PRACTICAL STEPS OF FILING COMPANY INCOME TAX IN NIGERIA
Every company (including non-residents companies doing business in Nigeria) and companies, which are exempted from incorporation in Nigeria are required to prepare and file on self assessment basis, with the Federal Inland Revenue Service (FIRS), audited accounts and income tax computations within six (6) months after the end of the financial year of the company.
In the case of newly incorporated companies, the returns are to be filed within eighteen (18) months, from the date of incorporation, or six (6) months after its first accounting period, whichever occurs first.
S/N Financial Year End Filing Due Date
1 January 31st July 31st of the same year
2 February 28th August 31st of the same year
3 March 31st September 30th of the same year
4 April 30th October 31st of the same year
5 May 31st November 30th of the same year
6 June 30th December 31st of the same year
7 July 31st January 31st of the following year
8 August 31st February 28th of the following year
9 September 30th March 31st of the following year
10 October 31st April 30th of the following year
11 November 30th May 31st of the following year
12 December 31st June 30th of the following year
PAYMENT OF TAX
Tax which has been assessed (if not disputed, or if the dispute is determined), is payable either in a lump sum or an instalmental basis subject to a maximum of six (6) monthly instalments basis, this will be subject to approval by the FIRS. An application for instalmental payment must be supported by evidence of payment of the first (1st) instalment. The approval of payment on instalment basis is not automatic, but discretionary.
PROFITS EXEMPTED FROM TAX
The Act provides for the exemption of the profits of certain companies or those obtained from specified sources from tax. These include:
• Statutory or registered friendly societies;
• Co-operative societies registered under any enactment or law relating to co-operatives societies
• Ecclesiastical, charitable or education establishments of a public character;
• Companies formed for the purpose of promoting sporting activities where such profits are wholly expendable for such purposes;
• Trade unions registered under the Trade Unions Act;
• Body corporate established by or under any local government law or edict in force in any State in Nigeria; and
• Any body corporate being a purchasing authority established by an enactment ad empowered to acquire any commodity for export from Nigeria for the purchase and sale of that commodity.
The requirement and steps for filing Company Income Tax in Nigeria with the FIRS are basically the same for small, medium or large taxpayers. Below are the easy steps to file your Company Income Tax:
Step 1: Obtain Forms
Applicant is required to obtain the Company Income Tax and a Self- Assessment Forms from the nearest FIRS office and carefully fill the form and confirm for correctness.
The Federal Inland Revenue Service permits companies to file their tax returns based on a self-assessment system where the company prepares its own annual returns and determines its tax liabilities. Although, the FIRS may carry out further assessment to ascertain the validity of the tax returns filed where it suspects that the information are false or no returns where filed at all.
Step 2: Make Payment
Applicant is required to make payment through any of the provided means such as draft, cash, internal transfer, etc. through the approved or collecting banks. Upon payment of the applicable fee, applicant will be issued an e-ticket as evidence of payment. Applicant is expected to verify the details on it to ensure completeness and correctness.
Step 3: Submit Documents
Applicant is to submit all documents such as the E-ticket issued by the bank as evidence of tax payment, duly completed CIT return form, Self-Assessment form, audited financial statement, and tax computation for the relevant year of assessment to the FIRS office for approval.
The accounts should be audited and signed by External Auditors who must be members of a recognized professional body. The Audited financial statement must consist of the following:
1. Statement of financial position,
2. Statement of comprehensive income,
3. Statement of changes in equity,
4. Statement of cash flows,
5. Notes on significant Accounting Policies and other explanatory information,
In filing for Companies Income Tax, audited financial statements are statutorily required. The returns should mandatorily be accompanied by the tax computations and capital allowances computations on qualifying assets of the company.
Due Date for Filing Companies Income Tax Returns
It depends on whether the taxpayer is a new company or an existing company.
For existing companies, CIT returns should be filed within six (6) months after accounting year end.
For new companies, CIT returns should be filed within eighteen (18) months from the date of incorporation or six (6) months after accounting year end whichever is earlier.
Companies that make CIT payment within 90 days from the due date for filing the corporate tax returns will get a discount on tax payable. For large companies with a turnover above NGN 100 million, the bonus is 1% while medium-sized companies with a turnover between NGN 25 million and NGN100 million will enjoy a bonus of 2%.
POST COVID TAX MATTERS
The Federal Inland Revenue Service (FIRS) on 23 March 2020 announced the following tax relief measures to address the impact of the coronavirus (COVID-19) pandemic on taxpayers:
• Extension of the due date for filing of value added tax (VAT) and withholding tax returns from the 21st day of the month to the last business day of the month, following the month of deduction
• Extension of the due date for filing of the companies income tax return by one month
• Use of electronic platforms for paying taxes and processing tax clearance certificates
• Electronic filing of tax returns by taxpayers
• Filing of tax returns by taxpayers without audited financial statements which must be submitted within two months of the revised due date of filing
• Submission of tax returns online by taxpayers via efiling.firs.gov.ng or by designated e-mail accounts published by the FIRS.
The FIRS announced the following additional measures to mitigate the impact of COVID-19 on taxpayers:
• Waiver of late returns penalty for taxpayers who pay their tax liabilities early but submit their tax returns later. Evidence of tax payment can be forwarded to the relevant FIRS e-mail address, or submitted later to the appropriate tax office
• Extension of timeline for remittance of VAT from the 21st day to the last day of the month, following the month of deduction
• Taxpayers facing challenges in sourcing foreign exchange (FOREX) to settle tax liabilities on their FOREX-denominated transactions are permitted to pay the Naira equivalent, based on the prevailing Investors & Exporters FOREX window rate on the day of payment
• A one month further extension of the waiver of interest and penalty on outstanding tax liabilities arising from desk review, tax audits, tax investigation and voluntary assets and income declaration scheme, to 31 August 2020.
In addition, an “Emergency Economic Stimulus Bill, 2020” was passed by the House of Representatives (HoR) to:
• Grant a tax rebate of 50% of the actual amount due or paid as pay-as-you-earn tax, to Nigerian companies who retain all their employees from 1 March 2020 to 31 December 2020.
• Suspend import duties on medical equipment, medicines and personal protective gears required for treatment and management of COVID-19 for three months, effective 1 March 2020. This has been further extended by the Honourable Minister of Finance to 30 September 2020.
• Introduce a new moratorium on mortgage obligations of Nigerians under the National Housing Fund.
The Bill is yet to be passed by the Senate.