Q3 2020 Company Income Tax Report: What You Should Know

Companies Income Tax (CIT) is a tax collected on the profits of registered companies in Nigeria. This also includes the tax on the profits of foreign companies carrying on any business in any part of Nigeria. CIT is one of the many means through which the country generates revenue. Companies founded in Nigeria which are referred to as Resident companies are liable to remit CIT on their global income while non-residents are required to remit CIT on their Nigeria-source income. Corporate income tax is based on accounting profits adjusted for tax purposes.

CIT is currently charged at the rate of 30% for companies having more than N100 Million Naira turnover. It is also charged at the rate of 20% for companies with a turnover between N25 Million and N100 Million. The tax is charged on profits for the accounting year ending in the year preceding assessment. Companies with less than N25 Million turnover are not liable to pay CIT which is in line with the Finance Act 2019.

According to the CIT Report recently published by the National Bureau of Statistics (NBS) the breakdown by sectors for Q3 2020 reflected that the sum of N416.01bn was generated as CIT as against N402.03bn generated in Q2 2020 which implies a 3.48% increase in the revenue generated in the two quarters.

Professional Services which included Telecommunications, generated the highest amount of CIT with N55.52bn generated and closely followed by Other Manufacturing which generated N42.03bn then Banks & Financial Institutions generated N24.05bn.

Mining generated the least and closely followed by Textile and Garment Industry and Local Government Councils with N120.93m, N167.51m and N321.72m generated respectively. Out of the total amounted generated in Q3 2020, N244.70bn was generated as CIT locally while N70.34bn was generated as foreign CIT payment. The balance of N100.97bn was generated as CIT from other payments.

The Federal Inland Revenue Service (FIRS) is solely in charge of overseeing CIT for companies; it is best to be on the good books of the FIRS and avoid penalties due to lack of compliance. You need to ensure you are not under paying or overpaying your CIT or better still, ensure that you comply with the CIT as at when due. To achieve all these, you need the assistance of a Tax Manager.

Is your organisation in need of an efficient and effective tax manager to handle your CIT computations and compliance needs? Look no further as Taxaide’s licensed tax practitioners can assist your organisation with CIT compliance requirements.

For more information on CIT and all tax-related issues, please do not hesitate to contact us at:

Tel: +234 700 TAXAIDE (070 829 2433), +234 1 631 0971

WhatsApp: +234 810 701 7274

Email: business@taxaide.com.ng

Website: www.taxaide.com.ng


First Thoughts:

The Downward Spiral and the Glimpse of hope.

So early last week, we had the official confirmation that Nigeria had sunk into recession yet again, the second one in five years. This was courtesy of the nation’s GDP contracting by 3.6 percent in Q3 2020 after shrinking by 6.1 percent in the previous quarter. According to the International Monetary Fund (IMF)’s forecast, the Nigerian economy will contract by 4.3 per cent this year, which would be the largest contraction in nearly 40 years. What a year it has been!

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Internal Generated Revenue by State Government in H1 2020: Summary

Internal Generated Revenue by State Government in H1 2020: Summary

The realities of the Covid-19 pandemic affected internally generated revenue across various states in Nigeria but in spite of the significant drop in revenue, the economy has rapidly gotten back up from the Q1 to the Q2.

The National Bureau of Statistics recently published the Internally Generated Revenue at State level for the Half year of 2020. The 36 states and FCT IGR figure hits N612.87bn in H1 2020 compared to the N693.91bn recorded in 2019. This shows us a negative growth of -11.7% from the previous year.

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How to Avoid the Cost of Non-compliance of Taxes in 2021

Value Added Tax (VAT): The Major Highlights

A quick question for you.

Have you ever tried to play smart and ended up regretting it? Chances are you have. Well that is exactly how it feels when you fail to remit your taxes by the due date, and it comes biting back.

Let us take a little trip down memory lane. The Value Added Tax (VAT) Decree of 1993 was the first to introduce VAT to the Nigerian economy. Since then, it has witnessed series of amendments including the most recent Finance Act 2019. The amendments are geared towards ensuring simplicity and compliance. The regulation that currently governs the administration of VAT in Nigeria is the Value Added Tax Act CAP V1 LFN 2007 (as amended) and the Finance Act 2019.

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First Thoughts: Like the Phoenix; Like Nigeria.

I grew up reading a lot of fantasy story books and believed for a very long time in the existence of a lot of mythical creatures. I looked forward to encounters with fairies, centaurs, bush babies, unicorns, dinosaurs and mermaids among others. I was almost a teenager before I got to finally accept that I was never going to actually see any of these creatures and so had to settle for the encounters with them in these story books and movies. I read all the 7 Harry Potter Books by J.K. Rowling from my early teens and into my early twenties and of course watched every single one of the movie adaptations and this simply reinforced my fascination with the imaginary world.

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It’s hardly news that we are in the last few months of 2020 and just like you have visions and goals every year, you should adopt same for your tax obligations in 2021.

The first quarter of every year is a crucial period in the tax compliance space in Nigeria. The first quarter ushers in the PAYE and PIT returns filing process. In this piece we would review the PAYE returns filing process as this is what is required first before the PIT filing returns.

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Nigeria’s 2021 budget: What you need to know

Following the recent release of the 2021 budget by the President of the Federal Republic of Nigeria, there have been concerns over Nigeria’s debt stock as the nation plans to fund the 2021 budget deficit with N4.28 trillion new borrowings, a situation that has attracted huge backlash from the citizens. The proposed new borrowings represent about a third of the proposed budget. We explain further details on the proposed budget below while comparing it to the 2020 budget.

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Tax compliance: PAYE

In Nigeria today about 75% of potential taxpayers are not in the tax net, and about 65% of registered taxpayers are not fully compliant. This is a worrisome reality that needs to be critically addressed as the average level of tax compliance in Nigeria is put at about 10% based on our research findings.

A taxpayer must ensure that his/her taxes are paid and are also duly accounted for from time to time. This means taxes are paid as and when due and that relevant returns are submitted to the tax authorities in prescribed forms and formats. Going by the news emanating from many State Boards of Internal Revenue, the level of compliance with the requirements for filing of Personal Income Tax returns as prescribed by the Personal Income Tax Act (PITA) remains low across the country.

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