The significant Nigerian government changes to the country’s tax system with the implementation of the 2024 Withholding Tax Regulations seeks to improve tax compliance, reduce the burden on businesses, and align Nigeria’s tax policies with global best practices.
Key Features of the New Regulations:
Exemption for Small Businesses: Small companies with an annual turnover below a specified threshold are no longer required to deduct tax at source, provided they meet compliance conditions such as having a valid Tax Identification Number (TIN).
Reduced Rates for Low-Margin Sectors: The regulations introduce reduced withholding tax rates for sectors operating on low margins, such as agriculture and manufacturing.
Exemptions for Key Sectors: Farmers, manufacturers, and other producers are now exempt from withholding tax, provided their activities fall under specified qualifying criteria.
Measures to Curb Tax Evasion: Stricter compliance requirements for businesses without a valid TIN, with companies engaging in transactions without a TIN facing double the standard withholding tax rate.
Simplification and Clarity: The regulations aim to address ambiguities in the application of withholding tax, providing clarity on critical aspects such as timing of deductions and scope of eligible transactions.
For expert guidance and support, please do not hesitate to reach out to our team (info@taxaide.com.ng)
The International Financial Reporting Standards (IFRS) 18 governs the preparation and disclosure in the financial statements of an entity. The standard which was issued on 9th April 2024 is effective for accounting periods beginning on or after 1st of January 2027, although it permits early adoption.
The International Financial Reporting Standards (IFRS 15) governs the recognition of revenue from contracts with customers, providing principles that guide entities in reporting revenue to reflect the transfer of goods or services to customers. While this standard primarily focuses on revenue recognition, it also sparks discussions on how revenue impacts comprehensive income and cash flow statements. However, the distinction between the presentation of comprehensive income and the cash flow statement under IFRS 18 may appear as a nuanced detail, yet it holds significant implications for financial reporting.
Comprehensive Income Comprehensive income encompasses all changes in equity during a period, except those resulting from transactions with owners in their capacity as owners. Under IFRS 18, revenue recognition affects comprehensive income indirectly. Revenue recognized from contracts with customers contributes to the overall performance of the entity, thereby impacting comprehensive income. However, comprehensive income includes not only revenue but also other elements such as gains and losses from investments, foreign currency translation adjustments, and unrealized gains and losses on available-for-sale financial assets. Therefore, while revenue recognition is a vital component of comprehensive income, it is just one piece of the broader financial picture.
Cash Flow Statement On the other hand, the cash flow statement provides insight into the cash generated and used by an entity during a specific period. Revenue recognized under IFRS 18 directly impacts the cash flow statement, as it represents cash inflows from operating activities. However, the cash flow statement includes other elements such as cash flows from investing activities, and financing activities. These components offer a comprehensive view of an entity’s liquidity and cash flow management, beyond just revenue generation. IFRS 18 addresses the gaps created by the existing standard (IAS1) such as ambiguity as to the classification of income and expense items in the statement of comprehensive income.
Presentation of Statement of Comprehensive Income under IFRS 18.
Distinction without a Difference?
The new standard (IFRS 18) ensures transparency of performance measures disclosed in the financial statements, comparability of information in the statement of comprehensive income, and ability of the users of the financial statement to make reasonable and more informed decision. The first requirement in the new standard is the presentation of new subtotals in the statement of comprehensive income as operating profit/loss, profit/loss before financing and tax, profit/loss for the year after tax, and the five (5) categorizations of income and expense items as (operating, investing, financing, income taxes and discontinued operations). The second requirement is the identification of management-defined performance measures (MPM) and the related disclosures in the financial statements. The third requirement of the new standard is the establishment of consistent principles for labelling and grouping of items in the comprehensive income. The principles of IFRS 18 are illustrated in the table below for a general corporate entity.
