Step-by-Step Guide: Understanding Business Taxes in Nigeria

Step-by-Step Guide: Understanding Business Taxes in Nigeria


Home


Africa Trending News

Oct 1, 2024

Share: Centered Image            
Understanding business taxes in Nigeria is crucial for maintaining compliance and avoiding penalties. Below is an overview of the main business taxes in Nigeria, including their rates, filing requirements, and who is obligated to pay them.

1. Company Income Tax (CIT)
Description
: This tax is charged on the profits of Nigerian companies and on the income of non-resident companies doing business in Nigeria.
Rate:
30% for large companies (annual turnover above ₦100 million)
20% for medium-sized companies (annual turnover between ₦25 million and ₦100 million)
Small companies with annual turnovers less than ₦25 million are exempt from CIT.
Filing: Companies must file CIT returns within six months from the end of their accounting year.

2. Value Added Tax (VAT)
Description
: VAT is a consumption tax imposed on goods and services supplied in Nigeria, except for those specifically exempted (e.g., basic food items, medical services).
Rate: 7.5%
Filing: VAT returns must be filed monthly by the 21st day of the following month. Businesses are required to register for VAT with the Federal Inland Revenue Service (FIRS).

3. Withholding Tax (WHT)
Description
: WHT is an advance payment of income tax, deducted at the source on certain transactions, such as contracts, rent, dividends, interest, and professional services.
Rate: Rates vary from 5% to 10% depending on the nature of the transaction and whether the recipient is an individual or a company.
Filing: WHT must be remitted to the tax authorities within 30 days of deduction.

4. Personal Income Tax (PIT)
Description
: This tax applies to employees' salaries, wages, and other income. Employers are required to deduct and remit PIT from employees' salaries to the relevant State Inland Revenue Service.
Rate: Ranges from 7% to 24%, depending on the employee's income level.
Filing: Employers must remit PAYE (Pay-As-You-Earn) monthly and submit annual returns by January 31st of the following year.

5. Education Tax (Tertiary Education Trust Fund - TETFUND)
Description: This tax is imposed on all registered companies in Nigeria to support the education sector.
Rate: 2% of the assessable profit.
Filing: Paid alongside the CIT returns to the FIRS.

6. Capital Gains Tax (CGT)
Description: This tax is payable on profits realized from the disposal of chargeable assets, such as land, buildings, shares, and other investments.
Rate: 10%
Filing: Payable to the FIRS or relevant State Internal Revenue Service within 30 days of realizing the gain.

7. Stamp Duties
Description: Stamp duty is charged on legal documents and agreements, including tenancy agreements, share capital increases, and other financial transactions.
Rate: Rates vary depending on the transaction type.
Filing: The stamp duty must be paid to the Federal Inland Revenue Service (for companies) or the State Internal Revenue Service (for individuals).

8. Industrial Training Fund (ITF) Levy
Description: Companies with more than five employees or an annual turnover of ₦50 million are required to contribute to the ITF.
Rate: 1% of the total annual payroll cost.
Filing: Remittance is made annually.

9. National Social Insurance Trust Fund (NSITF)
Description: This contribution is made to insure employees against workplace-related injuries and accidents.
Rate: 1% of the total monthly payroll.
Filing: Employers are required to register and remit monthly contributions.

10. Customs and Excise Duties
Description: This tax applies to the importation and exportation of goods. Rates depend on the goods’ type and classification.
Rate: Varies according to the Nigerian Customs and Excise tariff.
Important Points to Note:
Tax Identification Number (TIN): Every business must obtain a TIN, which is necessary for all tax-related transactions.

Filing Deadlines: Different taxes have specific filing deadlines, so businesses should maintain accurate records and adhere to timelines to avoid penalties.
Understanding these taxes will help businesses in Nigeria navigate the tax landscape efficiently and ensure compliance with the country's tax laws. Engaging a tax consultant or accountant can also assist in managing tax obligations effectively.

Related Posts



Overview of Limited Liability Partnership (LLP) in Nigeria Introduction

A Limited Liability Partnership (LLP) is a relatively new legal structure introduced in Nigeria by…


Requirements for Limited Liability Partnership (LLP) Registration in Nigeria (2024)

Registering a Limited Liability Partnership (LLP) in Nigeria in 2024 involves specific requirements that must…


Corporate Compliance in Nigeria: Key Requirements and Obligations

Corporate compliance refers to the adherence to laws, regulations, standards, and ethical practices that govern…


Step-by-Step Guide: How to Register An Oil Company in Nigeria

Registering an oil and gas company in Nigeria involves multiple steps, as this sector is…


Step-by-Step Guide: Obtaining a Money Lending License in Nigeria

Obtaining a Money Lending License in Nigeria allows a company to legally operate as a…


Step-by-Step Guide: Filing Your Company's Annual Return in Nigeria

Filing annual returns in Nigeria is a mandatory requirement for all registered companies, whether they…


Trademark Registration in Nigeria

Trademark registration in Nigeria is handled by the Trademarks, Patents, and Designs Registry, which operates…


How to Obtain a Nigeria Work Permit

A work permit is required for expatriates who wish to work legally in Nigeria. It…

Centered Image