WHAT YOU NEED TO KNOW ABOUT TAX AND YOUR BUSINESS
Taxes are divided into two.
1. Indirect Taxes
2. Direct Taxes
Indirect taxes are taxes collected for the government by businesses e.g. VAT.
Direct taxes are taxes paid directly to the government by individuals and businesses e.g. income tax.
Common types of taxes in Nigeria:
Personal Income Tax:
These are taxes on the income, wages and earnings of the individual. They may include wages, salaries, dividends, interest, royalties, rents, and product sales. This tax is progressive in nature in the sense that it will keep growing as the individual’s income increases. This tax is payable to the government of where the tax payer resides.
Company Income Tax:
This is the tax payable by all companies incorporated in Nigeria. At the moment, companies with an annual turnover less than 25 million are exempted from paying taxes.
VAT:
This is also known as consumption tax. It is at the rate of 7.5%
Withholding Tax:
Withholding Tax is a process of deducting tax at source and remitting the tax so deducted to the relevant tax authority. It is not another form of tax. Withholding tax is an advance payment of tax, which is deductible from the tax liability of the individual or group of individual or a corporate organization. The items of Withholding Tax and the rates are shown in Table A:
A:
Companies Individuals
Interest 10% 10%
Dividends 10% 10%
Rents 10% 10%
Director’s Fees 10% 5%
Royalties 10% 5%
Consultancy 10% 5%
Professional Services 10% 5%
Management Services 10% 5%
Technical Fees 10% 5%
Building Construction and related activities 5% 5%
Contracts and Supplies 5% 5%
Commission 10% 5%
Petroleum Profit Tax:
This tax is chargeable on profit of companies that operate in the upstream petroleum sector in Nigeria at the rate of between 50% to 85%, Such Companies charged under this tax will be exempted from the Companies Income Tax. It is regulated by the Petroleum Tax Act.
Stamp Duties:
This is the tax or duty payable on any agreement executed in Nigeria.
Education Tax:
This is a 2% tax drawn from profits of companies and its used to fun tertiary institutions.
Capital Gains Tax:
A tax levied on profit from the sale of property or an investment.
National information Technology Development Levy (NITDL):
This tax is levied on the profit before tax of Companies in Nigeria.
It is governed by the National Information Technology Development Agency Act (NITDA).
It is a 1% applicable rate on profit before tax with an annual turnover of N100 million and above.
TENEMENT RATE:
These are taxes on properties paid by landlords or occupiers of a building payable to local government Councils as part of their internally generated revenue. It is a consolidation of ground rent and neighborhood improvement levy.
VERY IMPORTANT TIPS:
Paying your tax obligations will help your business stay in good legal standing.
There are federal, state, and local government taxes. You need to discuss with your consultant to help out in order for your business to meet its obligations accordingly.
To make it much easier for you to keep accurate records for your business, the accounting software businessProfits is a solution that will be of help. If you need further clarification, please contact me at your earliest convenient time. My WhatsApp number is +2348022907640 or send a mail to adebola@sobanjointernational.com