TAX OBLIGATIONS FOR ENTREPRENEURS IN NIGERIA (PART 2)
The part one of this article discussed the Company Income Tax (CIT), Tertiary Education Tax (TET), Personal Income Tax (PIT) and Value Added Tax (VAT) respectively. For the Educative surgery of Tax obligations for Entrepreneurs in Nigeria, the following taxes will be examined because you have to be aware of them;
1. WITHHOLDING TAX (WHT)
Withholding Tax is an advance payment of income tax deductible at source on qualifying transactions. It may also represent the final tax liability on certain passive income. The relevant provisions are in the CITA, PITA, PPTA and WHT Regulations. The FIRS administers this tax for corporate entities while the SBIR administers this tax for individuals and unincorporated entities.
1. Dividend, Interest & rent: Company 10%, Individual 10%
2. Hire of equipment, motor vehicles, plant, and machinery: Company 10%, Individual 10%
3. Royalties: Company 10%, Individual 5%
4. Commission, consultancy, technical and management fees, legal fees, audit fees and other professional fees: Company 10%, Individual 5%
5. Building, Construction, and related activities: Company 2.5%, Individual 5%
6. All types of contracts and agency arrangements other than sales in the ordinary course of business: Company 5%, Individual 5%
7. Directors’ fees: Company N/A, Individual 10%
Companies liable: All Companies, organizations, and establishments approved for the operation of the Pay-As-You-Earn Scheme
• For WHT deducted from companies, remittance to the FIRS is due within 21 days after the duty to deduct arose
• For WHT deducted from individuals and unincorporated entities, remittance to the SIBR is due within 30 days after the duty to deduct arose
• Submission of WHT to FIRS must be in electronic form and must contain the Tax Identification numbers of all the suppliers from whom tax has been deducted.
2. PETROLEUM PROFITS TAX (PPT)
Petroleum Profit Tax is levied on the income of companies engaged in upstream petroleum operations. The passage of Petroleum Industry Bill is awaiting approval. The PPT rate according to S 21 (1)(2) is 85% for petroleum operations carried out under a Joint Venture arrangement with the Nigerian National Petroleum Corporation or any non-Production Sharing Contract over 5yrs.
Tax is payable on actual year basis, estimated tax returns must be filed within two months of the fiscal year while Actual tax returns must be filed within five months after the end of the accounting period that is, not later than 31 may.
The holder of an Oil Prospecting License or an Oil Mining Lease is required to pay royalties to the Federal Government as soon as production begins. This is usually in form of monthly cash payments at the prescribed rate or by way of royalty oil.
3. CAPITAL GAINS TAX (CGT)
CGT is applied on capital gain accruing to any person (company or individual) making a chargeable disposal of assets. It has a rate of 10% according to Section 2 (1) with chargeable assets on debts and incorporeal property, goodwill, copyrights, buildings, chattels etc. The exempt assets and gains include gains from disposal of shares and stocks, Nigerian government securities, life assurance policies, the main residence of an individual, compensation for wrong or injuries suffered by an individual and decorations awarded for valour or gallant conduct.
The statute of Limitation is six (6) years after the end of the year of assessment in which that gain accrues. Rollover Relief can be claimed where proceeds of disposal are used to purchase a new asset of the same class as the disposed asset. The new asset must be acquired within twelve months before or twelve months after the disposal of the old asset.
4. INFORMATION TECHNOLOGY (IT) TAX
Information Technology Tax is payable by specified companies with a turnover of #100million and above. The tax when paid is tax deductible for company income tax purposes. The tax is governed by the National Information Technology Development Act (NITDA) 2007. The rate is 1% of profit before tax and entities liable to this tax are GSM Service providers and all telecommunications companies, Cyber companies and internet providers, Pension Managers, Banks and insurance companies. Information Technology tax is assessed by the FIRS and is payable with 60 days of service of a notice of assessment. The penalty for non-compliance is 2% of the tax payable.
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