumer bears the burden of VAT. VAT, unlike CIT, is levied on commodities manufactured both in and outside of Nigeria. However, certain items, such as non-oil exports, are specifically exempt from VAT payment under the VAT Act. VAT is usually charged at a regular rate of 5%.
Every taxable business owner is required to file their VAT monthly returns by the 21st day after the month in which the transaction occurred.
PPT Petroleum Profit Tax
The Petroleum Profit Tax Act, Cap P13 LFN 2004, governs PPT (as amended). It is imposed on enterprises that operate in the upstream petroleum sector. It’s also worth noting that companies that pay petroleum income tax are exempt from paying Companies Income Tax on the same earnings.
In the first five years of operation, joint ventures had a 65.75 percent success rate. Joint ventures that have been in existence for more than five years, on the other hand, are liable for 85 percent of taxable profit. In addition, companies who are part of a production sharing contract are accountable for 50% of the taxable profit. The returns for each accounting period must be submitted no later than two months after the accounting period begins.
Furthermore, Within five months at the end of the accounting period, a report must be filed.
Failure to submit returns on time entails a penalty of N10,000 for the first month and N2,000 for each day the failure continues.
SD Stamp Duties
Stamp Duties Act, Cap S8, LFN 2004 governs SD (as amended). Both the FIRS, the FCT, and the State Internal Revenue Service are in charge of it. It’s also worth noting that stamp duty is only applied on written papers.
Types of Stamp Duties
- Ad-Valorem Stamp Duties
This is calculated based on the value of the consideration, such as a deed of assignment, duties on shared capital, debenture, or bills of exchange.
- Fixed Duties Stamp Duties
This relates to non-variable obligations, such as those on proxy forms, payment receipts, guarantor forms, and so on.
CGT Capital Gain Tax
The Capital Gains Tax Act, Cap C1 LFN 2004, governs CGT (as amended). It’s a tax levied on the difference between an asset’s selling price and its initial acquisition price. Capital Gains Tax is imposed on all chargeable assets, with the exception of those explicitly exempted by the act, and it is levied at a flat rate of 10% on all chargeable gains.
The payment and filing procedures are identical to those for Corporations Income Tax.
NITDL National Information Technology Development Agency
GSM Service Providers, Telecommunication Enterprises, Internet Providers, Banks, and other companies with a turnover of N100 million and more are all subject to NITDL.
The National Information Technology Development Agency Act, CAP N156 LFN 2004, governs NITDL (as amended). It amounts to 1% of profit before taxes.
The NITDL filing method is identical to that of the Companies Income Tax. Failure to pay on time will result in a 10% penalty.
EDT Education Trust Fund
The Tertiary Education Trust Fund Act of 2011 governs EDT. The tax is payable by all firms registered in Nigeria. It amounts to 2% of the assessable profit. The monies are utilized by the Higher Education Trust Fund in Nigeria for the repair, restoration, and consolidation of tertiary institutions (TETFUND)
A punishment of N1,000,000 or six months in prison, or both, is imposed for the first recorded offense against EDT. A fine of N2,000,000 or a 12-month prison sentence, or both, is imposed for the second and consecutive offenses.
WHT Withholding Tax
A withholding tax is an income tax paid to the government by the person who earns the money rather than the person who receives it. WHT deductions are commonly referred to as advance income payment deductions. WHT has a fee that varies between 5% and 10% depending on the transaction.
Every month, on the 21st of the month, WHT returns must be filed. Failure to file by the due date results in a penalty of N25,000 for the first month of default and N5,000 for each subsequent month of failure.
PIT Personal Income Tax
The Personal Income Tax Act, Cap P8 LFN 2004, governs PIT (as amended). Individuals, sole proprietors, families, trusts, and communities are all subject to it. Depending on the amount of taxable income, the rate might range from 7% to 24%.
If an individual’s annual income is less than N300,000, he or she is liable to a minimum tax of 1% of gross income.
Furthermore, Personal Income Tax returns must be submitted by March 31st of each year, and PAYE (Pay As You Earn) must be sent on the 10th of the following month.
Employers must remit taxes deducted from employees’ wages in the previous year by the 31st of January of each year.
Failure to file PIT on time results in a fine of N5,000 and a sum of N100 for each day the default persists, or six(6) months imprisonment, or both. Similarly, a business organization that fails to file a return by the deadline would be fined N500,000.
CIT Company Income Tax
CIT is a Companies Income Taxes and one of the most common forms of tax that FIRS collects. Profits earned by firms registered in Nigeria are subject to a 30% tax. This includes the company’s whole revenue stream. Profits earned from commercial activity outside of Nigeria, however, are immune from CIT.
CIT must be paid to FIRS within three months of the beginning of each assessment year, according to the Act.
New businesses must submit returns within eighteen (18) months of their incorporation date or within six (6) months of the end of their accounting period, whichever comes first. Existing businesses must also submit returns within six (6) months of the end of the fiscal year.
When a business makes a loss, owes no tax, or owes less than the minimum tax, it is assessed minimal tax.
PAYE Pay As You EarnYou Earn.” It is a way of collecting personal income tax from employees’ salaries and wages through an employer’s deduction at source, as permitted under the Personal Income Tax Act’s relevant sections (PITA). (Personal Income Tax Act, Section 81, Cap P8 LFN 2011)
Business Premises levy
It is a tax on property used to generate money, such as rental homes, office buildings, and industries. In metropolitan regions, the cost of registering a business premises is N10,000, with a subsequent
The abbreviation PAYE stands for “Pay As renewal fee of N5,000, while in rural areas, the cost is N2,000 / N1,000.
Hotel occupancy and Restaurant Consumption Tax
It is a tax on products and services consumed in Lagos State’s hotels, bars, restaurants, and event centers. Consumers who buy these products and services are responsible for this levy. LIRS’ collection agents are hotels, taverns, restaurants, and event centers.
Stamp Duties Table
|Rate of Tax
|16 kobo for every N 200 (0.08 %)
|75 kobo for every N 200 (0.375%)
|Incorporation of Limited Liability Company
|0.75% of authorized share capital
Personal Income Tax table
|CHARGEABLE INCOME||RATE OF TAX|
|First N 300,000.00||7 %|
|Next N 500,000.00||15 %|
|Next N 500,000.00||19 %|
|Next N 1,600,000.00||21 %|
|Above N 3,200,000.00||24 %|
Table of Taxes Applicable to Companies in Nigeria
|APPLICABLE TAX||TAX RATE||GOVERNING LEGISLATION|
|Companies Income Tax (CIT)||30 % of total profits of a company less allowable deductions||Companies Income Tax Act|
|Capital Gains Tax (CGT)
|10% of gains realized upon disposal of a chargeable asset||Capital Gains Tax Act
|Value Added Tax (VAT)||5% on the supply of goods and services||Value Added Tax Act|
|Education Tax||2% of assessable proﬁts of a company||Education Tax Act|
- Preparing your tax without stress. - January 11, 2022
- 12 Types Of Taxes In Nigeria And How they are Administered. - January 10, 2022