While revenue recognition affects both comprehensive income and the cash flow statement, the distinction lies in the focus and purpose of each financial statement. Comprehensive income provides a holistic view of an entity’s financial performance, incorporating not only revenue but also other income and expenses. In contrast, the cash flow statement focuses specifically on cash movements, highlighting the sources and uses of cash within the organization.
Despite this difference in focus, both comprehensive income and the cash flow statement play complementary roles in financial reporting, offering stakeholders a comprehensive understanding of an entity’s financial health. While revenue recognition under IFRS 18 may impact both statements, each serves a distinct purpose in conveying different aspects of an entity’s financial performance and liquidity.
In conclusion, while the presentation of comprehensive income and the cash flow statement under IFRS 18 may seem similar due to their shared reliance on revenue recognition, they serve different purposes and provide unique insights into an entity’s financial position. Understanding these distinctions is essential for stakeholders to interpret financial statements accurately and make informed decisions.
The Nigerian tax environment is constantly evolving, to stay up with the constantly evolving business environment, companies need to regularly evaluate their tax structures, tax positions, and tax compliances. This will help to guarantee that overall tax positions are supported by sufficient evidence, compliances are tracked, and any potential litigation-related issues are handled properly. The Finance Acts in Nigeria had been adopted as a fiscal policy model which introduced over 150 amendments to existing tax and regulatory legislations in Nigeria and is aimed at promoting fiscal sustainability, enhancing revenue generation, and supporting small businesses. As at date, the Nigerian Government has introduced four Finance Acts which are Finance Acts of 2019, 2020, 2021, and 2023. These pieces of legislation have changed the tax compliance regime for businesses in general which necessitates the need for consistent Tax Health Checks. The impact of the Finance Act on tax compliance in Nigeria has been significant. It has led to increased revenue generation for the government, increased tax compliance for taxpayers, and reduced the incidence of tax evasion and avoidance. The Finance Act has also introduced several measures to simplify the tax system, making it easier for taxpayers to comply with tax laws and regulations.
The Tax Health Check is a comprehensive review of a taxpayer’s tax affairs to ensure compliance with tax laws and regulations. It is aimed at identifying areas of non-compliance and addressing them before they become a problem for the taxpayer. It also helps taxpayers to avoid penalties, interest, and other charges that may arise from non-compliance.It involves a comprehensive review of a taxpayer’s tax affairs, including tax returns, financial statements, and other relevant documents. The review is conducted by a qualified tax professional who assesses the taxpayer’s compliance with tax laws and regulations.Best practices for conducting a Tax Health Check in line with the Nigerian Finance Act include engaging qualified tax professionals, conducting the review in a timely manner, and ensuring that all relevant documents are reviewed. Taxpayers should also ensure that they have a good understanding of tax laws and regulations and seek professional advice where necessary.
STEPS IN CONDUCTING TAX HEALTH CHECK 1. Understanding the Company’s nature of business; the industry it operates. 2. Determining the scope of work to enable you to work effectively and efficiently. 3. Establish a timeline; Every task should have its own timeline. 4. Collect sufficient data; Verify that the information obtained is sufficient, accurate, and error-free. 5. Identify risks and concerns: Determine the hazards that might arise from a failure to provide necessary documentation or from a failure to comply with applicable tax legislation. 6. Recognize opportunities; Conduct a thorough examination of the tax reconciliation process to make sure that all potential avenues for lowering tax obligations or recouping unpaid taxes are found. 7. Prepare your tax report; recommending solutions for danger areas and strategies to guarantee tax compliance.
Despite the benefits of Tax Health Checks, there are several challenges faced by taxpayers and tax authorities in implementing the procedure. These challenges include a lack of awareness among taxpayers, a shortage of qualified tax professionals, and a lack of cooperation from taxpayers. To improve the implementation of Tax Health Check procedures in Nigeria, it is recommended that tax authorities provide more education and awareness campaigns to taxpayers. This will help to increase awareness of the benefits of the Tax Health Check and encourage more taxpayers to conduct the review. This note should not be taken as tax advice, please contact your tax manager if you require any clarification.
