All The Kinds Of Taxes In Nigeria And What They're About

Entrepreneurship is a big thing in Nigeria, and knowledge of taxes is vital to anyone on the entrepreneurship path. Being ignorant of the taxes to pay has led to problems for a lot of entrepreneurs and so today, we have a list of all the taxes in Nigeria and what they mean.

The body in charge of tax regulations in Nigeria, FIRS (Federal Inland Revenue Service) states that there are nine types of taxes in Nigeria. 

Below is a list:

Companies Income Taxes (CIT)

This is a 30% tax charged on profits made by all registered companies in the country. It includes all sources of income of the company but doesn't include profits made from business activities outside the country. This is one of the major types of taxes collected by FIRS. 

The tax must be remitted to FIRS in the first three months of each year of assessment.

It is expected that new companies file returns within eighteen months from the date of incorporation or not later than six months after the end of its accounting period. Also, existing companies must file returns within six months from the end of the accounting year.

A company is charged minimum tax when they make a loss, have no tax payable or the tax payable is less than minimum tax.

2. Value-Added Taxes (VAT)

Value Added Tax aka consumption tax, is paid on purchased products. The tax is paid by the final consumer. Unlike the CIT that charges only on goods produced in the country, VAT is charged on goods produced within and outside Nigeria. The standard rate for VAT is usually 5%.

Every taxable business owner is expected to file for their VAT monthly returns not later than the 21st day following the month of transaction.

3. Personal Income Taxes (PIT)

PIT is governed by the Personal Income Tax Act Cap P8 LFN 2004 (as amended). It is levied on the income of individuals, sole proprietors, families, trustees, and communities. The rate ranges from 7% to 24% depending on the amount of chargeable income.

In a situation where an individual’s income is less than N300,000 per annum, such an individual is subject to a minimum tax of 1% gross income.

Also, Personal Income Tax returns must be filed on 31st March of every year while PAYE (Pay As You Earn) should be remitted every 10th day of the subsequent month.

For employers, taxes deducted from an employee's income in the preceding year must be remitted not later than 31st January of every year.

For an individual, failure to file PIT as at when due attracts a fine of N5,000 and a sum of N100 for every day the default continues or six(6) months imprisonment or both. In like manner, a corporate body that fails to file a return on the due date is liable to a fine of N500,000.

4. Petroleum Profits Taxes (PPT)

PPT is governed by Petroleum Profit Tax Act, Cap P13 LFN 2004 (as amended). It is levied on the income of companies involved in upstream petroleum operations. Another thing to note is that companies that pay

petroleum income tax is exempted from paying Companies Income Tax on the same income.

The rate is 65.75% for joint ventures in the first five years of operation. But, joint ventures in operation for more than five years are liable to 85% of the chargeable profit. Also, companies under production sharing contracts are liable to 50% of the chargeable profit.

The returns for each accounting period are to be submitted not later than two months after the commencement of the accounting period. Furthermore, final returns for each accounting period are expected to be filed within five months after the expiration of the accounting period.

Equally important, failure to submit the returns as at when due attracts N10,000 for the first month and N2,000 for every day the failure continues.

5. National Information Technology Development Levy (NITDL)

Companies that are liable to pay NITDL include GSM Service Providers, Telecommunication Companies, Internet Providers, Banks, and other companies with a turnover of N100million and above.

NITDL is governed by National Information Technology Development Agency Act, CAP N156 LFN 2004 (as amended). It is 1% of profit before tax.

The filing procedure for NITDL is the same as that of Companies Income Tax. Failure to pay as at when due attract a 10% penalty.

6. Stamp Duties (SD)

SD is governed by the Stamp Duties Act, Cap S8, LFN 2004 (as amended). It is administered by both FIRS, FCT, and State Internal Revenue Service. Also, note that stamp duty is administered on written documents only.

Forms of Stamp Duties

Ad-Valorem

This is charged in proportion to the value of the consideration, e.g. deed of assignment, duties on shared capital, debenture, bills of exchange, etc.

Fixed Duties

This applies to duties that do not vary with consideration, e.g. duties on proxy forms, payment receipt, guarantor forms, etc.

7. Capital Gains Taxes (CGT)

CGT is governed by Capital Gains Tax Act, Cap C1 LFN 2004 (as amended). It’s a levy charged on the positive difference between the sales price of an asset and the original purchase price. Capital Gains Tax is charged on any chargeable assets excluding those specifically exempted by the act and it has a flat rate of 10% of chargeable gains.

The payment and filing process is the same as that of Companies Income Tax.

8. Personal Income Taxes (PIT)

PIT is governed by the Personal Income Tax Act Cap P8 LFN 2004 (as amended). It is levied on the income of individuals, sole proprietors, families, trustees, and communities. The rate ranges from 7% to 24% depending on the amount of chargeable income.

In a situation where an individual’s income is less than N300,000 per annum, such an individual is subject to a minimum tax of 1% gross income.

Also, Personal Income Tax returns must be filed on 31st March of every year while PAYE (Pay As You Earn) should be remitted every 10th day of the subsequent month.

For employers, taxes deducted from an employee's income in the preceding year must be remitted not later than 31st January of every year.

For an individual, failure to file PIT as at when due attracts a fine of N5,000 and a sum of N100 for every day the default continues or six(6) months imprisonment or both. In like manner, a corporate body that fails to file a return on the due date is liable to a fine of N500,000.

9. Tertiary Education Taxes (EDT)

EDT is governed by Tertiary Education Trust Fund Act, 2011. All companies registered in Nigeria are liable to pay the tax. It is 2% of the assessable profit. The funds garnered are used for rehabilitation, restoration, and consolidation of tertiary institution in Nigeria by the Tertiary Education Trust Fund (TETFUND)

The first recorded offense against EDT attracts a fine of N1,000,000 or 6months jail time or both. The second and subsequent offense attracts a fine of N2,000,000 or 12months jail term or both.