Daniel Fowobaje Senior Associate, Tax Audit. d.fowobaje@taxaide.com.ng info@taxaide.com.ng
As we enter the Annual Personal Income Tax (PIT) Returns filing season, it’s important to note the approaching deadline of March 31, 2024, as required by Section 41 of the Personal Income Tax Act, 2011. This guide is designed to provide you with all the necessary information to ensure compliance and avoid potential penalties.
Understanding PIT Returns Filing
This process entails the meticulous documentation of all income accrued in the preceding calendar year, covering the period from January 1, 2023, to December 31, 2023. The filing is directed to the State Internal Revenue Service (SIRS) corresponding to the taxpayer’s residence.
Avoiding Common Errors in PAYE Returns: Pitfalls and Prevention Tips
Filing Pay-As-You-Earn (PAYE) returns can be a meticulous and intricate process for employers in Nigeria. The accuracy and completeness of these returns are crucial not only for compliance but also to ensure that employees’ taxes are appropriately deducted and remitted. However, errors can occur, leading to potential penalties and complications. Understanding these pitfalls and implementing prevention strategies is essential to streamline the PAYE filing process.
As an indispensable facet of tax compliance, the Annual Pay-As-You-Earn (PAYE) returns in Nigeria are mandated for every employer. Understanding the intricacies of this filing process is paramount to ensure adherence to tax laws and regulations set forth by the Federal Inland Revenue Service (FIRS) and State Internal Revenue Service (SIRS). This comprehensive guide aims to illuminate the landscape of Annual PAYE Returns, providing essential insights crucial for employers across Nigeria.
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Integrated with TaxiTPay® to enable seamless disbursement of VAT to the RTA or other VAT collection agent.
Cloud-based Technology: Work from anywhere and anytime.
Notifications & Reminders: Built-in real-time notifications and alert system to help you stay compliant and keep up with your obligations.
Mobile Compatibility: Work from your mobile device.
Instant Data Import: The built-in data import tools make data migration into TaxiTVAT® painless thereby giving you a smooth onboarding experience.
Fraud Control: Checks against fraud and illicit financial transactions with the user-role console to set-up administrators, approvers, and disbursers functions.
Data Security: Highly private, confidential, secure and encrypted data including soft token generation.
User Intelligence Experience: Analytical and interactive dashboard interface displaying a general awareness and overview of when and how vendor payments and tax obligations are met.
With no upfront software costs, you wouldn’t need to break the bank to afford TaxiTVAT®
There’s no software installation hassle and TaxiTVAT® updates automatically.
You can automatically export your TaxiTVAT® information into spreadsheets as the relevant general ledger.
TaxiTVAT® is scalable; it expands as your business grows, allowing you to undertake complex VAT computation, including Input and Output Tax computations.
Taxit Withhold
Direct Disbursement: Sorts out payment to vendors and RTAs and disburses payments directly to their individual bank accounts instantly.
Integrated with TaxiTPay® to enable seamless disbursement of payments to vendors and RTAs.
Automatic Payment Processing: Retains and sorts out all obligations to vendors, computes withholding tax (WHT) and ensures scheduled payments to vendors and RTAs.
Cloud-based Technology: Work from anywhere and anytime.
Notifications & Reminders: Built-in real-time notifications and alert system to help you stay compliant and keep up with your obligations.
Mobile Compatibility: Work from your mobile device.
Instant Data Import: The built-in data import tools make data migration into TaxiTWithhold® painless thereby giving you a smooth onboarding experience.
Fraud Control: Checks against fraud and illicit financial transactions with the user-role console to set-up administrators, approvers, and disbursers functions.
Data Security: Highly private, confidential, secure and encrypted data including soft token generation.
User Intelligence Experience: Analytical and interactive dashboard interface displaying a general awareness and overview of when and how vendor payments and tax obligations are met.
With no upfront software costs, you wouldn’t need to break the bank to afford TaxiTWithhold®
There’s no software installation hassle and TaxiTWithhold® updates automatically.
You can automatically export your TaxiTWithhold® information into spreadsheets as the relevant general ledger.
Information available in formats sufficient for filing monthly WHT Schedules
TaxiTWithhold® is scalable; it expands as your business grows, allowing you to add as many vendors or pay cycles as you like.
Tbook
TBook® allows taxpayers to manage their tax affairs and have access to online real time information about their taxes and other statutory obligations.
Notifications: Built-in real-time notifications and alert system to help you always stay informed of payments made to or on your behalf including receiving your TaxiTPaySlip®.
Ideal for all employees of organizations that use TaxiTPayroll® or persons who receive payments via TaxiTPay®.
Data Security: Highly private, confidential, secure and encrypted data including password access
User Intelligence Experience: Analytical and interactive functions to enable you to generate choice information.
At no cost, TBook® is freely available as long as your smartphone has sufficient data. TBook®’s data usage is very minimal.
There’s no software installation hassle and TBook® updates automatically.
You can automatically export your TBook® information into spreadsheets as your personal ledger.
Information is available in formats sufficient for filing your personal income tax returns.
Taxit Pay
One Stop hub for all payments, tax computations and deductions E-banking is the now the norm. To keep tabs on all tax deductions, organisations need a platform that can help track all transactions and keep track of all tax liabilities reducing the stress of computing a huge block of transaction annually.
Time Sensitive: Tax and related payments made in timely and stress-free fashion
Multi-application: Optimized for making diverse forms of payments and remittances which include net salaries, vendor payments, pensions, and major tax obligations.
Receipting: Integrated instant receipt-generating function that gets you your tax and related receipts straight from the RTAs
Generate employee pay slips (TaxiTPaySlips®) from TaxiTPay®
Integrated with TaxiTPayroll®, TaxiTWithhold®, TaxiTVAT® to allow their users smooth and seamless disbursement of relevant payments.
Cloud-based Technology: Work from anywhere and anytime.
Mobile Compatibility: Work from your mobile device.
Fraud Control: Checks against payment frauds and illicit financial transactions with the user-role console to set-up administrators, approvers, and disbursers functions.
Data Security: Highly private, confidential, secure and encrypted data including soft token generation.
User Intelligence Experience: Analytical and interactive dashboard interface displaying a general awareness and overview of when and how payments are made.
With no upfront software costs, you wouldn’t need to break the bank to afford TaxiTPay®
There’s no software installation hassle and TaxiTPay® updates automatically.
TaxiTPay® is scalable; it expands as your business grows, allowing you to undertake as many payments as you like.
Taxit Payroll
TaxiTPayroll® provides the most robust solution for payroll taxes and tax obligations in Nigeria. TaxiTPayroll® offers an easy to use online application that supports entrepreneurs and small businesses. Accessible 24/7 online, it allows you to grow your business and offers a simple way to get things done.
With no upfront software costs, TaxiTPayroll® won’t break the bank.
There are no software installation hassle and your payroll software updates automatically.
With our smart online payroll solution, your payroll expands and shrinks as your business grows, allowing you to add as many employees or pay cycles as you like.
You can automatically update your payroll general ledger.
Direct Disbursement: Sorts out the remuneration of employees and disburses payments directly to their individual bank accounts instantly.
Automatic Tax Processing: Retains and sorts out all statutory payroll obligations, computes payroll taxes and remits all at once and instant payment to the relevant agencies and agents (RTAs, PFAs, NHF, NSITF, ITF etc.) as payments fall due.
Cloud based Technology: Work from anywhere and anytime.
Notifications & Reminders: Built in real-time notifications and alert system to help you stay compliant and keep up with your payroll obligations.
Mobile Compatibility: Work from your mobile device.
Instant Data Import: The built-in data import tools make data migration into TaxiTPayroll® Painless thereby giving you a smooth onboarding experience.
